Thermonuclear Stand Down: Apple And Google Are Ready To Arbitrate On Patents

In papers filed in the Western District Court of Wisconsin on Thursday, Apple and Google expressed broad agreement to use binding arbitration to resolve their issues surrounding standards essential patents. The immediate scope of the negotiations involve patent disputes between Apple and Google’s recently acquired Motorola Mobility division, but this move can be seen as a key step towards resolving the broader battle between Apple and the makers of Android devices in general.
Bloomberg reported on the development yesterday,and quoted Strategy Analytics analyst Alex Spektor on its broader implications: “It’s in everyone’s best interest in the industry to pull back and reach some sort of equilibrium. Google could offer a certain level of protection to licensees who comply with whatever standard it puts in place.”
In contrast to Steve Jobs‘ “thermonuclear” war on Android, Tim Cook‘s apparent willingness to arbitrate shows yet another way that Apple is readjusting its priorities. Recent management shakeups have remade Apple’s org chart to resolve some underlying tensions carried over from the Jobs era, and the patent war has certainly been a problematic part of that legacy.
Resolving the standards essential patents between the two companies would simplify the battlefield and make it easier to negotiate the remaining disputes. By law, any patents that are deemed to be necessary to make a standards compliant product must be licensed by the patent owner at fair, reasonable, and non-discriminatory (FRAND) terms. In terms of mobile devices, these include patents related to basic connectivity like 2G, 3G, LTE and WiFi. Google has taken it farther and proposed that, “The patents covered by the arbitration… [include] other royalty-bearing standards, regardless of whether they were deemed essential.”
There are differences between the companies’ positions, notably about a German “Orange Book” case already in process, but none seem like deal-breakers. Both companies must have realized that they have a common interest in making peace. As contentious as their relationship has been, they must understand at this point that they are the two big winners in mobile and have more to gain by consolidating that position than in continuing to bash each others brains out. Essentially, Apple is the high-margin winner, since it actually makes substantial money from each unit sold. Google is the low-margin winner, because it makes money off of services that run on all Android devices, even if the manufacturers of those devices make little.
The willingness to settle may also be an acknowledgement that Google won the Android chess match through a clever turn on open source practices. By giving away the Android OS software for free, they were able to definitively distance themselves from any direct claim that they are profiting from its use. Google is wired into Android in a multiplicity of ways (and makes money on all of them), but all through services that handset makers choose to make use of. For Apple, there’s just no check mate in sight.
The other factor in this endgame may be Mozilla, or the disruptive potential of a true open source alternative emerging. Firefox OS is currently in version 0.7 and has just released a desktop simulator that developers can use to preview apps written for the new platform due to be released some time in 2013. Mozilla’s OS will run on web standard APIs that will mean that apps authored for Firefox OS will work as web apps on all platforms. Mozilla has yet to get developers very interested in developing for Firefox OS, but improvements in the performance of web apps overall (see my recent story on Famo.us for an example of how far this has come) may change that sentiment quickly.
Apple and Google, the owners of the two leading “native” mobile platforms have common cause to protect their turf both from the open web and any other disruptive curveball. You have only to look at the new $20 tablet being rolled out to educate India’s youth to see how quickly both iOS and Android could become unsustainably expensive.
I welcome the resolution of the “thermonuclear” war. Now that it is clear that annihilation is not possible, cooperation is a better strategy. Perhaps Apple can use patent resolution as a starting point for a more sensible policy towards making good use of Google’s software and services, rather than banishing them on political grounds. The companies may never become true friends, but FRAND is a good place to start.