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Microsoft, Google Feuding over Patents

August 6, 2011

Lately both Google and Microsoft have taken their fight to social media as well as courtroom. The fight stems from Microsoft & Co (Apple, RIM (Blackberry), Sony, EMC and Ericsson) won close to 6000 patents from the bankrupt Nortel & Novel. Nortel was a communication company with history dating back to 1895 and Novell dates back to 1979 and is a networking company and supporter for the open source code Linux. While I would like to say congratulation to the winning parties and Google to stop whining and acting childish, I can’t! Taking a closer look at what transpired should give all of us a pause including the FTC (Federal Trade Commission).

Few red flags are out there that at minimum should have made the FTC question the transactions/auction legality. Those are:

  1. Microsoft offering Google to join the bidding process
  2. Consortium included industry heavy weights and competitors

How in the world FCC and the public didn’t question this illegal behavior is beyond me. According to the FTC website on antitrust:
For the most blatant agreements not to compete, such as price fixing, big rigging, and market division, the rules are clear. The courts decided many years ago that these practices are so inherently harmful to consumers that they are always illegal, so-called per se violations. For other dealings among competitors, the rules are not as clear-cut and often require fact-intensive inquiry into the purpose and effect of the collaboration, including any business justifications. Enforcers must ask: what is the purpose and effect of dealings among competitors? Do they restrict competition or promote efficiency?”

To me the act of having a consortium of competitors acting as one entity had one thing in mind, to harm the consumer with Google being a byproduct of that. How could a small technology business flourish if this consortium will fight with their deep pockets or ask for licensing fees that might be too high for small firm to absorb? This partnership in my opinion has violated the FTC rules in:

  1. Bid Rigging. Some might argue auction was open to all, but if you look at the deep pockets of competitors in this partnership no one could have truly won. If Apple had more cash than the US government imagine how much cash this consortium has. Imagine as well if Google did join in!
  2. Price Fixing. This is to be seen if those patents will be used to increase prices for licensing the purchased patents on companies not part of this consortium. But big indication this is happening is the flood of law suits coming against companies “infringing” on those patents. Think of organized crime mentality, pay us or get destroyed by our might of legal onslaught. For example Barnes & Noble is being sued by Microsoft for their Nook infringing on patents using Android OS! (some the patents Microsoft going after their partner Apples uses on IPads!)
  3. Monopolizations. According to:” Section 2 of the Sherman Act makes it unlawful for a company to “monopolize, or attempt to monopolize,” trade or commerce. As that law has been interpreted, it is not illegal for a company to have a monopoly, to charge “high prices,” or to try to achieve a monopoly position by what might be viewed by some as particularly aggressive methods. The law is violated only if the company tries to maintain or acquire a monopoly through unreasonable methods. For the courts, a key factor in determining what is unreasonable is whether the practice has a legitimate business justification.” This partnership used aggressive methods to cannibalize the patents to monopolize the trade and harm future innovation by burying competitors in either litigations or unreasonable licensing fees or force them to use their products.

The fact it’s only patents that were sold shouldn’t been any different than if above companies where to be merged with above consortium or to be acquired by competitor. The FTC needs to take a hard look at what happened and in the future not allow such practice. I would suggest if a company of that size default then for the benefit of everyone (consumers and corporations alike), their patents becomes public and for all to use. Think of drug patents when it expires and generic flood the market. Technology patent of defunct companies need to be treated as such and open it to public, think of all the new technological innovations that colleges would come up with when they utilize those public patents.

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