After years of reverse-engineering electronics gadgets and looking for infringing products, a patent consortium owned by Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Ericsson (NASDAQ:ERIC), Sony, EMC and BlackBerry (NASDAQ:BBRY) has filed a battery of lawsuits against Google (NASDAQ:GOOG) and Android manufacturers like Samsung, HTC, Huawei and others. The action opens another, major front in the patent-infringement war that has engulfed virtually all of the world's major mobile players.
The lawsuits stem from the Rockstar patent consortium, which paid $4.5 billion for the 6,000 patents that bankrupt Nortel Networks offered up for auction in 2011. Rockstar is primarily backed by Apple, which paid $2.6 billion into the effort. BlackBerry paid $770 million for its share of the patents, Ericsson paid $340 million and the remaining $790 million was split among cloud-storage company EMC, Microsoft and Sony. According to a report from Wired, Rockstar for the past several years has employed 10 full-time workers to reverse-engineer various products in a search for infringing companies. Rockstar would then pursue those companies for patent licenses.
And now it seems Rockstar has found a group of companies that declined to ink patent-licensing agreements. According to reports of the lawsuits, Rockstar's handful of lawsuits target a wide range of technologies, including the pairing of Internet searches with advertisements that forms the basis of Google's business. The patents also target various technologies in Google's Android operating system, which Samsung, HTC, Huawei and others use in their smartphones. According to Reuters, Google declined to comment on the lawsuits and the other companies targeted in the lawsuits did not immediately respond for a request for comment.
In Rockstar's lawsuits, the consortium notes that Google participated in the auction for Nortel's patents, starting with a $900 million bid and offering as much as $4.4 billion. Thus, Rockstar notes, Google is well aware of the value of the patents.
Indeed, shortly after Rockstar won Nortel's patents in auction, Google announced in 2011 its $12.5 billion acquisition of Motorola Mobility, which Google at the time said was partially to obtain Motorola's trove of 17,000 patents. "We think combining with Motorola and having that kind of a patent portfolio to protect the (Android) ecosystem is a good thing," David Drummond, Google's senior vice president and chief legal officer, said at the time.
Apple's investment in Rockstar appears to have sprung directly from former CEO Steve Jobs, who told his biographer that he would "go nuclear" on Android because he thought it was a product stolen from Apple's iPhone. Specifically, according to biographer Walter Isaacson, Jobs "became angrier than I had ever seen him," while discussing Android, explaining that "I will spend my last dying breath if I need to, and I will spend every penny of Apple's $40 billion in the bank, to right this wrong. I'm going to destroy Android, because it's a stolen product." Jobs died in 2011.
According to Strategy Analytics, Android commanded 81 percent of the global smartphone market in the third quarter, far ahead of the iPhone's 13.4 percent.
Apple's campaign against Android led to the company's $1 billion courtroom victory against Samsung's Android smartphones in 2012, though the damages in the ruling were subsequently slashed by $450.5 million. The case has since been mired in appeals.
The billions of dollars that have been tied up in patent lawsuits in the mobile industry and the wider business market have sparked calls for an overhaul of the patent system. "Rockstar's attack on Google highlights two of the most egregious problems with our country's broken patent regime," said Charles Duan, Direct of Public Knowledge's patent reform project. Duan said that Rockstar sells no products and doesn't promote innovation, and also shields its owners, including Apple, from counter lawsuits.
"Many of the patents asserted by Rockstar appear to be overly broad and of low quality. It is likely that its attempt to hobble its owners' competitors in the courtroom will ultimately fail. But it will be expensive to reach that point, and whatever the outcome of the litigation, consumers will bear the cost," Duan concluded.
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