Did Motorola just hint they are ready to join Android IP racket with their own patent fee demands?

Android and it’s licensees haven’t been doing too well lately in dealing with various intellectual property issues. They are being sued left and right over patents, and courts already started handing them some painful defeats.

I recently calculated that, in one scenario,  a typical licensee might end up paying $60 per Android device in patent fees. Some accused me of sensationalism, fear  mongering and using the very worst possible outcome.  Recent developments show that it might not have been the worst case.

ITC court has issued a preliminary ruling that HTC is infringing on 2 Apple’s patents, the ruling that might result in a U.S. import ban for all HTC Android phones. Now Bloomberg reports that Samsung has agreed to Apple’s demand to delay the launch of Galaxy Tab 10.1, and stop it’s advertising, until it gets Australian court approval to do so. While I think those setbacks are very temporary and there won’t be any real import bans until current patent suits are resolved in courts in a few years, they are a worrysome indications for a major Android weakness.

And now, it seems, that we can add another player, with one of the biggest patent portfolios in the industry, that may be getting ready to join the Android IP racket, demanding royalty payments from those who use Google’s OS in their devices. I can hardly believe I’m writing this – but this new player is Motorola Mobility. It very clearly signaled it’s intentions during the recent quarterly earnings conference call.

Here’s what Motorola’s CEO Sanjay Jha had to say about their patent portfolio, and what they intend to do with it:

We own one of the strongest and most respected patent portfolios in the industry. We have over 17000 patents granted and 7000 patent applications pending, with particular strength in 2G and 3G essentials, non-essential patents important to the delivery of the competitive products in the marketplace, video, particularly compression/de-compression and security technologies, and, finally, a leading position in 4G LTE essentials. With new entrants in the mobile space, resulting from the convergence of mobility, media, computing and the internet, our patent portfolio is increasingly important. We regularly review the company’s strategies, opportunities and assets, including the IP, with the goal of creating and enhancing value.

…….

…. when I first came here (to Motorola), one of the reasons that I liked this opportunity, was because I had a view that brand and IP portfolio was very strong. As I arrived here and had had a chance to understand our IP portfolio, I actually think it’s stronger then I anticipated. There are really a few areas where our patent portfolio is extremely strong. First, 2G/3G essentials, I think that is very well understood by the (Wall)street and the industry, and we have monetized that asset over the last few years very well. Probably a little less well known is our strength in patent portfolio in non-essential patents, which are capabilities that are important to have in delivering competitive products in the marketplace. Third, I think is in our video coding/de-coding and security, and fourth, probably least understood and most underestimated , is our strength in our 4G LTE patent portfolio. As I look at these patent portfolios, I feel very good that we will be able to go forward and find ways to create enhanced shareholder value.

… that (IP royalty) number has come down over the years as a result of licenses that have expired over that period of time, and they are largely related to our 2G and 3G patent portfolios. As we go forward, I think that the introduction of number of players with large revenues, which have come into the marketplace as a result of the convergence of the mobility, computing, internet and other segments, I think that that creates an opportunity for us to monetize and maximize the shareholder value in a number of different ways and we evaluate all of them all the time.

I can understand Sanjay Jha touting Motorola’s patent portfolio, and even emphasizing their non-essential patents. That’s a clear signal to Microsoft, Apple and others – “Back off. You mess with us, we will mess with you and it may turn out that we have a bigger club to beat you with”.

But the talk about the additional patent portfolio monetization is a very clear sign that Motorola is about to get way more aggressive with its patent licensing efforts. Their main targets? New players, with large revenues, who entered mobility industry due to convergence.

Do you know any new player in mobility, who has large revenues and is not using Android for it’s mobile devices? HP – does not count – they’ve bought Palm, with all of it’s patents. Microsoft is actually suing Motorola – so it seems to be in stronger position here. And Microsoft extends it’s IP protection to all Windows Phone licensees. The rest? All are doing Android. So Android devices from all of them, including HTC and Samsung, are potential targets for IP licensing fee demands from Motorola.

Actually, HTC and Samsung might be THE primary targets for Motorola going forward. Because Motorola is loosing hard to both of them in an open market.

Motorola bet all of it’s future on Android. And was the key Google partner on par with HTC from almost the beginning. Motorola even got an exclusive access to the first consumer grade/mass market version of Android (2.0), and most of Verizon’s Droid Does launch marketing money. HTC had to wait 6 months to release it’s own first Android 2 handsets (HTC Desire/Droid Incredible/EVO). Samsung took even longer to ship it’s Galaxy S. But now, due Motorola’s execution blunders, it is falling behind Samsung and HTC fast.

During the last 12 months Motorola grew it’s Android device sales from 2.7 million to 4.84 million (including tablets) – that’s ~80% growth, which looks pretty good in isolation, but pretty bad if you compare it to competition. In the same time period – HTC grew it’s sales by 124% – from 5.4 million smartphones in 2010 to 12.1M in 2011. Samsung’s growth was mind blowing 500%+ from estimated 3-4 million last year, to estimated 16-19 million in Q2 2011 (not all of them are Androids, a few million run Bada). Both companies grew much faster and from a higher base then Motorola.

Which means that Motorola is rapidly loosing it’s market share and significance in Android market, and started generating losses once again. So now they might be looking for additional revenue streams, and patent portfolio may seem like a good and easy place to start. If Microsoft can get hundreds of millions from Android licensees, why should Motorola miss out on the opportunity? Especially if that will allow Motorola to make their smartphones a bit more competitive, at least on price?

Or is Sanjay just hinting Larry here: “You better buy us. Soon. You were ready to pay 4B+ for 6K Nortel patents, and we are worth 6.4B today. Offer nice premium and you’ll solve all your Android patent problems, and get a team to make all your Nexus stuff as a bonus. Spin out everything else to some Chinese upstart, and you’ll even make a nice profit in the end…

 

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • philoxenus

    When used as a possessive, “its” has no apostrophe. “It’s” is a shortened version of “it is.”