How Apple led the high-stakes Nortel patent win against Google, sealing Ballmer’s promise

“‘It’s not like Android’s free. Android has a patent fee. You do have to license patents.’ That was Microsoft CEO Steve Ballmer in an interview last year with The Wall Street Journal,” MG Siegler reports for TechCrunch. “At the time, Microsoft was on the verge of releasing their first Windows Phone 7 devices, and knew their best hope in the market would be to go after Android — the same OS which quickly ran Windows Mobile into extinction. In the months that have followed, right or wrong, it looks like Microsoft is slowly but surely forcing Google’s OEM partners for Android to agree with this stance.”

“Google’s last great chance to save Android in this regard may have been the Nortel patent purse — 6,000+ patents spanning mobile and wireless innovation,” Siegler reports. “Unfortunately, the search giant lost the rights to those patents in a bidding war with their rivals. As a result — pending government inquiries surrounding the antitrust implications of all of this — Android remains very vulnerable. Perhaps more so than ever.”

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“But the story of just how Google failed to secure these patents — which many had assumed they’d win — may be even more fascinating… Essentially, Apple decided to stake the Rockstar group in this high-stakes poker game,” Siegler reports. “If the U.S. or Canadian governments don’t now either block this result (which seems unlikely given that they approved the bidders beforehand) or force fairly drastic changes (such as they did in the Novell patent case), Google and Android seem in some very serious trouble.”

Much, much more in the full article – recommended – here.

MacDailyNews Take: Obviously, Apple had enough money to outbid anybody on their own, but chose to do it this way (via Rockstar) for a reason or reasons, which might include antitrust cover and/or other legal reasons and/or to further some other strategic plan(s).

Related articles:
Google’s Schmidt worried and disappointed over Apple consortium’s Nortel patent win – July 8, 2011
RUMOR: Apple gets outright ownership of Nortel’s LTE (4G) patents – July 5, 2011
Google’s Android intellectual property headache looks set to become a migraine – July 5, 2011
Leaked bids show how Apple-led ‘Rockstar’ beat Google to Nortel patents – July 2, 2011
Apple consortium wins $4.5 billion Nortel patent trove auction; Google, Intel lose bidding battle – July 1, 2011
Intel gets antitrust approval to bid on Nortel patents – June 24, 2011
Apple gets U.S. antitrust approval to bid for Nortel patent trove – June 23, 2011
Apple, Intel among bidders for Nortel patent trove – June 17, 2011
Nortel delays patent auction one week citing significant interest – June 16, 2011
RIM looks to outbid Apple, Google, and Nokia for Nortel’s patent treasure trove – April 18, 2011
Google bids $900 million for 6,000 Nortel telecom patents in quest to boost patent portfolio – April 4, 2011
Apple reportedly bidding for Nortel patent portfolio – December 13, 2010

42 Comments

  1. Apple’s cash hoard is a strategic weapon, as opposed to a tactical one. How much more valuable is it when used to cripple a rival than to buy back stock or pay a dividend? The Wall Street common wisdom is all people with the minds of accountants, and the courage of bankers are capable of understanding. That’s why they are bankers or accountants in the first place. Analysts even worse.

    1. I couldn’t concur more. Those patent busting trolls from Google should be sent back from whence they came – right back under the bridge.

        1. While you could argue that “from whence” is redundant, according to the built-in OS X dictionary note on usage:

          “Strictly speaking, whence means ‘from what place,’ as in : whence did you come? Thus, the preposition from in : from whence did you come? is redundant and its use is considered incorrect by some. The use with from is very common, though, and has been used by reputable writers since the 14th century. It is now broadly accepted in standard English.”

          So really, what Ballmer’s left nut said was perfectly acceptable, and you’re just being a pedant (and worse, an effectively incorrect one).

    2. Brilliant both your words and Apple’s strange but wise move with MicroSoftie and the whole “Partner Thingie” ….. Simply Brilliant …….

      It’s like getting rid of the aggressive players and playing with some who are somewhat aggressive but not towards Apple, at least not this time ……

      Apple can pick and choose and share as needed and innovate like crazy …..

  2. This move by Apple was absolutely brilliant. Apple essentially put up the money for the competitors to beat Google over the head. Why should Apple get its hands dirty, just send the hit men like Ballmer to break a few knees at Google.

    If you read the comments on the WSJ article, the Android fanboys and MS fanboys are having a brawl and not even mentioning Apple.

    Steve Jobs is like the Godfather, eating spaghetti and playing with his grandson while the rival gangs shoot it out. Apple never ceases to amaze me. Always thinking five moves ahead of the competition.

    Well played Apple, well played.

    1. You are on target! I read some of those posts, and it’s hilarious. They focus on Microsoft as the enemy. But Google has quite a few others. Let’s not forget Oracle, for example. Apple is playing this brilliantly.

