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'Apple-Google patent rush' could drive acquisition price up 50%

post #1 of 34
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Apple and Google's interest in securing wireless patents has driven up the cost of intellectual property so much that one potential acquisition is projected to command a 50 percent premium.

One high-profile acquisition target profiled by Bloomberg on Tuesdsay is InterDigital, which owns patents related to high-speed mobile phone networks. Last week, the company said it has hired banks to explore a potential sale, and since then it has gained $1.4 billion in value to $3.2 billion.

But an acquisition of the Pennsylvania-based company may cost more than $5 billion, and potential buyers could pay a 50 percent premium to secure the company's portfolio of 8,800 patents.

InterDigital is seen as the next major target after Apple led a consortium of companies, including Microsoft and Research in Motion, to buy Nortel Networks' patent portfolio for $4.5 billion. Apple paid the lion's share of that sum, contributing $2.6 billion in the acquisition.

The final $4.5 billion selling price was a fivefold increase from the initial bid made by Google. Officials with the search giant have declined to say whether they plan to bid on InterDigital, but the company's general counsel, Kent Walker, said on Monday that he believes patents are "government-granted monopolies" that stifle innovation.

At $4.5 billion, the Nortel patents sale was the biggest in history, Walker said. If InterDigital were to hit its projected, inflated $5 billion selling price, it would be an even larger sale.



Bloomberg said about 15 percent of InterDigital's patents are related to data transfer on mobile phones. Some believe the patents could be more valuable than those auctioned off by Nortel, because InterDigital's portfolio reportedly has more 4G-related wireless patents.

Patent ownership has become a major concern in the wireless industry as lawsuits between competitors have continued to mount. Earlier this month, a judge with the U.S. International Trade Commission made a preliminary ruling in favor of Apple against rival HTC. The presumed violation of two patents has been projected to earn Apple a high royalty rate from the sale of Android-powered devices.

Apple and Finnish handset maker Nokia also had an ongoing legal battle with the ITC, in which the commission's staff sided with Nokia in a preliminary review. Apple and Nokia opted to settle out of court, and Apple is now a licensee of Nokia's patents for an undisclosed ongoing fee.
post #2 of 34
I realize that Apple is terrified of suing Google directly. That's why all these proxy wars are all up ons.

But honestly, I just want them to get it done and be done about it. Enough ruining of other companies is going on already. We don't need the entire tech world taken down around us.

Apple's the U.S. and Google is the Soviet Union. Samsung's Korea (obviously) and everyone else sued in this vein are all the other countries over which we had proxy wars during the Cold War.

Microsoft is Britain: a large power basically staying neutral in the whole thing, waiting it out to see who wins.

Originally posted by Marvin

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Originally posted by Marvin

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post #3 of 34
The Sun never sets on the Blue Screen of Death.
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post #4 of 34
Quote:
Originally Posted by Tallest Skil View Post

I realize that Apple is terrified of suing Google directly. That's why all these proxy wars are all up ons.

But honestly, I just want them to get it done and be done about it. Enough ruining of other companies is going on already. We don't need the entire tech world taken down around us.

Apple's the U.S. and Google is the Soviet Union. Samsung's Korea (obviously) and everyone else sued in this vein are all the other countries over which we had proxy wars during the Cold War.

It's unclear what remedy Apple could get against Google. I think they'd almost have to go after them in court and not in the ITC, and by the time Google looked like losing, which might take years, they could just open source the final version of Android and Apple would still be left having to sue OEMs one by one. The most Apple can get off Google is money, and it wants market share.

Apple is also supply constrained so it makes more sense for them to kill off the Android OEMs one by one.

Quote:
Microsoft is Britain: a large power basically staying neutral in the whole thing, waiting it out to see who wins.

Hey! We were NATO stalwarts! Microsoft could be France perhaps, or Italy, or maybe China.
post #5 of 34
Terrified of suing Google? Apple? Based on what? Having seen Google execs mentioning the war, I would say they are the worried party. If they can't lay their hands on some patents soon they will face some problems. Either partners using Android will stop since they realize they will be in a mess otherwise or Google will have to truly step up and be part of the defense. With no patents to bargain with, it may very well go down to be expensive. Or impossible.

