

Google bid pi billion dollars for Nortel patents (and lost) - fromedome
http://www.reuters.com/article/2011/07/02/us-dealtalk-nortel-google-idUSTRE76104L20110702

======
JonnieCache
As much as this phrase is a cliché on the internet, I believe it is entirely
justified in this case: well played.

More seriously, I think the fact that the person high up enough to lay three
billion dollars on the table was also the kind of person who knows about
Meissel–Mertens constant says a lot about google's structure. Either that or
the whole thing was a whimsical piece of obtuse preplanned PR, which still
says a lot.

~~~
MikeCapone
If anything, it's good for the brand (at least with the people that matter).

~~~
protomyth
Who do you feel are "the people that matter" in Google's case?

~~~
Natsu
I assume he means the smart hacker types, because they're about the only
people who would appreciate that sort of thing.

~~~
eneveu
Google generates a lot of good will in the developer community: lots of open
source projects, Google Summer of Code, free hardware at developer
conferences, Google tech talks, hacker "jokes"...

I don't know if this is a deliberate strategy, or if it simply stems from the
company's culture and values, but it sure helps them. I personally love them.
Winning the hackers and early adopters is a key to winning a market. I'd bet
the majority of Google+ early adopters belong to the tech crowd. Similarly,
many Android early adopters (from the tech crowd) convinced their friends and
family to switch.

It's also good for recruiting :)

~~~
protomyth
I get the feeling that investors might not get the joke when dealing with
billions of dollars. If the patents come back to haunt Google, I bet the
shareholder meeting will be fun.

------
Steko
The real interesting thing in the article isn't that the nerd number bids,
it's how the alliances formed. They weren't set going in, people hit their
limit then looked to buy into an alliance. Intel chose to partner with Google
instead of Microsoft and Apple. Android vendor Sony-Ericsson went with Apple
instead of Google.

~~~
dvdhsu
I had always thought Apple was very close to Intel, as they work closely
together. Peculiar.

~~~
orangecat
Apple's Intel-based products are quickly becoming a hobby compared to ARM-
based iOS devices.

------
acangiano
Google should now spend Pi billion dollars lobbying the US government to
abolish software patents. ;-)

~~~
nsomaru
heh, that would make me gulp if I had spent 4.5bn on some paper 0_0

~~~
Daniel14
It wouldn't make me, because you can't just buy changes of the law, not even
in the US. Three billion dollars is a lot, but will never match what other big
companies stand to lose from software patents becoming less important. This is
the worst possible outcome for Google and the open source community. Apple,
MS, Sony and others will be able to sue everyone - but not each other. And
after laying that amount of cash on the table, they will. Google is right to
be pissed off, but they can't do much about it.

------
computator
$750,000 per patent--$4.5B divided by 6000 patents--is clearly absurd.

Or is it? I'm thinking that it does make economic sense, but only if you buy
in bulk.

The vast majority of patents (not even limited to software patents) make no
money, are never enforced, and are completely unused in every sense of the
word. Even a patent lawyer has admitted this to me.

But in very rare, unpredictable, and seemingly capricious cases, it's worth a
fortune. The best example is the patent purportedly for inventing wireless
email that allowed NTP to extort $600 million from Research In Motion a couple
years ago.

If you buy patents in bulk, you might even be able to achieve a return despite
the randomness in value.

I'm going to make the analogy to owning a gun and deciding how many bullets
(patents) to buy:

\- A dozen bullets and you can (maybe) protect yourself. This is your
defensive patent portfolio; if sued, you can maybe find some way to
countersue.

\- Thousands of bullets and you can wage war. This is your attack patent
portfolio.

\- But a single bullet is good only for suicide. Start-ups that spend their
time and energy filing one patent application probably kill themselves. I saw
one case where it happened.

I think I'm going to call this principle the Patent Portfolio Price Power Law.
In a ruthless business sense, a LOT of software patents makes sense.

~~~
Duff
Tech companies like Google have nearly unlimited pools of money, so they can
spend ridiculously large amounts of money for things that make sense to them.

