Google, Android Makers Sued By Apple “Rockstar” Consortium Over Search, AdWords

Roughly two years ago Google and a consortium of companies competitively bid for the vast patent portfolio of bankrupt Canadian Company Nortel Networks. Google initiated the bidding with $900 million but ultimately was outbid by the Rockstar consortium, consisting of Microsoft, Apple, Blackberry, Ericsson and Sony.

Google’s final bid was $4.4 billion. Rockstar won the patents for $4.5 billion. Now Google has been sued by Rockstar and two subsidiaries over several of the patents in the former Nortel portfolio: US Patents 6,098,065; 7,236,969; 7,469,245; 7,672,970; 7,895,178; 7,895,183; and 7,933,883.

These patents have broad search and paid-search advertising implications. For example, patent 6,098,065 (filed in February 1997) covers “a system for providing advertisements to a user searching for desired information within a data network.”

At the time of the Nortel patent auction Google’s General Counsel Kent Walker said the following about Google’s motivations for bidding:

[O]ne of a company’s best defenses against [patent] litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories.

So after a lot of thought, we’ve decided to bid for Nortel’s patent portfolio in the company’s bankruptcy auction. Today, Nortel selected our bid as the “stalking-horse bid,” which is the starting point against which others will bid prior to the auction. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate. In the absence of meaningful reform, we believe it’s the best long-term solution for Google, our users and our partners.

Google’s failure to win the Nortel auction led directly to its acquisition of Motorola Mobility for more than $12 billion. Most of the patents in that portfolio have arguably been neutered through a consent decree with the US FTC as part of its antitrust settlement with the US. However Google may be able to use some of them defensively in this action.

The complaint, filed in the patent plaintiff-friendly US District Court, Eastern District of Texas, is embedded below. It’s difficult to tell much from reading the complaint other than Google and others are allegedly infringing the identified patents. This and related lawsuits include members of Android collective: Samsung, LG, HTC, Huawei, ZTE and ASSUTeK.

Presumably Rockstar sought to negotiate licenses from Google, et al and those negotiations failed. There’s no information about any licensing negotiations that I was able to find.

Google may try to argue that “prior art” invalidates or warrants reconsideration of some or all of the patents in question. For example, OpenText sold search ads in 1996, before the filing of the Nortel patents in question. And, as mentioned, there may be something in the Motorola portfolio that Google can use as a shield.

You may recall that Google was sued over AdWords by Overture (acquired by Yahoo) and ultimately settled the case for under $300 million prior to going public. In retrospect that looks like pocket change. There will likely be some sort of settlement here as well. However the litigation could drag on for years.

At one point in the past Microsoft CEO Steve Ballmer stated that Android wasn’t really “free” because it was and would be subject to licensing fees:

Android has a patent fee. It’s not like Android’s free. You do have to license patents. HTC’s signed a license with us and you’re going to see license fees clearly for Android as well as for Windows.

This lawsuit may be an extension of that strategy.

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.