Google could face pressure to write down the US$5 billion value of the patents in its Motorola subsidiary, as the mobile arm faces fines from Europe’s antitrust commissioner for trying to use them to block sales of Apple’s iPhone in Germany.
The European commission’s antitrust unit raised a formal statement of objections this week, which could be followed by a substantial fine, after Motorola tried to use a number of its standards-essential patents (SEPs) to try to stop sales of iPhones with 3G network capability in Germany.
Using such patents to block rival products from companies willing to license them, as Apple was, constitutes “abuse of a dominant position,” the unit said.
SEPs have to be used to make a smartphone or device meet standards such as 3G and 4G for smartphones.
Holders of such patents agree to license them on “fair, reasonable and nondiscriminatory” terms, in return for becoming part of the standard and receiving repeated small license fees.
However, Motorola has used its SEPs to seek court bans on Apple and Microsoft products and now faces strictures and possible fines from Joaquin Almunia, the competition commissioner. The commission’s position makes the patents less valuable in court battles.
Google bid US$12.5 billion for Motorola Mobility in 2011, citing its strong patent portfolio as a defensive move against Apple and Microsoft, which were gunning for Android handset makers in patent infringement cases. In July last year, after the acquisition was complete, Google valued Motorola’s patents at US$5 billion.
The commission’s finding comes just weeks after a US court cut Motorola’s demands for US$4 billion in annual royalties from Microsoft to just US$1.8 million, following a year-long battle over patents relating to Wi-Fi and the Xbox games console.
The decisions in the US and Europe mean that Motorola’s portfolio of about 17,000 patents represents “totally and utterly awful value,” said Richard Windsor, head of the Radio Free Mobile consultancy. “I suspect the days of usefulness of SEPs are numbered, which is going to make life increasingly difficult for the Android community in particular. The winners here are Microsoft and Apple.”
Google did not comment on the commission decision or its patent valuation.