My guess is that companies like Ericsson, Nokia and Sony prefer playing in the same team as Apple (patent-wize) since they all respect patents and have patents to license and/or exchange. They are all the type of companies who has made their fortune by investing billions in research and development. This they will newer just let go of. However they do all have common foes: Google, Chinese copy cats and others who simply just do refuse to pay for patented ideas. Or even tries to compete with and crush companies by copying their ideas in front of a advertising alter.

Quote:
Originally Posted by Tallest Skil View Post

I realize that Apple is terrified of suing Google directly. That's why all these proxy wars are all up ons.

But honestly, I just want them to get it done and be done about it. Enough ruining of other companies is going on already. We don't need the entire tech world taken down around us.

Apple's the U.S. and Google is the Soviet Union. Samsung's Korea (obviously) and everyone else sued in this vein are all the other countries over which we had proxy wars during the Cold War.

Microsoft is Britain: a large power basically staying neutral in the whole thing, waiting it out to see who wins.
post #6 of 34
Quote:
Originally Posted by tumme-totte View Post

Terrified of suing Google? Apple? Based on what?

Based on the fact that the last time Apple tried to protect their OS software's intellectual property, they lost to the thief and had to spend two decades with 4% of their original 100% marketshare.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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post #7 of 34
I wonder how google feels about patents that protect search algorithms... ;-)

But seriously, I agree that the patent system is broken. One solution might be for Congress to increase the budget for the patent office so that it can do a more careful review of patent applications and use a higher bar in deciding which patents to grant. But that ain't gonna happen so long as Republicans exist (gubbermant spending == BAD!, drrr drrr drrr), so Google is going to just have to suck it up.
post #8 of 34
Quote:
Originally Posted by Tallest Skil View Post

Based on the fact that the last time Apple tried to protect their OS software's intellectual property, they lost to the thief and had to spend two decades with 4% of their original 100% marketshare.

That was a totally different barrel of monkeys! That time Apple was trying to effectively make new law by getting the court to extend copyright to look & feel. It learned that lesson well - this time it's relying on well established modes of IP.
post #9 of 34
Quote:
Originally Posted by Tallest Skil View Post

Based on the fact that the last time Apple tried to protect their OS software's intellectual property, they lost to the thief and had to spend two decades with 4% of their original 100% marketshare.

Apple lost because Sculley signed a contract with Microsoft allowing them to copy the OS as long as Office was made available on the Mac. So MS made Office available but in a handicapped state. Even Sculley later admitted he was wrong.
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post #10 of 34
Quote:
Originally Posted by Blastdoor View Post

I wonder how google feels about patents that protect search algorithms... ;-)

Don't know. What was the outcome of the cases where they sued their competitors over search or mobile advertising?
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post #11 of 34
Quote:
Originally Posted by Blastdoor View Post

I wonder how google feels about patents that protect search algorithms... ;-)

But seriously, I agree that the patent system is broken. One solution might be for Congress to increase the budget for the patent office so that it can do a more careful review of patent applications and use a higher bar in deciding which patents to grant. But that ain't gonna happen so long as Republicans exist (gubbermant spending == BAD!, drrr drrr drrr), so Google is going to just have to suck it up.

Or we can just continue to spend as much money as we want, borrow what we don't have, and eventually China will own the United States. That sounds much more reasonable, you're right!
post #12 of 34
Patents really are Mutually Assured Destruction. What we need now is for IBM to get into the phone business...

That, or for Apple to vertically integrate into the Telco business and buy Sprint...
post #13 of 34
They don't want to pay for anything.
post #14 of 34
Quote:
Originally Posted by aaarrrgggh View Post

That, or for Apple to vertically integrate into the Telco business and buy Sprint...

Doing WHAT for them? Sprint operates on CDMA and in the U.S. alone. Not only is there no point to buying ANY telecom, buying Sprint is completely worthless because the rest of the world, as much as you don't seem to notice it, exists.

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
Reply
post #15 of 34
Quote:
Originally Posted by Tallest Skil View Post

Doing WHAT for them? Sprint operates on CDMA and in the U.S. alone. Not only is there no point to buying ANY telecom, buying Sprint is completely worthless because the rest of the world, as much as you don't seem to notice it, exists.

so very very very true
post #16 of 34
Quote:
Originally Posted by aaarrrgggh View Post

Patents really are Mutually Assured Destruction. What we need now is for IBM to get into the phone business...

