Aug 17 AT 4:05 PM Dustin Earley 35 Comments

With the acquisition of Motorola, Google shows us how to buy patents on the low

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Just how much is a mobile patent worth? If it keeps your company from losing millions of dollars every quarter alone, quite a bit. Still, there is no real number value yet, since most patent portfolios have been bought at auction. And as the threat of legal battles grows every bigger, prices have gone up. If you do the math on the Motorola acquisition in terms of patent value, it would seem that Google really knows what they’re doing.

Google is fond of numbers. There’s always some degree of hidden math inside most anything Google does, and the Motorola acquisition is a beautiful example of this. Coming out of analytical firm Frost & Sullivan today is an amazingly plausible theory on just how Google came to the total of $12.5 billion, and how smart of a price it really is.

Motorola has a portfolio of 24,500 patents and patent applications that instantly bolsters Google’s strength in the IP war. Looking at some recent patent auctions and using some simple math can show why these patents were indeed the target of Google’s acquisition.

Using one of the industries recent patent auctions as a baseline, in December of 2010, Novell sold off its portfolio of 882 patents for $450 Million. A simple division calculation leads us to a value of $510,204.08 per patent. Why not round that figure off you ask?

Well, let’s look at the patent value of the Motorola acquisition.Forgetting that Motorola also makes mobile phones, let’s say the entire value of the acquisition was in their 24,500 patents and applications. At a $12.5 billion price tag, that equates to…drum roll please…$510,204.08 per patent. Can anyone guess what heuristic they used in the board room in valuing the deal?

In the Motorola acquisition, Google bought a patent portfolio and got a mobile phone business thrown in for free.Frost & SullivanAnalytical Firm

Impressive, no? Especially compared to how much other patents have gone for recently. The 6,000 patent portfolio from Nortel, the one acquired by Apple and Microsoft, went for $4.5 billion. That equals out to a grand total of $750,000 per patent. It looks like Google really knows how to bargain shop.

Source: Economist

Dustin Earley: Tech enthusiast; avid gamer; all around jolly guy.

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