Tech jobs vaporized as patent war goes nuclear

Google spent more than $400,000 per patent when it bought Motorola Mobility, wasting money in legal games that could have created jobs and products

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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 nontech 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.

There's another industry that has gotten so consumed in legal maneuvering that it's lost focus on its core service: medical malpractice. The fear of lawsuits is forcing doctors to provide unnecessary medical care to the tune of some $50 billion a year, according to a recent study by Daniel Kessler, a professor at the Stanford Graduate School of Business. Well, the fear of patent wars is driving tech companies in similar ways.

Like the broken tort system, 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.

I welcome your comments, tips, and suggestions. Post them here (Add a comment) so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net. Follow me on Twitter at BSnyderSF.

This article, "Tech jobs vaporized as patent war goes nuclear," was originally published by InfoWorld.com. Read more of Bill Snyder's Tech's Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.

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