Mobile Industry Goes On Offensive With Increasing Patent Wars, Cross-Licensing Deals

A war is waging in the mobile industry and unlike patent battles of previous years this new battle isn’t about patents company’s have invented but rather patents they have purchased, sometimes for billions of dollars.

The battle started in 2010 when a group of tech company’s spent $450 million to purchase 882 patents from software provider Norvell. Those companies set out to secure patents they could implement at no additional costs in their own devices while suing other company’s who use them. Among the patent portofolio buyers were Microsoft, Oracle, Apple and EMC an unlikely group of partners.

While that patent farm buyout was seen as a big intellectual property grab for those company’s it was quickly dwarfed when Microsoft, Apple and Blackberry maker Research in Motion along with three other company’s swooped in to by 6,000 patents from bankrupt telecoms manufacturer Nortel at a cost of $4.5 billion.

Fast forward to September 2011 and in an attempt to develop their own library of patents Google, Inc. announced plans to purchase Motorola Mobility, by far the largest single wireless telecom patent holder (24,500 patents) for $12.5 billion. Google announced their acquisition after Google’s Chief Legal Officer, David Drummond wrote a blog post on the official Google blog titled “When patents attack” in which he said:

“Our competitors are waging a patent war on Android.”

Unlike patent battles from the past the new holdings could start a new type of patent war, one in which company’s hold hostage their patent technologies in exchange for cross-licensing deals. Apple needs a Motorola patent, they offer Google one of their own, Google needs a Samsung patent, they offer a fair trade.

As Professor Werbach told the BBC:

“As long as major companies feel they need to shore up their patent portfolios, we’ll continue to see patents valued as defensive assets in a total war, rather than based on their potential for value creation.”

“While in the short run Nortel’s creditors and Motorola’s shareholders may have benefitted from patent price inflation, the overall impact will be significant market distortion.”

When all is said and done there are hundreds of thousands of patents geared towards the patent industry, while single “patent firms” may sue for licensing and patent sale agreements it’s very likely that these large patent purchases by the likes of Google, Apple and others will end in a stalemate as the legal cost of defending thousands of patents continues to push up costs for all company’s while cross-licensing becomes a more cost effect approach to doing business.

Do you believe that patent use will move more towards cross-licensing over direct lawsuits?