Particle Debris (wk. ending 7/8) Fairly Legal

| Particle Debris

I was on vacation last week, so here’s my slightly delayed edition of Particle Debris. It was a relaxing vacation that included the Georgetown Loop Railroad and the Renaissance Festival in Larkspur.

Georgetown, CO RR

Georgetown, Colorado Loop Railroad

Microsoft has a new source of cash flow, and it’s called Android. That’s because Microsoft has a strategy of going after technologies in Android that Microsoft thinks violate its patents. The goal is to keep Android from being free. And because Google is relatively patent poor, Google doesn’t have the patent protection other companies like Microsoft have. Here’s the article: “Microsoft patent division taking cash from at least 5 Android vendors.” Now you know why Apple and its partners went after the 6,000 Nortel telecommunication patents and collectively spent US$4.5B.

From a business perspective, I think Google launched into Android rather naively, and is now suffering the business savvy wrath of its competitors.

So how did Apple and its partners manage the coup? Here’s some fascinating background by MG Siegler. “How Apple Led The High-Stakes Patent Poker Win Against Google, Sealing Ballmer’s Promise.

One of our steadfast readers, Nemo, pointed out to me this morning that it is also a bit naive for Google to believe that they’ll end up being able to obtain licenses for those patents on a favorable basis.

I think that Apple can negotiate this and still keep useful ownership of the Nortel patents. That Google started putting in silly bids doesn’t help its argument that Apple, Microsoft, et al. teamed up to anticompetitively attack Android with Nortel’s patents. If Google was serious, why didn’t it make serious bids? Google certainly could have afforded a US$5 billion, which might have won.

The antitrust laws are not for the purpose of protecting those who won’t compete or who don’t wish to pay fair value for the right to license someone else’s IP. But if push comes to shove, Apple and its consortium can agree to license any essential patents to Google for a royalty that reflects the economic value of those patents. In that event, Google still loses and the Apple-Microsoft consortium still wins, because choosing Android over Windows Phone 7 and/or Web OS doesn’t make sense if Android OEMs must pay significant licensing fees.

And Google and its Android OEMs can’t object to paying a fair price for Nortel’s patents, hoping that the DOJ and the FTC will require that the Apple-Microsoft consortium give it, Google, the Nortel patents for free or for less than they are worth, at least at the value reflected in the price, $4.5 billion, paid for those patents at auction. To simply void the Apple-Microsoft consortium’s winning bid not only does great harms to Nortel’s creditors but would itself be anticompetitive in that Google would be awarded the patents without having to compete for them and would get them for less than they are worth. The DOJ and FTC can’t go further than fair and reasonable licensing terms for the Nortel patents, and, once again, that means Android loses and the Apple-Microsoft consortium wins.”

For all you Apple and Nikon fans, you can now attach Nikon lenses to your iPhone with this US$200 attachment. It seems like an odd thing to do if you already have a Nikon camera body, but on the other hand, what if you’re on an outing and want to exploit a second or third lens you have laying around. Besides, it’s just one of those things you may just have to have.

Social media is a mixed bag. Sometimes it’s a lot of fun, and sometimes it seems that there are just too many social media forms and some are pointless. You can get lost in all of them and lose you’re sense of personal balance. Here’s some food for thought on all that, even if the title is intended to be a bit lurid and arresting: “Stop using social media.

Fencing

Read My Patent!

There are differing opinions about the new Hewlett Packard TouchPad. In the last P.D., I pointed to some of the major reviews, all of which expressed a degree of disappointment. On the other hand, viewed in isolation, the TouchPad, had there never been an iPad, looks like a pretty good first try. And that’s the key: first try. The upshot is that technology development is like a flowing river, a time line. At any given time in your product development, you’re constrained by the state of the art plus your own corporate learning curve. (And parts availability.)

