Friday, April 10, 2015

The Google that has joined Via Licensing's LTE pool is the real Google--not the FRAND abuser

Yesterday's announcement that Google has agreed to make its LTE (4G) standard-essential patents, all or most of which previously belonged to Motorola, available through Via Licensing's LTE patent pool, is for all intents and purposes more meaningful than most settlements of patent disputes between industry players are. It means that Google is being Google again, and has distanced itself from the abusive conduct that gave rise to antitrust investigations in the U.S. (consent order) and Europe (decision, but no fine, which also looks like a compromise).

By "Google being Google again" I mean that the search giant and Android maker has given up on the notion that two wrongs (overwhelmingly meritless, at least impactless, patent assertions against Android on the one hand, and retaliatory abuse of FRAND-pledged standard-essential patents on the other hand) could make a right. Google temporarily used its SEPs in ways that ran counter to positions it was simultaneously taking on non-SEPs, even to the extent that Google, the parent company, submitted a public interest statement in an ITC proceeding that was amazingly inconsistent with what Motorola, the subsidiary, was saying in its own submission in connection with a parallel case. Also, Google's (ab)use of SEPs didn't really lend credibility to its positions on patent reform.

Now the "Don't Be Evil" company has apparently decided to become consistent again. In the LTE context Google is now aligned with companies that have never abused FRAND-pledged SEPs, some of which have even made significant efforts to advocate reasonable interpretations of FRAND. These are the other contributors to the Via Licensing LTE pool: AT&T, China Mobile, Clear Wireless, Deutsche Telekom, DTVG Licensing, Hewlett-Packard, KDDI, NTT DOCOMO, SK Telecom, Telecom Italia, Telefonica, and ZTE. Temporarily, Google's (Motorola's) FRAND positions were actually the same that some infamous SEP trolls and some failed businesses with an increasing or near-exclusive focus on patent licensing (and the privateers they feed with patents) tend to take.

This is the very Google that more than any other (IT) industry giant wants to make the world a better place through investments that the stock market doesn't reward in the short term but Google can afford, such as self-driving cars and "interventions that enable people to lead longer and healthier lives." More than any other large company I know, Google is truly about much more than just making money for its shareholders and other stakeholders. (Of course, this still doesn't give Google the right to violate antitrust rules in its core business, or to leverage excessive control over Android in anticompetitive ways.)

I find it hard to believe that the timing of the announcement--one day after an appellate hearing at which Google saw that it can't win the FRAND part of its Microsoft dispute, though it is winning the real war over Android royalties--is a coincidence. In that Microsoft v. Motorola case, Google's lawyers consistently argued that patent pool rates should not be used as an indicator of FRAND rates. Different standards (H.264 and WiFi) are at issue in that case, but still: Google wouldn't have wanted to undermine its anti-pool-rate argument. It certainly didn't want to give Microsoft's counsel the chance to mention its new position at the hearing, and if it had seen any realistic chance of Judge Robart's FRAND rate-setting opinion being overturned, it might have waited (possibly forever) with this move. Yes, this is speculative, but the connection is close and strong enough to support such a theory.

It's not clear whether Apple and Microsoft (which builds LTE devices as a result of the Nokia acquisition) will be able to benefit directly from Google's contribution to the Via Licensing LTE pool. With Apple, Google has a ceasefire in place, but no license deal (at least none that would have been announced). With Microsoft, it is still embroiled in litigation, though Microsoft hasn't brought any new offensive cases against Motorola in a while (at least none that would be discoverable).

Maybe Google's agreement with Via Licensing precludes Apple and Microsoft from licensing Motorola's LTE patents through that pool until comprehensive license agreements between those companies and Google are in place. In that case, Apple and Microsoft could still use the Via Licensing pool rates as pretty powerful evidence in any FRAND rate-setting dispute with Google.

Maybe Google doesn't even care if Apple and Microsoft license its LTE patents through that pool. Google could still assert older (3G) patents if necessary, as long as those haven't expired. And with the lack of success of Apple and Microsoft's patent assertions against Android devices so far, Google may not even be afraid and, therefore, may not feel it needs any leverage from LTE patents to counterbalance Apple and Microsoft's non-SEP enforcement. Apple started its enforcement against Android more than five years ago; Microsoft, more than four-and-a-half. After all this time, Google may be convinced that it doesn't need a good offense as its best defense because a defense-defense will always do the job to protect Android.

The main reason I used to criticize Google's position on patents so much was its inconsistency. It wanted to devalue non-SEPs while trying to gain undue leverage from SEPs. At first sight, one could also say that Apple and Microsoft are inconsistent because they want to bring SEP license fees down while exaggerating the value of non-SEPs. But FRAND-pledged SEPs are encumbered, and encumbrance is not a value enhancer. Consistency obviously depends on the particular arguments that are used and on whether any differences in value have a logical basis. For example, Apple is in my opinion being inconsistent by stressing its royalty base and "smallest saleable unit" point in connection with SEPs but arguing that even minor aspects of minor features (where the price of the smallest saleable unit, Android, is technically zero) make a substantial percentage of the entire value of a smartphone.

Overnight, Google has gone from "most inconsistent" to "most consistent" when it comes to patent licensing. This overnight change took years of litigation and a couple of antitrust investigations. Still it's great news, and I hope that some others, such as Apple, will soon match Google's level of consistency in this regard.

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