Tech firms try to convince regulators that they’ll play nice with patents

February 9, 2012

With the Justice Department on the cusp of allowing two major acquisition deals among technology companies, the firms involved — including giants Google, Apple and Microsoft — are trying to reassure regulators that their battles over intellectual property won’t harm the industry.

Antitrust officials are preparing to greenlight, as early as next week, a pair of purchases that allow the country’s biggest tech firms to build up their arsenals of patents: Google is paying $12.5 billion to purchase cellphone maker Motorola Mobility, largely to acquire the company’s lucrative patents. Meanwhile, a group of Google’s rivals, including Apple and Microsoft, is set to buy the extensive patent portfolio of now-bankrupt telecommunications firm Nortel Networks.

The patents cover aspects of technology related to the lucrative market for mobile devices. The companies are stockpiling patents in an escalating, Cold War-like fight; any company that falls too far behind risks getting pummeled by rivals in the courts, where a dizzying array of lawsuits are already in progress. At stake could be the future of smartphones.

On one side of the global battle: Google and its Android partners, such as HTC, Samsung and Motorola. On the other: Google’s rivals, including Apple, with its iPhone, and Microsoft, which also offers software for smartphones.

Companies can often resolve their disagreements by licensing patents to one another. But antitrust officials in this country and in Europe are worried that firms won’t offer agreements that are on fair terms. In particular, regulators are concerned that companies will seek injunctions against one another that would force competitors to halt the sales of their products.

Apple last week had to briefly suspend the sale of some smartphones and tablet computers in Germany because Motorola sought an injunction alleging that Apple had infringed on its patents.

In part to allay these fears, companies have begun making promises about what constitutes fair terms for patent agreements, particularly for those that are considered essential — for example, ones that deal with Internet capabilities on phones. (For these kinds of patents, companies agree to license them under “fair, reasonable, and non-discriminatory” terms, or FRAND.)

Microsoft on Wednesday said it will “not seek an injunction or exclusion order against any firm” for patents that are deemed essential. Apple made a similar promise in November.

Although Google has not ruled out the possibility of seeking injunctions, the company said in a letter Wednesday that it would take that route only if another firm refused to accept its patent licensing requirements.

“Since we announced our agreement to acquire Motorola Mobility last August, we’ve heard questions about whether Motorola Mobility’s standard-essential patents will continue to be licensed on FRAND terms once we’ve closed this transaction,” said Google in a statement. “The answer is simple: They will.”

The Federal Trade Commission and the European Commission are both investigating Google for antitrust violations. The Europeans have also launched an inquiry into whether Google’s Android partner Samsung is illegally blocking competitors from using its patents.

The Justice Department’s impending approval of the acquisitions was first reported by the Wall Street Journal. Justice Department spokeswoman Gina Talamona declined to comment for this article.

Jia Lynn Yang is a staff writer at The Washington Post who covers policy and business. Before joining the Post, she worked at Fortune magazine.
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