When you’re late to the game, you have to work incredibly hard to catch up, and it’s almost a super human effort. So as HP comes out with what is essentially an iPad 1, Apple is moving to the iPad 3. Closing the gap means pushing the technology beyond what you’re accustomed to, stressing your company talent, and accelerating the necessary infrastructure to the point of high strain. It’s almost more than any company can achieve, even one with HP’s engineering talent. So the inevitable occurs: you’re graded in comparison to the competition, and the appearance is that “HP fiddles while Apple innovates.

That’s why Apple’s competitors have to be on the ball and be no more than 6 months behind with competing technology and prompt patent applications. Being 15 or more months behind Apple is the kiss of death.

Finally, flaws in server software that led to security breaches, in the past, were just considered a fact of life. You couldn’t sue the developer or the host. Nowadays, however the stakes a much higher. And when that happens, the rules can change. As Tim Lee points out at ars technica, “That’s changing rapidly. Recently, Sony faced a class action lawsuit for losing the private information of millions of users. And this week, it was reported that Dropbox is already being sued for a recent security breach of its own.” As the pain gets greater, the lawyers get more involved and figure out new ways to compensate victims. Here’s some background with an ominous title: “So sue me: are lawyers really the key to computer security?

Technical Word of the Week

Buggage (n.) Emotional baggage. Example, “I hope my visitors don’t bring their buggage.” Thanks to Andrew Stone of Stone Design, via Twitter.

Comments

Nemo

What is really interesting is what the auction tell us about what Google thought the Nortel patents were worth given its business model.  Intel, according to reports, began the bidding at $1.5 billion and then dropped out of the bidding on Wednesday.  While we don’t know what Intel’s final bid was, let’s estimate that Intel dropped out at $2 billion.  Subtract that from the combined Intel-Google final bid of $4 billion, and we can estimate that Google was only willing pay $2.0 billion dollars to provide some patent protection for its Android OEMs, while licensing the Nortel patents to its Android OEMs for no royalty but with the licensing requirement that they use its services (Search, Location, Ad Agency, etc.).  In other words, Google was only willing to burden its ad and market information revenues from its services to finance about $2 billion for the Nortel patents and pay for the patent protection that those patents would have provided for its Android OEMs.

This means that Google could have certainly afforded to pay more at auction, if it was willing to absorb a hit to its profitability or its net worth, or if it was willing to charge its Android OEMs and explicit royalty for licensing the Nortel patents.  But since Google wasn’t willing to do any of those things, about $2 billion dollars for the Nortel patents was its limit.

Now should the FTC or DOJ intervene just because Google didn’t want to charge a royalty for Nortel’s patents or because it didn’t want to absorb the cost at the expense of its profitability or net worth, especially when Google was going to use those Nortel patents, inter alia, for the purpose of anti-competitively locking its Android OEMs into using its service on pain of being denied the use of the Nortel patents?  I don’t think so, because its improper for either agency to intervene just to protect Google’s particular business model, when it might have won the Nortel patents if it had been willing to charge a royalty for Android, nor should either the FTC or DOJ aid Google by giving it access to the tools, the Nortel patents, that it would have used to anti-competitively lock its Android OEMs into using its services for their Android phones. 

U.S. anti-trust authorities should not now aid Google when it could easily have offered much more at auction, if it charged a royalty for Android.  And Google charging a royalty for the Nortel patents would have made for a competitive environment, where Android OEMs could have either considered other services for their Android phones or even licensed other mobile OSs, such as Microsoft’s Windows Phone or HP’s Web OS, as opposed to the instant anti-competitive circumstance where Android OEMs outside of China have little choice, because of Google?s restrictive licensing terms,  but to accept Google?s services on Google?s terms for their Android phones.  U.S. anti-trust laws are for protecting and fostering competition, not for helping Google to further entrench its services on its OEMs? Android phones in a manner that precludes all competition for those services on those phones.

Lee Dronick

“because Google is relatively patent poor”

If not a patent troll they are certainly a patent prole.

The gadget for attaching Nikon lenses to an iPhone. I could see a use for it by people like me who a drawer full of lenses and some film camera bodies. Even if one had a digital Nikon the gadget would act like a second camera body.

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