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Microsoft and Apple appear to be trying to bully the Android ecosystem out of the market with lawsuits and licensing demands.

Companies have transformed patents from a way to a protect innovations, into a currency used to bully competitors out of the market.  (Source: Google Images)

Without intervention, Android's top phonemakers may find themselves forced into a financially untenable position.  (Source: Digitals Life)
U.S. antitrust regulators fear "Rockstar" coalition could litigate Android phonemakers to death

The smartphone war continues to rage on and Google Inc.'s (GOOG) Android has stepped out into the lead.  It outsold Apple, Inc. (AAPL) smartphones over 2 to 1 globally in the last quarter.  And minority players like Microsoft Corp. (MSFT) were struggling to cling on to insubstantial market shares.

I. Google: Market Champion or Buying Time?

Android's race to the top was fueled by its support of an open ecosystem in which players like Motorola Solutions Inc. (MSI), Samsung Electronics Comp., Ltd. (SEO:005930), and HTC Corp. (TPE:2498) could all make Android devices without direct licensing fees (Google profited off of app sales and mobile advertising).  

The result was an ecosystem which frequently delivered hardware that was more advanced than Apple, Research in Motion, Ltd. (TSE:RIM), and Microsoft's offerings.  And not only was the hardware better, the selection was broader too.

But despite the appearance that Android won, the ecosystem is now facing the looming potential of doom.  That doom could come thanks to Apple, RIM, and Microsoft's growing portfolio of purchased intellectual property and desire to sue Android handset makers into submission.

Apple currently is suing HTC, Samsung, and Motorola in cases that stretch across multiple countries and continents [1][2][3][4].  Microsoft is suing Motorola as well and is using legal threats to try to force Samsung into a per phone licensing deal (as much as $15 USD per Android phone sold), as it did with HTC last year.  Likewise, Oracle Corp. (
ORCL) is seeking $6.1B USD in damages, claiming that Android is infringing on the Java patents it obtained in its acquisition of Sun Microsystems.

The combined picture is clear.  Apple and Microsoft have sued or entered into sweet licensing agreements with virtually every major Android maker (a few like 
LG Electronics Inc. (SEO:066570) have been spared, presumably on the merits of their smaller market share).

II. Android Faces Death by Multiple Means

The question becomes whether Android handset makers can remain viable in the face of these lawsuits.  While a $15 USD licensing fee to Microsoft might not be lethal, if Samsung and HTC have to pay an additional $15 USD to Apple and $15 USD to Oracle, the result may be the phones will become unprofitable.

On the other hand, if Google's handset partners refuse to play ball, they may be forced to pay even worse damages by international courts.

Apple, Microsoft, and others have multiple routes to use their intellectual property to kill Android.

III. Shadowy Alliance Beats Google for IP Treasure Chest

Those efforts have been strengthened by the purchase of Nortel Networks' portfolio of over 6,000 patents.  The telecom equipment maker put the portfolio on the market after it was forced to declare bankruptcy in 2009.

Google hoped to win the portfolio, bidding $900M USD.  It insisted that its purposes for acquiring it would be peaceful.  In its blog its Senior Vice President and General Counsel Kent Walker explains, "[O]ne of a company’s best defenses against .
.. [patent] litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services."

The comment would prove fortuitous, as Google was beat by a shadowy bidder calling itself "Rockstar Bidco".  That bidder offered up $4.5B USD, an offer that was embraced by a cash-thirsty Nortel, leave Google's potential offer in the dust.

So who was Rockstar Bidco?  Turns out it was none other than Apple, Microsoft, RIM, and three other companies -- the same players who are working to use their already substantial IP to try to sue or license Android handset makers into the red.

IV. U.S. Antitrust Regulators May Step In

The plot to kill Android is so obvious that it has top antitrust experts screaming foul.  Robert Skitol, an antitrust lawyer at the Drinker Biddle firm, opines in a Washington Post interview, "Why is the portfolio worth five times more to this group collectively than it is to Google? Why are three horizontal competitors being allowed to collaborate and cooperate and join hands together in this, rather than competing against each other?"

Brian Kahin, a senior fellow at the Computer & Communications Industry Association, adds, "The one thing that's significant here is you have three of the four smartphone platforms ganging up on the fourth. You want patents for an economic benefit, not as a legal instrument."

The questions Mr. Skitol and Mr. Kahin raises are reportedly being echoed among top U.S. antitrust officials.  Pressure is mounting for the U.S. government to block or place serious restrictions on the "Rockstar Bidco" acquisition of the Nortel IP.

The American Antitrust Institute sent a letter to the U.S. Department of Justice, begging them to limit the purchase.

The sale is set to be made official on Nortel's antitrust proceedings today, though regulatory approval still awaits.

Mr. Walker says the outcome of the pending sale could be a matter of life or death for the Android ecosystem and free market.  He states, "This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers."

V. From Bully to Victim: Google's Unusual Situation

Google clearly won't go down without a fight, nor will its handset partners.  But if the intellectual property pressure grows too great, the Android coalition may be rendered unable to compete.

