Google tries to buy its way out of patent problems

$900 Million for Nortel’s patents could put some of its patent questions to an end.

Google (GOOG) and its Android partners are, like the rest of the industry, engulfed in patent disputes from Oracle (ORCL), Nokia (NOK) Apple (AAPL), Microsoft (MSFT) and others over Android, and to lesser degree, Chrome.

As a younger company with only a relatively recent focus on mobile communications, Google has a shallow patent pool from which to fight these battles.

Today, Google announced that they’d try to put some of the patent litigation uncertainties to an end with the purchase of Nortel’s patents. The patents are part of auctions to sell off the assets of bankrupt Canadian communications giant Nortel, which has 6,000 patents to its name.

The agreement includes the planned sale of approximately 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.

Google says that if it wins the bidding, their hope is that “this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate.”

This says a few things to me:

Google is willing to spend a lot on getting up to snuff on patents (All of YouTube cost ‘only’ $1.65B in 2006. Android, estimated in the tens of millions, was a fraction of the price of the patents in 2005.)
Google wouldn’t spend this figure unless it thought that there was a good chance that patent litigation without it would tally more. (RIM (RIMM) settled with NTP in 2006 for over $600 million – so there is some precedent for huge expenditures.)
Google also started the opening bid for wireless spectrum, which Verizon eventually won, two years ago. That means that just because Google is first in doesn’t mean that it won’t be outbid.
Clearly, many of those 6,000 patents won’t be ones applicable to Google’s business, so there could be another patent sale down the road that would mitigate some of these costs. Cisco, HP, Nokia, Siemens and Juniper could all be possible buyers.
Today is Larry Page’s first day on the job and he’s already spent close to a billion dollars. This seems like a pretty good wager though, especially if it can erase the patent questions around Google and Android.

Google clearly isn’t happy about going down this expensive road. It lead its announcement with this dire assessment of the industry.

The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation. Some of these lawsuits have been filed by people or companies that have never actually created anything; others are motivated by a desire to block competing products or profit from the success of a rival’s new technology. The patent system should reward those who create the most useful innovations for society, not those who stake bogus claims or file dubious lawsuits. It’s for these reasons that Google has long argued in favor of real patent reform, which we believe will benefit users and the U.S. economy as a whole.