People do the same thing. How many rich guys buy a $500k Ferrari that is never
driven?

~~~
redthrowaway
>How many rich guys buy a $500k Ferrari that is never driven?

None. No Ferrari costs $500k outside of an auction house, and even then that's
a very rare price. The classic collectable ferraris go for far more, and the
"average" ferraris go for far less.

------
alderssc
Google has a history of doing things like this. In their IPO filing, they
intended to raise $2,718,281,828 [see
[https://secure.wikimedia.org/wikipedia/en/wiki/E_-
_base_of_n...](https://secure.wikimedia.org/wikipedia/en/wiki/E_-
_base_of_natural_logarithm#In_computer_culture)].

~~~
pjscott
Ah, so _that's_ why they didn't use e as one of their bids! I had been
wondering.

------
sambeau
See. Another case of 2π being more suitable.

~~~
zipdog
The bid was on Thu 6/28 as well (Tau day)

------
thought_alarm
You've got to hand it to Google. It's a brilliant strategy if the Nortel
patents were being auctioned off in radians.

Unfortunately for Google, the patents were auctioned off in reality.

------
nikcub
I think Google's plan was to get the other parties to pay more for the group
of patents than what the original price was (~$1.5B).

They probably decided that they may as well have some fun with it in the
meantime

(although google has a history of using mathematical significant figures in
financial dealings, such as in their S1 filing)

~~~
__rkaup__
Does that happen often in business?

~~~
zipdog
There was a multi-million dollar contract in Japan a few years ago decided by
a single hand of Rock Paper Scissors.

~~~
binarycheese
That's classic. Any references will be appreciated.

~~~
archangel_one
Here:
[http://en.wikipedia.org/wiki/Rock_paper_scissors#Auction_hou...](http://en.wikipedia.org/wiki/Rock_paper_scissors#Auction_house_rock-
paper-scissors_match)

------
jrockway
I don't understand why the article refers to this as "shenanigans that didn't
work". The problem wasn't that they bid pi billion dollars. The problem was
that they didn't have enough money to buy the patents.

~~~
ericflo
They certainly had the money, they just didn't bid enough money.

~~~
jrockway
Was that the problem? My understanding was that they could see the other bids,
but chose not to bid higher.

~~~
ericflo
Google has 36 billion dollars of cash on hand, so they had the money, they
apparently weren't willing to bid more than pi billion though.

~~~
megablast
A minor point, but they certainly do not have $36B cash on hand, they have it
in assets that can be liquidated reasonably quickly, but companies do not keep
$36B lying around, or in the bank. It is stashed in short term investments.

~~~
nikcub
what investors refer to as 'cash on hand' doesn't literally mean a room full
of bills or a bank account. a 'cash asset' is anything that can be
theoretically converted back into cash quickly and with little trouble
(tbills, term deposits, bank accounts, any AAA+ funds, etc.)

for eg. if the Greek government owed me $1B, I wouldn't call that cash on
hand, but if the US government owed me $1B, it is

------
cma
Should have gone with Tau

~~~
div
Why bid over 6 billion when the current bid is at least below 3.1 billion
right ?

------
cageface
Stand by for a new raft of belligerent offensive patent suits...

------
darrikmazey
In my mind (despite the precedent with Google), Google's irreverent bidding
suggests that they were simply running up the bid. In which case perhaps the
partnership with Intel suggests similar strategies from companies that never
intended to win the portfolio. It would be interesting to me to know if Google
later secures licensing on some or all of these patents for less than Pi
billion, as licensing seems more likely than litigation.

------
meow
Looks like they ran out of well known constants. I'm sad google lost this
round.

------
nextparadigms
They should've gathered the whole OHA alliance around and get them to make a
pool. Just getting Apple alone in the bid would've meant a very high chance
they lost the bid, because Apple could've outbid them if they really wanted
the patents. But of course it got even worse, with all the others joining up
with Apple to take them.

They really didn't expect this to happen? I'm a bit disappointed in Google for
not thinking this through, if they really wanted to get them to protect the
whole Android ecosystem.

EDIT: I also think Microsoft is focusing too much on making money on patents,
rather than from their own product. Are they going to buy as many patents as
possible that later they can use to act as a leech on Android ecosystem?
That's a pretty perverse business model, and it doesn't make them look any
better than Righthaven.