That, or for Apple to vertically integrate into the Telco business and buy Sprint...

Better yet. Really vertical integrate into a space satellite delivery system ($8 Billion)
post #17 of 34
Quote:
Originally Posted by starwarrior View Post

Better yet. Really vertical integrate into a space satellite delivery system ($8 Billion)

Obviously they need an interstellar colonization program. Duh.
post #18 of 34
With a new stock high today Apple should buy InterDigital while the getting is good.
post #19 of 34
Quote:
Originally Posted by aaarrrgggh View Post

Patents really are Mutually Assured Destruction. What we need now is for IBM to get into the phone business...

That, or for Apple to vertically integrate into the Telco business and buy Sprint...

Nah... why buy one when you can buy patents that give you leverage with all of them?

I wonder how long it will take for RIM to go bankrupt, and how much their patents are worth...
post #20 of 34
Quote:
Originally Posted by Blastdoor View Post

Nah... why buy one when you can buy patents that give you leverage with all of them?

I wonder how long it will take for RIM to go bankrupt, and how much their patents are worth...

They are still solvent but they have no solid future which will hurt them doubly. First in the product market with consumers and second in the stock market with investors. I hope I see some decent acquisitions or innovations so I can reinvest with RIMM.
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post #21 of 34
The more I think about it, the more perfect the idea of Apple going on a patent-buying spree sounds. Buying large companies is a pain in the butt because you have to integrate all of their (most likely) sucky employees, deal with all the sh!t products they sell that are of no interest to you, etc etc. All that just to gain access to a few key assets.

Buying patents, otoh, is much more simple. It makes it possible to sell things that other people can't sell without sharing some of their profits with you. Nice work if you can get it, and Apple's got the means to get it.
post #22 of 34
Quote:
Originally Posted by cloudgazer View Post

That was a totally different barrel of monkeys! That time Apple was trying to effectively make new law by getting the court to extend copyright to look & feel. It learned that lesson well - this time it's relying on well established modes of IP.

Yes, and I suspect we are just beginning to see the fruits of Steve's hard learn experiences kicking in this time around.
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post #23 of 34
Anyone interested in this article should listen to the latest NPR's This American Life about Patent Trolls. Great job NPR!
post #24 of 34
Quote:
Originally Posted by solipsism View Post

They are still solvent but they have no solid future which will hurt them doubly. First in the product market with consumers and second in the stock market with investors. I hope I see some decent acquisitions or innovations so I can reinvest with RIMM.

What can a one trick pony do when its pony is dead? Many a company dies a horrible financial death assuming it can pull of a success in the same market place twice. Steve is among the few to have managed to have a business that did that.
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post #25 of 34
Quote:
Originally Posted by digitalclips View Post

What can a one trick pony do when its pony is dead? Many a company dies a horrible financial death assuming it can pull of a success in the same market place twice. Steve is among the few to have managed to have a business that did that.

Don't get me wrong, I don't think it's likely, but it's certainly not impossible. Look at Sears. Even though they're fall from the top was assured decides ago they are still around and still making a profit even though that profit is in decline. RiM and Nokia are still more financially capable than most of the handset vendors in the market. If they can find a solution they could carve out a sustainable niche even if well below Apple's financial dominance.
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post #26 of 34
Quote:
Originally Posted by AppleInsider View Post

... At $4.5 billion, the Nortel patents sale was the biggest in history, Walker said. If InterDigital were to hit its projected, inflated $5 billion selling price, it would be an even larger sale. ...

A bargain compared to the $8.5 billion Microsoft paid for Skype. The InterDigital acquisition will be strategic. The buyer will earn far more than the purchase price through royalties.

The Skype acquisition was a tactical short-term ploy by Microsoft. A public relations move. A desperate lunge at relevance.

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post #27 of 34
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Originally Posted by AppleInsider View Post

The final $4.5 billion selling price was a fivefold increase from the initial bid made by Google. Officials with the search giant have declined to say whether they plan to bid on InterDigital, but the company's general counsel, Kent Walker, said on Monday that he believes patents are "government-granted monopolies" that stifle innovation.

