EU and US competition regulators have approved Google's planned takeover of Motorola Mobility.

Out-Law News | 14 Feb 2012 | 5:11 pm | 3 min. read

EU and US competition regulators have approved Google's planned takeover of Motorola Mobility.

The European Commission said that the acquisition would "not significantly modify the market situation in respect of operating systems and patents" for smartphone and tablet devices. The US Department of Justice (DoJ) said it was allowing the takeover to proceed despite raising concerns about the commitments Google had made over how it would licence Motorola's standard-essential patents.

Motorola owns approximately 17,000 patents and has made a further 6,000 applications in relation to mobile devices. The company's portfolio includes "hundreds" of standard-essential patents, the DoJ said. The takeover is worth an estimated $12.5 billion, according to a report by the New York Times.

Google is "unlikely" to prevent Motorola's competitors, such as Samsung and HTC, from using its Android operating system because it is the company's "core business model" to make its services and software available to "the widest possible audience," the Commission said. The takeover would also "not materially change" the way Google already is able to attract customers to use its other services, such as search and advertising, it said. The takeover also does not significantly alter the smartphone market and the way competitors rely on standard-essential patents, the Commission said.

"The transaction would not significantly impede effective competition in the [European Economic Area] or any substantial part of it. Today's decision is without prejudice to potential antitrust problems related to the use of standard essential patents in the market in general. However, any such issues would not arise specifically as a result of the proposed transaction," the Commission said in a statement.

The EU's Competition Commissioner, Joaquín Almunia, said the Commission would "continue to keep a close eye on the behaviour of all market players in the sector, particularly the increasingly strategic use of patents".

Standards are agreed technical specifications to ensure that a single technology is used across an industry, often with the goal of achieving interoperability of products regardless of the manufacturer. Companies can opt to send experts to help develop standards but, in return, most standards setting organisations insist that companies agree to licence any intellectual property they own that is essential to implementation of that standard on fair, reasonable and non-discriminatory (FRAND) terms.

The DoJ said that Google's commitments over how it would licence standard-essential patents belonging to Motorola were "less clear" than similar commitments made by Apple and Microsoft. Despite this it said that the takeover could go ahead. The DoJ also said that a deal struck by Apple, Microsoft and Research in Motion (RIM) amongst others to buy around 6,000 patents owned by bankrupt telecoms firm Nortel was also "unlikely to substantially lessen competition for wireless devices". 

"Apple’s and Google’s substantial share of mobile platforms makes it more likely that as the owners of additional [standard-essential patents] they could hold up rivals, thus harming competition and innovation.  For example, Apple would likely benefit significantly through increased sales of its devices if it could exclude Android-based phones from the market or raise the costs of such phones through IP-licenses or patent litigation.  Google could similarly benefit by raising the costs of, or excluding, Apple devices because of the revenues it derives from Android-based devices," a DoJ statement said.

"The specific transactions at issue, however, are not likely to substantially lessen competition.  The evidence shows that Motorola Mobility has had a long and aggressive history of seeking to capitalize on its intellectual property and has been engaged in extended disputes with Apple, Microsoft and others. As Google’s acquisition of Motorola Mobility is unlikely to materially alter that policy, the division concluded that transferring ownership of the patents would not substantially alter current market dynamics.  This conclusion is limited to the transfer of ownership rights and not the exercise of those transferred rights," it said.

However, the DoJ said that the way in which Google may decide to "exercise its patents in the future remains a significant concern". The regulator said it has ongoing concerns that standard-essential patents may be used to "disrupt competition" in the mobile device industry and would continue to assess the way patent rights are asserted by rivals in the sector to ensure competition and innovation is "unfettered".

Google said it was "happy" with the approval of its takeover plans.

"This is an important milestone in the approval process and it moves us closer to closing the deal. We are now just waiting for decisions from a few other jurisdictions before we can close this transaction," Don Harrison, Google vice president and deputy counsel, said in a blog.

"The combination of Google and Motorola Mobility will help supercharge Android. It will also enhance competition and offer consumers faster innovation, greater choice and wonderful user experiences," Harrison said.