European and U.S. Regulators Clear Google for Motorola Mobility Acquisition

Google Inc. has moved closer to acquiring Motorola Mobility after the European Commission and U.S. Department of Justice cleared the $12.5 billion transaction.

In order to close its acquisition of Motorola Mobility  the manufacturer of smartphones and tablet computers  Google still needs regulatory approvals in China, Israel and Taiwan, The Associated Press reported.

The Justice Department said it was closing its investigation into the merger. The agency’s antitrust division said the deal was unlikely to substantially lessen competition, although the agency indicated it was concerned over whether Google would use its newly acquired patent rights to squash competition or raise its rivals’ costs by demanding unreasonable terms to license certain crucial patents. Motorola Mobility holds roughly 17,000 patents as well as 6,800 patent applications including hundreds of so-called standard essential patents (SEPs) that the company has committed to license to others through participation in organizations that set technical standards.

“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,” the Justice Department stated. “As Googles 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.”

The acquisition of Motorola Mobility would expand Google’s expertise in the wireless market; Android, Google’s mobile operating system for smartphones and tablet computers that are made by Motorola Mobility, Samsung and other equipment manufacturers, accounts for 46 percent of the smartphone market in the U.S. based on subscribers.

The EC and Justice Department cooperated closely with each other during their investigations into the Google/Motorola deal and were focused heavily on the issue of patents.

“We have approved the acquisition of Motorola Mobility by Google because, upon careful examination, this transaction does not itself raise competition issues,” said Joaquin Almunia, European Commission Vice President in charge of competition policy, in a statement. “Of course, the Commission will continue to keep a close eye on the behavior of all market players in the sector, particularly the increasingly strategic use of patents.”

Kent Walker, Google’s senior vice president and general counsel, wrote last year that an explosion in patent litigation threatened to hurt innovation. That fact prompted Google to bid $900 million for 6,000 patents and patent applications belonging to bankrupt Nortel Networks, but Google was outbid by a consortium that included Apple, Microsoft and Research in Motion, among others. The Justice Department on Monday said it closed its investigation into that $4.5 billion sale as well after finding that the deal was unlikely to substantially lessen competition for wireless devices. Still, the agency found that Apple and Google would have a greater incentive than Microsoft or RIM to attempt to use patents as a strategic measure to harm rivals.

“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,” the Justice Department said. “Google could similarly benefit by raising the costs of, or excluding, Apple devices because of the revenues it derives from Android-based devices.”

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