Apple and Microsoft Get a Helping Hand Against Motorola

Sometimes even the largest tech companies in the world behave like bickering children in dire need of adult supervision.

Last year, Barnes & Noble tattled to the Department of Justice over Microsoft's (Nasdaq: MSFT  ) patent pursuits as the software giant tries to milk Android-related royalties out of the bookseller.

Microsoft did some tattling of its own, accompanied by longtime rival Apple (Nasdaq: AAPL  ) , to the European Union over Motorola Mobility (NYSE: MMI  ) and its preposterous patent demands. Then again, who can blame Moto, considering its actual business is in the gutter and the best thing it has going for it is its patent portfolio?

Why else do you think Google (Nasdaq: GOOG  ) wants to acquire the hardware maker? Certainly not for its $249 million net loss last year. As hypocritical as it may be, Google wants Moto just for its IP so it can keep waging mobile patent warfare.

Motorola has been able to score some initial legal victories in Europe over some of its relatively older patents in two separate cases against Apple and Microsoft. The company offered to license its aged IP for an outrageously high royalty rate of 2.25%.

In its case against Microsoft, the patents relate to a video encoding standard that uses an entire pool of more than 2,300 patents. Motorola's demands for its small contribution to that pool are more than 100 times greater than what it costs to license the entire pool.

Since the patents in each case are considered necessary industry standards, Moto is required to license them out under fair, reasonable, and non-discriminatory, or FRAND, terms, but there are no specific guidelines on what constitutes FRAND. This is why Microsoft and Apple are calling on regulators to step in, and step in they have.

European regulators have now announced that they are saying "hello, Moto" with an investigation on whether it's abusing its patents and hurting competition, even as the European Commission just signed off on Googorola's consummation. The deal isn't done quite yet, as a few other regulators throughout the world have yet to give Googorola their blessings.

Apple was able to get a similar European investigation started in its battle with Samsung a few months ago.

A Google spokesman said: "We haven't finalized our acquisition of Motorola Mobility but will work with the European Commission to answer any questions they might have. We have long-standing concerns about patent abuses, including lawsuits and royalty demands targeting the Android ecosystem."

So on one hand, Google says it's concerned about patent abuses, but on another, it's backing its proposed subsidiary's outlandish patent abuse?

Be careful, Moto. Keep it up and you mind land yourself a time-out.

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Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Google, Apple, and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple, writing puts on Barnes & Noble, and creating bull call spread positions in Microsoft and Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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