Of course when you do no research and own few patents yourself you will say this. It's like the kid on the playground upset that he doesn't have the toy some other kid has saying "I never wanted that stupid toy anyway".
post #28 of 34
Quote:
Originally Posted by solipsism View Post

... RiM and Nokia are still more financially capable than most of the handset vendors in the market. If they can find a solution they could carve out a sustainable niche even if well below Apple's financial dominance.

That solution, the secret formula for survival (let alone success), requires more than just a slick handset and pad running a slick OS. But that's pretty much all that RIM and Nokia could possibly ship in the next few years. (Plus or minus the BlackBerry Messenger service, which drove BlackBerry sales until recently.)

What made the original iPod so successful way back in 2001? The slick hardware? The slick click-wheel interface? Well, sure, those features helped. But iTunes is what put iPod over the top. The ease of use, the simple "Rip. Mix. Burn." and sync. In the last 10 years, Apple added the Music Store (then video then book stores), then the App Store to iTunes. iPod, the hardware + OS, is only the tip of the iceberg. The massive infrastructure is mostly below the water: the servers, the e-commerce software, the hundreds of millions of iTunes accounts, etc.

Now Apple is leveraging all that to help sell iPhones, iPads, and Macs. And Apple has generated unbeatable mindshare over the last 10 years. Have fun trying to carve out a niche below all that.

Better to build a time machine. Send your engineers and marketing team back to 2001, start working on your own iTunes-like infrastructure, and out-Apple Apple. Bon voyage.

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post #29 of 34
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Originally Posted by hittrj01 View Post

Or we can just continue to spend as much money as we want, borrow what we don't have, and eventually China will own the United States. That sounds much more reasonable, you're right!

As of May China owns 26% of all foreign held debt, which was 4.45T in January of a total 14.1T at the time. So China owns about 1/14th of our debt or about 7%. Yeah China is gonna rule us at this rate. They own about as much of our debt as Steve Jobs owns of Disney.

Quote:
Originally Posted by cloudgazer View Post

Hey! We were NATO stalwarts! Microsoft could be France perhaps, or Italy, or maybe China.

No way, MS can't be France. They don't surrender nearly often enough MS tends to be heads down and damn the torpedoes. Look at the losses the XBOX division has piled up over the years and they keep coming.
post #30 of 34
Quote:
Originally Posted by Tallest Skil View Post

Based on the fact that the last time Apple tried to protect their OS software's intellectual property, they lost to the thief and had to spend two decades with 4% of their original 100% marketshare.

Steve wasn't in charge then. Everyone thinks Apple is the old Apple. Go study Steve's history of patent disputes of any company he owns and/or head of at the time of the claims.
post #31 of 34
Google doesn't have the resources and never will to compete with Apple.

Google wants key patents in markets it competes with Apple means Apple will want them just as well and like The Price is Right, Google bids $300 and Apple can always bid $301.
post #32 of 34
Quote:
Originally Posted by SSquirrel View Post

No way, MS can't be France. They don't surrender nearly often enough MS tends to be heads down and damn the torpedoes. Look at the losses the XBOX division has piled up over the years and they keep coming.

Sounds like Credit Lyonnaise to me, very french
post #33 of 34
Quote:
Originally Posted by SockRolid View Post

That solution, the secret formula for survival (let alone success), requires more than just a slick handset and pad running a slick OS. But that's pretty much all that RIM and Nokia could possibly ship in the next few years. (Plus or minus the BlackBerry Messenger service, which drove BlackBerry sales until recently.)

Nope a solid handset running a slick OS at a mid market price point with access to a decent App Market would be enough for survival. RIM is using the Android market which is semi-decent, though it's not clear how many apps they're compatible with. Nokia may have more problems with WP7. Survival is possible though far from certain, the question is can they keep even their current levels of profitability.
post #34 of 34
Quote:
Originally Posted by bloggerblog View Post

Apple lost because Sculley signed a contract with Microsoft allowing them to copy the OS as long as Office was made available on the Mac. So MS made Office available but in a handicapped state. Even Sculley later admitted he was wrong.

Maybe. Because the "look and feel" case never went to trial, we will never know how large a role the license agreement had in final analysis. FWIW, Office didn't even exist at the time but Microsoft did develop some of the first software for the Mac, and they apparently did threaten to withdraw development if they did not get the license to use Mac interface elements. This is what Microsoft got incidentally -- not a license to copy the OS.
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