Since Oracle (ORCL) sued Google (GOOG) over Android’s alleged infringements of Java IP, there’s been a lot of speculation about what Oracle really wants. Perhaps it’s just that under new management, Sun (JAVAD) is no longer interested in open source (as in the death of OpenSolaris) or any other form of openness.
But no matter what the motivations or how the case turns out, Google will be changed forever.
Google is being dragged kicking and screaming into the world of patents. Welcome, Larry and Sergei, to the mess that is our 21st century intellectual property system.
Google's founders had a vision of a world where superior efficiency and scale provided unchallenged market position and competitive advantage. CEO Eric Schmidt joined after being at two companies that lost such a game: Sun and Novell (NOVL). (Am I the only one who sees an irony in Schmidt being beaten over the head with a club he helped make?)
Unfortunately, the world is not so simple as to say that the company with the largest market share gets to keep all the spoils. Just ask Bill Gates — or perhaps Lou Gerstner of IBM or Steve Jobs or the folks who sued Rambus (RMBS).
For this technology-trumps-all, rude shock #1 was its disputes with content owners: not just Viacom (VIA.B) vs. YouTube — but also Google books and Google news. As Randy Stross noted in his 2008 book, Google had a painful adjustment when it could't understand why it couldn't go and do whatever it wanted to do. (Again much like Microsoft (MSFT) in the 1990s or Apple (AAPL) today.)
In reaction, Google had to hire a lot of copyright lawyers to represent its interests in disputes over fair use, compulsory licensing and incentives for creativity. Within the next 3-12 months, I suspect Google will similarly bring a world-class patent counsel in house.
As it so happened, the Oracle/Google lawsuit came up Friday in a previously-scheduled meeting with an industry insider. Without any direct personal knowledge, he attributed it to Google’s naïveté:
He then drew an analogy to a mythical “Free Car Company.” Can the car company get out of royalties on engines or wiper blades just because it gives away cars?
As far as I can tell, I don’t think Google cared [about the risk of patent litigation].
1. They assumed we’re a big company and nobody’s going to sue us.
2. They assumed “nobody is going to sue a GPL distributor, because the FSF and free software advocates are going to be behind us.”
Can you get out of paying patent royalties just because you distribute GPL code?
He also noted that the lawsuit may be about more than just Java middleware. A decade ago, there were four major patent holders for operating systems: IBM, Microsoft, HP (HPQ) (probably from its acquisitions of Tandem and DEC) and Sun. James Gosling (of Java fame) notes that Sun armed itself with patents to defend against IBM.
Now Google is shipping one of the most popular operating systems ever invented, and being challenged by the firm that holds one of those four major patent portfolios.
In the world of high stakes cross-licensing, Google needs a friend among those Big Four. A year ago, it looked to be HP, but since they bought Palm they’ve turned a cold shoulder to Android.
Once upon a time, list price for a mobile phone OS royalty was $5/unit (for something like Symbian or Windows.) If Google shipped 10 million units in Q2, then (even with the Christmas rush), a whole year’s royalties would be less than $500m, perhaps (depending on the per unit price) under $100m.
Still, if Oracle can extract a billion or two from Sun’s patent portfolio — without having to reinvest in actually inventing anything — the $7b purchase price is going to look cheap.