Microsoft, Motorola ruling: Google patents not worth billions

A judge found in favor of Microsoft in a patent spat with Motorola, indicating that Google grossly overpaid for the smartphone maker, despite the patent protection it was given.

Image via CNET

A U.S. judge fell in favor of Microsoft in the first round of an ongoing spat against Motorola over how much the software giant should pay the Google division for patent use.

But the case was more than twofold: the ultimate cost that Microsoft must pay for the patents would lead to an estimate valuation of Motorola's patent cache, which could have drastic effects on how the company makes deals with rivals and competitors in the future.

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The case centers around how much Microsoft should pay the search giant's mobile division for licensing its H.264 video and networking "essential" patents, aptly named because they are necessary to the functioning of its Xbox console and Windows software.

In the ruling, U.S. District Judge James Robart in Seattle said Microsoft owed about $1.8 million, a slightly higher figure than Microsoft's offering price of $1 million a year.

Google-owned Motorola, on the other hand, argued that it should be paid a massive $4 billion a year for use of these devices, as a result of the revenue and profit generated by both Xbox and Windows. 

While Motorola believed that it licensed its patents on a reasonable basis "consistent with those set by others in the industry," reports AllThingsD, Microsoft welcomed the decision saying it was "good for consumers," as it allowed patents essential to innovation remain affordable.

The string of judgements falling against Motorola seems to suggest Google grossly overpaid for the company, despite the patent protection it was given.

The valuation of Motorola's patents remains undefined, but significantly lower than Google expected. 

For the search turned mobile giant, it's a huge blow. It puts the company that Google bought for $12.5 billion — which has since increased to about $13 billion  with restructuring costs  and suchlike — worth a lot less than what it shelled out for back in 2011. 

Google's Eric Schmidt said Motorola was "not all about the patents," but it bolstered Google's position in the wake of competition, notably from Apple, which had brought a slew of patent-related cases against its manufacturing partners. All the patent fights were ultimately aimed at knocking Android down a peg or two.

But it almost was all about the patents. In total, Google acquired 17,000 patents in total, worth roughly $12.5 billion — not including staff, acquisition costs and other things. Call it $12 billion or even $11 billion, the difference between Motorola's asking price of $4 billion down to the court's $1.8 million determination values Motorola far less than Google expected.