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

googorola-2

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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  • Interpol91

    Awesome article! I’m an engineering student so anything having to do with math intrigues me

    • Futureboy

      Then here’s an equation you’ll love:

      1 android platform + 24,500 new patents = AWESOME!

  • ddpacino

    Nice mathematics reporting. Apparently, Google DEFINITELY got he better end of those auction deals. However, many would say they wasted too much money.

  • T1392

    Bring on the Motorola Nexus devices already! :-) We want the hardware not just the patents.(well at least I do.) :-P

  • http://youtube.com/user/jawckamoe Marcus

    Wow. Google played really smart here. All that math…

  • labrazil

    No to be cynical and I give you props for the research, but remember, it’s not about quantity here, it’s about quality. Hopefully those 24K+ patents are of high quality and will give Goog some much needed leverage!

    • Dustin Earley

      I totally agree. And since Motorola owns the patent on the cell phone (or so I’ve read), they should be quality.

    • aj

      nicely said brah. its like a buying a bargain car for way less than other cars but if the car is a junker and needs to be fixed up then serves no purpose in saving vs. buying the nicer closer to new car for more money you save more cause your not constanly fixing it up so. Again lets hope google didnt useless patens( although i have total faith that google didnt just buy these cause they were a steal but i could be wrong. hope for the best)

  • T1392

    Bring on the Motorola Nexus devices already! Im happy bout the patents but also excited to see if google will push motorola.

  • GeauxLSU

    But did they round off the patent count, or does Motorola have exactly 24,500?

  • andrew

    Hilarious, as the Apple zombieheads are saying the exact opposite

    http://forums.appleinsider.com/showthread.php?s=&threadid=130667

    • DroidSamurai

      What they know about math :-)

    • LeePlaya

      “When asked about the Google-Motorola combination during this week’s conference call, Oppenheimer said Apple strongly believes in competition, but that companies must invent their own technology rather than take the ideas of others. He said customers should be allowed to choose what is the superior product on the open market.”

      You gotta be kidding… all that crap they are pulling in Europe and now talking about they “strongly believe in competition” BS!

  • T1392

    Guess its time for a new phone my Og Droid flipped out and posted the same thing twice. Sorry guys my mistake im not a troll.

  • Rashad

    Go Google! This is great news

  • http://ArtisticAbode.com BetterWithRoot

    I can see the infomercial now…

    “You get all these patents for only 12.5 billion dollars…BUT WAIT; THERE’S MORE! If you buy right now, we will throw in our whole company!”

  • Kevin

    Motorola plays a big role for that 12 Billion aside from the Patents. Judging how Motorola’s CEO will get 63 Million after the deal closes.

  • DroidSamurai
  • dokholiday44

    i remember about 2 years ago there was an article on here that talked about google becoming a cell phone carrier. Lets see they have the OS, a phone manufacturer, and a large potential customer base. Can you say vertical monopoly?

    • DroidSamurai

      Now that they bought a phone maker, the chance that they will buy a carrier is significantly lower.

  • RockinEvo

    Very nice article I didn’t even begin to factor the perks of that deal between them, Google plays their cards very well in the past and I can’t see it slowing down anytime soon. Oh by the way did I mention this is a very nice article lol

  • bob

    They are actually getting a better deal than you suggest as MMI has about $3B in cash and $2B in tax loss carry fwds so net they paid $7.5B or $306k/patent

  • uknowme

    Dustin I congratulate you on an excellent article! Could you just explain “And as the threat of legal battles grows every bigger, prices have gone up.”

    • Dustin Earley

      *ever bigger

      Patent prices go up because the threat of law suits pushes them up.

      • uknowme

        Sorry, in general I’m not the grammar guy. For some reason that bugged the crap out of me.

  • teecruz

    this is freaking amazing! :)
    I really think Google should buy T-Mobile, now. why not?
    You guys have been fornicating since Day 1, might as well make it official?

    #screwATT

  • Richard Yarrell

    The funny part people haven’t even seen yet. I won’t say exactly why or be exact today but TRUST ME ANOTHER VERY VERY BIG SURPRISE WILL APPEAR DOWN THE ROAD. I live in New York and visit google offices on Ninth avenue pretty often I personally see TMOBILE in Google’s future which would create the world’s first totally integrated information company. NOBODY saw this purchase of motorola coming and trust me tmobile can be had by google and will be had. You heard it here first

    • http://sean-the-electrofreak.blogspot.com/ Sean the Electrofreak

      I guess you haven’t heard about the AT&T and T-Mobile merger, have you? :p

  • uknowme
  • Slith

    Simple math, brilliant catch.

  • vasra

    Frost is not quite correct.

    They used the number of essential patents for GSM 3G / LTE as the most likely patent determining factor.

    Based purely on that, they should have bought InterDigital at r. 3.5bn USD (incl. premium), as it has probably even more LTE essential patents than Motorola Mobility has.

    But they didn’t?

    So what went wrong with the Google & Inter Digital negotioations?

  • http://www.facebook.com/profile.php?id=100002275344855 luiek20

    Fuck yeah math!

  • Richard Yarrell

    Subject:Watch “Motorola Photon 4G vs HTC EVO 3D”, EVO 3D PIMP SLAPS PHOTON 4G https://www.youtube.com/watch?v=LhGg8SN6lZ4&feature=youtube_gdata_player

  • vyprnoch

    Google really has a long relationship with math.
    On losing Nortel auction by bidding on math related values, I was frustrated-how would Google ever protect Android?
    But somewhere in my heart I knew (so did you all) that Google will always think before they act.

