Patent Bubble Draining Cash From Mobile Industry

Google’s $12.5 billion bid for Motorola Mobility, following on the $4.5 billion sale of Nortel’s patents and the expected $3+ billion sale of Interdigital, has thrown the mobile industry into confusion.

Who’s next to be acquired? RIM? Nokia?

Both companies’ shares have risen sharply since the Google-Motorola deal giving rise to M&A speculation.

But both are tough nuts for an acquirer to swallow.

RIM is still making $700 million profit a quarter and may well be protected by the Canadian government.

Nokia is valued at €15 billion and may be protected by the Finnish government.

Who might do the acquiring?  Microsoft? ZTE? Huawei?

And just how much value should be put on these patent banks?  Has the industry gone a little potty in its pricing?

The shame of it is that no one expects the buyers of these patents to use them in productive ways to create new products.

They are simply being bought as a defensive ploy in the increasingly bitter mobile industry lawsuits.

So loads of great ideas encapsulated in these patent banks will very likely be left unexploited, and the huge amounts spent to buy the patent banks will leave companies with less to spend on developing new IP to make their products greater.

This is bad news for the wireless industry, bad news for engineering and bad news for technological progress.

But good news for lawyers and bankers.