Patent Peace In Our Time For Apple And Google?

| About: Apple Inc. (AAPL)

Even before its big iPad3 announcement, Apple (NASDAQ:AAPL) is up $3 on news it may be willing to make peace with Google's Android OEMs.

The potential deal, first revealed by Dow Jones, would add about $15 to the cost of an Android device, on top of the $15 presently being paid for Microsoft (NASDAQ:MSFT) patent claims. It would also eliminate the legal troubles Apple has encountered in Germany, where Motorola has been hammering it for violating patents previously licensed under Fair, Reasonable And Non-Discriminatory (FRAND) rules as part of industry standards.

Google (NASDAQ:GOOG) stock also rose today despite the company being ordered to turn over internal documents surrounding Android development in a suit between Apple and Motorola.

Florian Mueller of FOSSPatents urged caution on the news, noting that the royalty basis hasn't been discussed, that talks are in an early stage, that not all Apple patent claims are covered, and noting that the key to a final agreement will lie in the differentiation Apple is able to force through on its products, not how much money changes hands.

Why would Apple settle, when it seems on the verge of winning some major decisions? One reason is that Android is not going away: Its mobile market share rising again over the last three months to 48.6%, while Apple's is at 29.5%, according to Comscore. The duopoly seems secure, and an agreement would have Apple making money off Android while retaining its uniqueness.

Settling with Samsung, Android's largest OEM, would also benefit Apple because Samsung is a major supplier of iPad parts. Being at war with your suppliers is not a good thing.

The Register notes that the playing field is also changing, and that Apple might actually want to cooperate on such things as NFC-based mobile wallets. Google's ability, through Motorola, to get Android into cable boxes and mobile infrastructure also means it's not going away, no matter what happens. So given Apple's strong legal position now may be the perfect time to talk settlement.

Any settlement would also be welcomed by the market, where patent fights are having a chilling effect on the whole market, and getting increasing numbers of people interested in major patent reform that might render some of Apple's current advantages moot.

It's called quitting while you're ahead.

Disclosure: I am long AAPL, GOOG.

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