Opinion: Tech jobs vaporised as patent war goes nuclear

The billions being spent on patents by Google and others is a huge waste, says Bill Snyder

Think what Google could do with $6 billion. Think of the research that would spawn new products, advance innovation, and create who knows how many thousands of good jobs up and down the technology food chain. Instead, that money is going to buy patents. Worse, not only will those jobs not be created, existing jobs will be lost as the patent arms race goes nuclear and more and more companies are acquired for their patent portfolios and then discarded — along with their employees. The patent wars go nuclear

When I say Google is wasting $6 billion, I'm being charitable. Google actually is paying $12.5 billion to buy Motorola Mobility. There's absolutely no doubt that the major, if not the only, reason it's making that gargantuan purchase is to defend the Android platform from patent-related legal attacks from Apple and others. Some analysts have suggested that Motorola's big patent portfolio represents roughly half the value of the company. If you do the maths, each patent works out to $400,000 to $500,000. I'd never argue that companies shouldn't protect their investment in intellectual property. That's exactly why we have a patent system. But the patent system is so broken that any bozo with money to spend can buy a portfolio of patents, do nothing with them, then sue a company that actually is creating value. Google isn't defending itself from the noxious little creatures we call patent trolls, of course. It's fighting with the likes of Apple, Microsoft, and Oracle, who are in turn fighting with the likes of Samsung and HTC. Our broken patent system has touched off a war, and your job could be the collateral damage. More patent buyouts are on the way

Everyone knows what an arms race is. One side builds a new weapon, and the other side has to match it. Then the first side builds an even more powerful weapon, prompting the other guy to build more and so on. Remember how well that worked out for the Soviet Union? Now there's an arms race in the technology industry, with patents playing the role of ICBMs. "Patents are emerging as a new currency," Alexander I Poltorak, chief executive of the patent licensing and enforcement firm General Patent, told the New York Times. "I've recently received several calls from financial analysts and bankers who want to know how to value patents and what does it mean." The same article notes that other companies with large patent portfolios could be the next to go, including Alcatel-Lucent, Kodak, Research in Motion, and Nokia. That notion makes even more sense when you notice that shares of struggling RIM have bounced up about 10 percent this week, a move that likely indicates investors view it as a takeover target. Trip Chowdhry, the savvy principal analyst at Global Equities Research, says the next patent battlefield will be 4G, and companies such as Qualcomm that hold patents in those areas could be in play. There is a bright side, but only if you're Carl Icahn or another major shareholder in Motorola Mobility. They'll get richer because Google offered a premium of 63 percent over the current value of the company as measured by its share price. Of course, the investment banks that pimped the deal will get richer as well. More tech jobs will disappear as the money goes to patents, not innovation

The lunatic expenditure of money on patents brings to mind Hewlett-Packard's expenditure of billions on the acquisition of Compaq, a failed, ego-driven venture that resulted in the loss of about 20,000 jobs in the combined companies, and many more in the tech and non-tech ecosystems surrounding them. However, it managed to enrich the biggest shareholders and those same investment bankers. Whenever there's a merger, jobs are lost. To be fair, there are times when that's simply inevitable. If a company is going to fail, an acquisition may actually save some jobs that would have been lost. Maybe that's the case with Motorola Mobility. For now, Google says it will run the newly acquired company as a separate business unit. But doing so would position Google as a competitor to companies like HTC that build Android handsets. And Google would be running a business that it knows nothing about. That's a difficult position, and if I were talking bets, I'd say that business unit will be sold in a few years (sans patents) — with the loss of even more jobs. "Without the patent portfolio, no one would even have looked at Motorola Mobility," says Chowdhry. Phones, he notes, are a purely commodity business that Google doesn't really need. (For the record, Chowdhry is not predicting a sale of the phone and tablet business once the acquisition closes, and he believes the acquisition is a positive.) If Chowdhry is correct, and the phone and tablet business is something of an afterthought, then Google may have spent even more per patent than I thought. The broken patent system is destroying value and replacing innovation with fear-driven acquisitions. The Icahns of the world will get rich as this continues, but too many others will simply get the shaft.

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Tags MotorolaApplepatentshtcpatent trollsGoogle

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