      I was particularly amused by one post, that stated that Android is the best mobile OS. People are of course entitled to their own opinions, as well as their own delusions. But yes, Android may be the best mobile OS available to OEMs who wish to compete in the low end of the marketplace. At least until all those license fees come into place.

    2. As with Zeke above, this post provides a terrific insight into the business Apple is engaging in. Ballmer as hit man indeed! His persona fits that role so well, Jobs eating spaghetti, rival gangs shooting it out…wonderful imagery here, 84 Mac Guy.

      I love it.

    3. My thoughts exactly. Apple came to the dance with RIM and Microsoft, the two ugly stepsisters of mobile. The brilliant thing is Apple got them to pay part of the cab fare to the dance. RIM and MS are no threat to Apple in Mobile. That’s why the alliance.

      1. RIM might not be, but I think MS might turn out to be more of a problem than Apple (or most other people) seems to think.

        They may be having to buy their way into the market by bribing Nokia for now, but I’ve already seen posts by people saying how much they love their Windows 7 Phones.

        More to the point, a lot of people will buy W7Phone just because it’s Windows and Windows is familiar to them. I already get tons of people asking for Windows-based tablets even though those have existed for years and been hugely unsuccessful. Of course, if Office were available on Win7Phone or their tablet OS, that would be a deal maker right there for a lot of people.

        No matter what the facts actually are, it’s people’s perceptions that matter. And wrong as they may be, if the cell phone landscape turns into another Apple vs Microsoft battleground, a lot of people are going to side with Microsoft just because they are using MS for their computers.

        1. @ kerrigor: Interesting viewpoint. I would like to know how people’s perceptions of Apple’s iPad might change if MS did bring something to the game. For better or worse, the iPad is the “gotta have” tablet and I think MS will feel the heat.

          Right now MS has a very small market share in the mobile phone arena; do you have many people buying it?

  3. My oh my would you look at this its Microsoft vs. Google. two of apple’s biggest rivals in a fight for 2nd place. Google is the main enemy of apple and Microsoft in this scenario and the enemy of my enemy is a friend which means that Microsoft is apple’s friend. You don’t get many opportunities to say that. But I think we all know who the ultimate winner is going to be… Whoever has steve jobs as their CEO!

  4. The enemies of my enemies are my friends.

    That said, I’m sure that in those 6000+ patents, there are a number that are of little interest to Apple, but are of value to other partners. EMC and storage patents immediately come to mind; IIRC EMC has taken “ownership” of some of those patents, much like Apple has taken “ownership” of some of the LTE patents.

  5. The inclusion of RIM in the consortium will make this palatable to the Canadian Government and $4.5B will make the Nortel shareholders happy.
    🙂

  6. The main reason for Apple to not bid for patents by itself is not anti-trust since the company does not own much of low-level communication patents at all.

    They just pragmatic — there is no point to spend all these money by themselves, while others may help with the funding and share the ownership.

  7. I’m still willing to bet that the fund managers are going to continue to say that Apple’s share value is precarious due to the rise of Android. They keep running these Android market share numbers through their heads and consider it a serious threat to Apple somehow.

    I’m an Apple investor and I can easily tell that Android isn’t really a barrier to iPhone sales. The only barrier I see is how many iPhones can Apple produce to satisfy demand. Even if Android never came into existence there would still be a problem with Apple keeping up with iPhone demand. The growth rate of Android has nothing to do with how many iPhones can be sold. Those consumers buying Android could easily have been buying Nokia, BlackBerry or Palm smartphones. Why does WS seem to believe that only a company that has major market share can be successful and those with less market share can’t be.

    A build rate of 25 million iPhones in a quarter is an absolutely astounding amount of devices. Very likely, there’s no SINGLE company that uses Android putting out that many smartphones and definitely not at that profit margin.

    1. Android is great for Apple, and not because “competition is good” BS. What Android is doing is what Windows did for the personal pc back when Apple started it. The iphone is a an expensive phone, just like the mac was back in the day. This let windows gain market share, just like android is gaining now. What windows did was take the pc to the masses something apple at those prices simply couldnt, Android is taking the smartphone to the masses. What happens next ? Those android users will eventually upgrade to iphone, just like windows users are today upgrading to a mac. Win-Win for Apple.

      1. Dood, when an Android phone is sold, even at BOGO prices or $0.00 the price for the Android phone over the life of the contract is greater than the price of the iPhone after the contract is over and the used iPhone is sold on E-Bay.

        A 2 year old Android phone is worthless.

        1. Yeah. That’s something that windows users could never really get through their head. Any mythical “premium” to own a mac could be made up in the resale of the mac several years down the line. I remember selling a 3 year old PowerBook for a thousand dollars on eBay.

          1. Ah, yes, those were the days. However today’s eBay is a terrible place to sell as they nick you for so much more percentage of your selling price that it’s hardly worth it.

            But you’re right – Mac resales are like BMW resales.

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