Friends and rivals

Last Updated: Sun, Feb 02, 2014 05:05 hrs

On January 26, Google and Samsung announced the signing of a global patent cross-licence agreement covering both companies' existing and future patents for ten years. This might alter the balance of power in the global consumer electronics industry. In particular, it offers the allies competitive advantage in the mobile space versus Apple, which already has a similar cross-licensing agreement with HTC. Android, Google's operating system, powers Samsung's smartphones and tablets, which compete against Apple's iPads and iPhones. The Samsung-Google deal could also mean the adoption of a less confrontational attitude to intellectual property in technology spaces, where the filing of patent-related cases is common. Side by side with the litigation, cooperation is often actually forced upon players, who need access to each others' intellectual property. Samsung and Apple are locked in bitter patent disputes in many jurisdictions, even though Samsung has been a large component supplier to Apple. Google is also involved in many such disputes with Apple, and others - for example, the so-called "Rockstar Consortium" of Apple, Microsoft and Sony has sued Google and six other Android smartphone makers.

If this sort of agreement comes into vogue, every major technology company could benefit since such cross-licensing alliances create a healthier environment for innovation across the ecosystem. Such moves give partners access to a wider pool of intellectual property and they are also less likely to litigate against each other. Samsung and Google are already close collaborators in smart phones and televisions. Google has also collaborated with Asus and LG for the development of the Nexus series of phones. Samsung also has cross-licensing deals with Microsoft and Nokia. Their core strengths are complementary. Samsung is the world's largest smart phone and TV manufacturer, and a major manufacturer of screens, DVD drives, memory chips, etc. It owns a large number of patents related to hardware, and to "wearables", like the smartwatch, Galaxy Gear. Google dominates search and social media. Apart from developing Android, it is also working on futuristic projects like driverless cars and wearable Google Glass.

Google has made many acquisitions in the past five years. The pattern suggests it looks to be an intellectual leader in the cutting-edge area of autonomous smart devices - the so-called internet of things. Samsung could make enormous contributions to product development in this space, given its wide-ranging expertise in hardware. In January 2014 alone, Google has bought three niche companies. Nest Labs, which makes smart thermostats and smoke alarms, was acquired for $3.2 billion or a little over Rs 20,000 crore. DeepMind, an artificial intelligence research outfit cost $500 million (about Rs 3,150 crore) and Boston Dynamics, which makes military robots, cost an undisclosed amount. In 2011, Google paid $12.5 bn (Rs 78,750 crore at today's exchange rate) to buy Motorola Mobility, the mobile devices unit of Motorola. It has just sold the Motorola Mobility manufacturing business to Lenovo for $2.9 bn or a little over Rs 18,000 crore, while retaining the vast majority of the 20,000-odd patents owned by Motorola Mobility (MM). Lenovo receives licences to the MM patents portfolio as part of the deal.

Management theorists cite the shifting alliances and patent disputes in the technology industry as classic examples of the "frenemy" phenomenon where a friend may also be a rival. The Samsung-Google agreement, coupled to the earlier HTC-Apple and the Samsung-Nokia, Samsung-Microsoft agreements could see the evolution of a new model. More cross-licensing deals will mean that less in the way of resources will be wasted in avoidable litigation. That can only be beneficial for companies and consumers.

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