The situation is highly unusual, due to a number of reasons.  First, Google itself is the subject of antitrust scrutiny on reports that it abused its dominant Android position to bully service providers.  Second, the case represents a situation in which small players are able to team up and legally damage a clear-cut market leader -- a relative rarity.

Thus Google -- which of late has become viewed as a bully of sorts -- finds the tables turned, and finds itself a clear victim.

VI. The Big Picture

While the possibility that Android, a beloved smartphone institution, could be sued out of existence by Apple, Microsoft, et al. is alarming to many, this incident in many ways serves most of all to illustrate much broader problems with the U.S. intellectual property system.

Companies in the U.S. are laying claim to increasingly generic intellectual property and using that IP as instrument not to innovate, but to litigate.  The street runs two ways in most cases -- often times IP lawsuits are followed by IP countersuits [1][2].  But often one player in the market is using IP as the general bully, while the other is trying to defend itself.

Many argue the U.S. desperately needs intellectual property reform.  But the federal government under both former President George W. Bush (R) and under President Barack Obama (D) has been slow to act.

The Nortel sale should offer a key signal to the market.  If the federal government blocks it, it may be a sign that the era of using IP as an offensive weapon is coming to an end.  On the other hand, if it's approved without restriction, it will offer a virtual blueprint of how to defeat your competitor.  If the latter scenario plays out consumers may find themselves in an odd market where it's not the competitor with the best products that wins, but the company with the best lawyers and patent portfolio.

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RE: Sad
By Pirks on 7/11/2011 4:11:50 PM , Rating: -1
Luckily I was right next to my iMac and a few quick licks of the Apple logo got me up and about again
Now that's more like it Tony :)))
Googled fucked it up big time
Nah, Google was just mocking you Apple zealots all this time, here's how and why:

"Looking at Google's bids for the patents, which were based on pi (3.141519 billion) and other universal constants like the distance between the Earth and the Sun, it's like Google wasn't even taking the bid seriously. And why would you? If you're Google and you're about to buy RIM, who's stake in the Nortel bid was $770 million, you're getting your piece of over 6,000 Nortel patents for a $4 billion dollar discount. Google actually buying these Nortel patents at over $4.5 billion would have been a stupid move if they're planning on buying RIM in the near-ish future. A RIM acquisition has effectively been discounted by over $3.5 billion."


"This external display is controlled by a BlackBerry PlayBook, which docks on the center console next to the driver, and when required, can be undocked and passed along inside the car for other members of the family."

Munch on this Apple zealots, stupid iPad kicked out of Renault vehicle and replaced by much better RIM Playbook.

Now watch Tony spit out his "RIM users are defecting but RIM posted 67% international revenue growth but... oh wait!" consfused propaganda attempts :)))

RE: Sad
By name99 on 7/11/2011 4:53:30 PM , Rating: 2
Wait to miss the IMPORTANT part of that article:

"Additionally, the Frendzy provides a large external screen, which can be used as advertising space, while the car is parked as well as when it is on the move; the French car-makers’ proclamation to the world regarding changing marketplace trends in outdoor advertising ?"

WTF? So what your Blackberry Playbook is controlling is a large advertising panel on your car! An advertising panel that is supposed to run (wasting electricity in an extremely obvious way) on a supposedly environmentally friendly vehicle?

Without getting into the issue of Apple vs RIM, let me just say that this basic idea is stupid beyond belief. It's a concept car that will NEVER get beyond concept.
You know how to repel women and make sure you will never get laid again in your life? Arrive at your date driving a car that displays video public advertisements all over it.

Believe me, if Apple were asked to be part of this godawful idiocy, they would have sent the Renault representative out the door with a "fsck you, and never come back. You want our good name to go down with this POS?"

RE: Sad
By Pirks on 7/11/11, Rating: 0
RE: Sad
By fcx56 on 7/11/2011 11:45:15 PM , Rating: 2
It's funny you posted this as not more than three hours ago I tried to watch Sucker Punch and had to shut it off less than half way through. One of the worst movies in quite some time. Yeah the girls were hot, but let's be serious, having to watch them act like they're acting was simply excruciating. Oh, and try to pick a girl up with Sucker Punch playing for the "outside world to view" and see if that goes any better for you, talk about hard boned...

RE: Sad
By Pirks on 7/12/11, Rating: 0
RE: Sad
By Smilin on 7/12/2011 1:09:52 PM , Rating: 2
Dude WTF are you watching a PG-13 movie for the girls? Find something R rated, geez.

I for one have no problem with steam and clockwork powered german zombie soldiers fighting it out with a 'mech nor a 30' tall samurai with a freaking chaingun or a b-24 liberator vs a dragon.

Maybe I wasn't after oscar material or something but I think you turned it off too soon.

RE: Sad
By Tony Swash on 7/11/2011 5:16:34 PM , Rating: 1
Nah, Google was just mocking you Apple zealots all this time:

If so they cut off their nose to spite their face.

RE: Sad
By Pirks on 7/11/2011 8:40:08 PM , Rating: 1
Haha, maybe, maybe, or else I'll enjoy the spite face of Apple zealots when Google buys RIM :P

"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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