~~~
orangecat
_I'm a bit disappointed in Google for not thinking this through_

Presumably they ran the numbers and figured that the expected costs of
defending against lawsuits based on these patents was around $4 billion, in
which case they're better off not bidding higher.

------
nutjob123
Google thinks this is real funny until Samsung android phones are banned from
the us

------
megamark16
Am I the only one who thinks Google didn't really plan on winning anything? I
think they were just making a statement about the ridiculousness of patenting
an algorithm. But, I'm probably wrong.

You can't patent innovation, although you can attempt to stifle it with
patents. If you're going to sue me on the grounds of patent infringement, I
can go work on something else, but you're just going to be left holding your
bag of patents. Like a bully on the playground, sure you've got the ball now,
but nobody wants to play with you.

------
sshah
See how this is great for people in finance and law - they get big firms into
bidding wars, end up paying a large number and eventually end up filing
infringement suits to get back the $$$$ spent.

------
snotrockets
When bidding with imperfect information (that is, each party does not know the
other bids, only if his is the highest,) it makes sense to bid in non-even
numbers.

I think the bidding here wasn't such, so it probably not the reason here.

------
jowiar
How irrational.

------
darrikmazey
I would also be interested to know exactly the order of bids, because if
Google and Intel never bid directly after one another, it might suggest they
had an allied strategy going in.

------
robryan
Things like this make it hard to ever really abolish patents, either a lot of
companies would be out a lot of money or the government would have to
reimburse they a lot of money.

~~~
fleitz
They are a granted monopoly, you pay the filing fee whether it is accepted or
not hence the gov't has no liability. Look at making gold illegal for examples
of how the gov't can drastically devalue your assets with no recourse.

~~~
natnat
The government can indeed devalue or even confiscate your assets if it wants
to. The problem is that legislators have no interest in pissing off well-
heeled companies that can contribute billions to their opponents when the only
people opposed to software patents are a few programmers and policy wonks with
a whole lot less money than the companies that own the patents.

Also, keep in mind that lawyers tend to be much more politically connected
than programmers.

------
helmut_hed
Am I the only one who wants to know what the _numbers that were not even
numbers_ were? What does that mean?

------
statictype
That's an awful lot of money to spend on patents unless they plan on
aggressively pursuing violators of it.

~~~
JanezStupar
It will be really interesting to see what Google's next move will be. Since
the competitors had to stretch themselves for this one, will this continue as
a game of attrition (through various legal and acquisition costs)?

And I suspect that this was a really bad move in this context on the side of
Google's competitors. Oh and I am well aware that these companies got loads of
cash on hand. But it can't last forever.

~~~
rimantas

      > Since the competitors had to stretch themselves for
      > this one
    

What do you have in mind? Apple has about $66 billion in cash.

    
    
      > Oh and I am well aware that these companies got loads of cash
      > on hand. But it can't last forever.
    

They are still making money as crazy.

------
ck2
They should have bid Planck's constant and would have won?

~~~
hesselink
I think you have Planck's constant (about 6 * 10^-34) confused with something
else. It would be about $0, which is still less than $4.5 billion.

~~~
delinka
pi is also less than $4.5billion. It's the multiplier that matters.

------
ignifero
Looks like their strategy was to just push the bids up, so as to force their
competitors (who are competitors to each other) to bond together in a giant
bid: divide and conquer.

Either that, or they didn't like the Feigenbaum constant.

~~~
cageface
It might turn out to be closer to unite and submit than divide and conquer if
they find themselves on the business of a buch of new IP lawsuits. I doubt the
winners plan to sit on these.

------
cmeiklejohn
should have bid 2.71828 and 0.42331 bil.

------
immortalbeast
Would be funny if in the future Google's ordered to pay $3.14159 Billion for
violating the same Nortel patents in Android.

------
immortalbeast
Google was Trying hard to be cute it backfired.

Typical childish behavior from Larry Page.

~~~
aubs
I like it.

