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Aug 15 2011   10:26AM GMT

Google Acquiring Motorola Mobility: It’s All About Patents

Ed Hardy Ed Hardy Profile: Ed Hardy

Google shocked the tech world today by announcing that it’s going to acquire Motorola Mobility, the company behind some of the most popular devices running Google’s Android OS. This has left many people wondering what this means — Is Google going into the hardware business? Is it going to block Samsung and HTC from making Android devices?

GoogleDoing a bit of reading between the lines, it becomes clear that this deal is going down for one simple reason: Google wants Motorola’s patent portfolio to help defend itself from lawsuits from Apple and Microsoft.

The best evidence for this comes from the other makers of Android-based smartphones. Google must have pre-warned them about this deal and defending this operating system from patent lawsuits must have been at the top of the agenda, as evidenced by this statement from  Peter Chou, the CEO of HTC:

“We welcome the news of today‘s acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem.”

The heads of LG and Sony Ericsson also released very similar statements.

It’s a Bad Business
The smartphone business is sees its share of cutthroat tactics, and an increasingly popular one is the patent lawsuit. Rather than competing on who makes the better software and handsets, some companies have taken to seeing who can find the best lawyers.

The basic issue is that the patent system in the United States is about as broken as it can be. The U.S. Patent Office is woefully underfunded and understaffed, so every day companies are given patents that are too broad, or for things that are obvious. The companies than turn around and use these bad patents as the basis for a lawsuit against one or more of their top competitors.

Worst-Case Scenario
Now that we know the real reason for Google buying Motorola, we’re still going to have to deal with the unintended consequences. When one company makes both the operating system and some of the most popular devices running it, there’s plenty of potential for problems.

The setup that works best is for one company to develop the system software and then license it to hardware makers. This way there’s little chance of favoritism. For example, all that Microsoft cares about is that there are lots of computers sold  running Windows, it makes no difference to Steve Ballmer who makes these.

If you want ann opposite of what can go wrong, Palm, Inc. once made the Palm OS and made the Palm line of PDAs. The other companies that licensed this operating system, most notably Sony, frequently complained that Palm gave itself unfair advantages, such as adding features to the OS specifically for Palm’s own hardware.

Google has promised that this won’t happen with Motorola Mobility. It’s new acquisition is going to be run as a separate company which will keep its own name. Andy Rubin, Senior Vice President of Mobile at Google, said, “Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.”

But going forward, Google is going to have to be very careful about no showing favoritism to Motorola Mobility. It has to avoid even the appearance of favoritism. If it doesn’t, Samsung, HTC and LG, and others are going to have some serious complaints, and might even stop making Android-based devices if they don’t think they can compete against Google’s own hardware division.

That’s a worst-case scenario I know. But it’s important to think about how events can go wrong some time in the future if you want to avoid them.

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