Motorola Mobility: Google’s $12.5 Billion Escape Hatch

We have had a few days now to digest the acquisition of Motorola Mobility by Google.  It is clear that the stock market does not like the deal – the price of a share of GOOG has dropped by $30 since the deal was announced.  A respected analyst, Horace Dediu, has written a long article in the Harvard Business Review and talked more about it in the “critical path podcast” –  both of which are summarized very well in Fortune’s Apple 2.0 blog by Philip Elmer-DeWitt.

I encourage all to read the pieces linked above and to listen to the podcast, but I’ll also cut to the chase.  Dediu’s conclusion is that Google’s acquisition of Motorola Mobility makes no sense.  Not as an expansion of Google’s business, not as a strategic decision to begin making telephone handsets and tablets, not even as an expensive way to buy lots of patents that deal with various aspects of mobile computing and communications.

One thing that we do know is that Google does not employ dumb people.  They must have something in mind to support their decision to spend $12.5 billion – a lot of money even if you have Google’s bank account.

Celebrating Patent Trolls

The topic of the month in tech is “patent trolls are evil.” They typical statement is that patent lawsuits stifle innovation and divert resources from development into defending patent suits.

I disagree – what “patent trolls” actually do is accelerate the inventing process. They allow the true innovators – the ones that invented something new and got patents – to get immediate value for the patent rights because they pay cash to the innovators when they purchase the right to sue infringers of the patents. Innovators then can invest that cash to developing now inventions. This speeds the cycle for an inventor to get to the next invention.

The people or companies that have to allocate resources to defending against patent suits are the infringers – those that do not really innovate but rather copy the inventions of others. These are free riders – the do not invest in creating new technologies but rather quickly rush a copy of new technology to the market in hopes of grabbing sales from the actual inventor. They actually reduce the incentives to innovate because the inventor makes lower profits when she has to compete against these copiers. This is the whole reason why the field of patent law exists – to protect inventors from these copiers.