  • ben dover

    haha! google bid $900mil on the Nortel patents. that’s only $150,000 per patent and those ended up selling for $750,000 a patent. Google was just throwing a low ball number out there. Google would have already been wrapping up the 12.5bil buy out of MMI at that point so they had their attention elsewhere.

  1. Awesome article! I’m an engineering student so anything having to do with math intrigues me

  2. Nice mathematics reporting. Apparently, Google DEFINITELY got he better end of those auction deals. However, many would say they wasted too much money.

  3. Bring on the Motorola Nexus devices already! :-) We want the hardware not just the patents.(well at least I do.) :-P

  4. Wow. Google played really smart here. All that math…

  5. labrazilGuest 4 years ago

    No to be cynical and I give you props for the research, but remember, it’s not about quantity here, it’s about quality. Hopefully those 24K+ patents are of high quality and will give Goog some much needed leverage!

    • I totally agree. And since Motorola owns the patent on the cell phone (or so I’ve read), they should be quality.

    • nicely said brah. its like a buying a bargain car for way less than other cars but if the car is a junker and needs to be fixed up then serves no purpose in saving vs. buying the nicer closer to new car for more money you save more cause your not constanly fixing it up so. Again lets hope google didnt useless patens( although i have total faith that google didnt just buy these cause they were a steal but i could be wrong. hope for the best)

  6. Bring on the Motorola Nexus devices already! Im happy bout the patents but also excited to see if google will push motorola.

  7. But did they round off the patent count, or does Motorola have exactly 24,500?

  8. andrewGuest 4 years ago

    Hilarious, as the Apple zombieheads are saying the exact opposite

    http://forums.appleinsider.com/showthread.php?s=&threadid=130667

    • What they know about math :-)

    • “When asked about the Google-Motorola combination during this week’s conference call, Oppenheimer said Apple strongly believes in competition, but that companies must invent their own technology rather than take the ideas of others. He said customers should be allowed to choose what is the superior product on the open market.”

      You gotta be kidding… all that crap they are pulling in Europe and now talking about they “strongly believe in competition” BS!

  9. Guess its time for a new phone my Og Droid flipped out and posted the same thing twice. Sorry guys my mistake im not a troll.

  10. Go Google! This is great news

  11. I can see the infomercial now…

    “You get all these patents for only 12.5 billion dollars…BUT WAIT; THERE’S MORE! If you buy right now, we will throw in our whole company!”

  12. Motorola plays a big role for that 12 Billion aside from the Patents. Judging how Motorola’s CEO will get 63 Million after the deal closes.

  13. i remember about 2 years ago there was an article on here that talked about google becoming a cell phone carrier. Lets see they have the OS, a phone manufacturer, and a large potential customer base. Can you say vertical monopoly?

  14. RockinEvoGuest 4 years ago

    Very nice article I didn’t even begin to factor the perks of that deal between them, Google plays their cards very well in the past and I can’t see it slowing down anytime soon. Oh by the way did I mention this is a very nice article lol

  15. bobGuest 4 years ago

    They are actually getting a better deal than you suggest as MMI has about $3B in cash and $2B in tax loss carry fwds so net they paid $7.5B or $306k/patent

  16. Dustin I congratulate you on an excellent article! Could you just explain “And as the threat of legal battles grows every bigger, prices have gone up.”

  17. this is freaking amazing! :)
    I really think Google should buy T-Mobile, now. why not?
    You guys have been fornicating since Day 1, might as well make it official?

    #screwATT

  18. Richard YarrellGuest 4 years ago

    The funny part people haven’t even seen yet. I won’t say exactly why or be exact today but TRUST ME ANOTHER VERY VERY BIG SURPRISE WILL APPEAR DOWN THE ROAD. I live in New York and visit google offices on Ninth avenue pretty often I personally see TMOBILE in Google’s future which would create the world’s first totally integrated information company. NOBODY saw this purchase of motorola coming and trust me tmobile can be had by google and will be had. You heard it here first

  19. Simple math, brilliant catch.

  20. vasraGuest 4 years ago

    Frost is not quite correct.

    They used the number of essential patents for GSM 3G / LTE as the most likely patent determining factor.

    Based purely on that, they should have bought InterDigital at r. 3.5bn USD (incl. premium), as it has probably even more LTE essential patents than Motorola Mobility has.

    But they didn’t?

    So what went wrong with the Google & Inter Digital negotioations?

  21. Richard YarrellGuest 4 years ago

    Subject:Watch “Motorola Photon 4G vs HTC EVO 3D”, EVO 3D PIMP SLAPS PHOTON 4G https://www.youtube.com/watch?v=LhGg8SN6lZ4&feature=youtube_gdata_player

  22. Google really has a long relationship with math.
    On losing Nortel auction by bidding on math related values, I was frustrated-how would Google ever protect Android?
    But somewhere in my heart I knew (so did you all) that Google will always think before they act.

  23. haha! google bid $900mil on the Nortel patents. that’s only $150,000 per patent and those ended up selling for $750,000 a patent. Google was just throwing a low ball number out there. Google would have already been wrapping up the 12.5bil buy out of MMI at that point so they had their attention elsewhere.