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

Posted:
in iPhone edited January 2014
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.
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Comments

  • Reply 1 of 33
    tallest skiltallest skil Posts: 43,399member
    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.
  • Reply 2 of 33
    solipsismsolipsism Posts: 25,726member
    The Sun never sets on the Blue Screen of Death.
  • Reply 3 of 33
    cloudgazercloudgazer Posts: 2,161member
    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.
  • Reply 4 of 33
    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.



  • Reply 5 of 33
    tallest skiltallest skil Posts: 43,399member
    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.
  • Reply 6 of 33
    blastdoorblastdoor Posts: 1,888member
    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.
  • Reply 7 of 33
    cloudgazercloudgazer Posts: 2,161member
    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.
  • Reply 8 of 33
    bloggerblogbloggerblog Posts: 1,808member
    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.
  • Reply 9 of 33
    gatorguygatorguy Posts: 19,805member
    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?
  • Reply 10 of 33
    hittrj01hittrj01 Posts: 753member
    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!
  • Reply 11 of 33
    aaarrrggghaaarrrgggh Posts: 1,567member
    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...
  • Reply 12 of 33
    irontedironted Posts: 129member
    They don't want to pay for anything.
  • Reply 13 of 33
    tallest skiltallest skil Posts: 43,399member
    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.
  • Reply 14 of 33
    cloudgazercloudgazer Posts: 2,161member
    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
  • Reply 15 of 33
    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)
  • Reply 16 of 33
    cloudgazercloudgazer Posts: 2,161member
    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.
  • Reply 17 of 33
    kozchriskozchris Posts: 209member
    With a new stock high today Apple should buy InterDigital while the getting is good.
  • Reply 18 of 33
    blastdoorblastdoor Posts: 1,888member
    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...
  • Reply 19 of 33
    solipsismsolipsism Posts: 25,726member
    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.
  • Reply 20 of 33
    blastdoorblastdoor Posts: 1,888member
    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.
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