Google exec talks Nortel patent auction loss, calls for patent reform

During an interview on Monday, Google Senior Vice President and General Counsel Kent Walker opened up about the company's loss to Apple in the Nortel patent auction, calling for patent reform in the U.S. as he characterized patents as "government-granted monopolies" that block innovation.

Walker had indicated in April that Google was interested in a collection of 6,000 patents from bankrupt Canadian telecommunications equipment maker Nortel because "many of [Google's] competitors have larger portfolios given their longer histories." The search giant succeeded in placing the initial "stalking horse" bid, but ultimately lost out to a group consisting of Apple and other competitors, including as Microsoft, Research in Motion and Sony.

Shortly after the auction's results were announced, he posted a short statement describing the outcome as "disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition," but declined to comment more on the matter.

In an interview with TechCrunch's MG Siegler on Monday, Walker opened up about the Nortel auction and shared his thoughts on the U.S. patent system. He said the current patent situation in the technology industry "looks like plates of spaghetti" and has become a mess in the past 15 years.

"A patent isn’t innovation. It’s the right to block someone else from innovating,” he said, later adding that "patents are government-granted monopolies." Though the system was originally setup to reward innovation, "that’s not happening here,” he noted.

Regarding the Nortel auction, Siegler questioned whether Google had been serious about the deal, as some industry watchers had suggested the company's decision to bid "mystifyingly precise" mathematical constants meant it had treated the auction as a joke.

“No one bids that kind of money without taking things seriously,” Walker said. “We think of this situation as a very serious one. There have been questions about our bidding strategy. We did have one."

“That said, the numbers being talked about were dwarfed by the amount finally bid. It’s all kind of moot,” he continued, noting that the $4.5 billion Nortel deal was the "biggest patents sale in the history of the world.”

Though unable to provide a specific figure, Walker said Google had a number in mind for what they were willing to pay for the patents, one that Apple and the so-called "Rockstar Bidco" consortium surpassed. For its part, Apple paid a $2.6 billion share in the Nortel patent acquisition.

"You have to have the discipline not to overbid,” Walker said, adding that there are "other opportunities out there," especially after fierce competition drove the Nortel auction up significantly higher than expected. Both Google and Apple have been suggested as interested in bidding for InterDigital, which claims to have "deeper and stronger" patents than Nortel.

Walker was unable to answer specific questions about the auction because of an NDA, but he did say that Google went into the auction knowing that there would be opportunities and risks for partnerships.

The executive didn't appear particularly worried about the current patent disputes in the technology industry. According to him, patent issues have flared up in the past before settling down. “They settle into mutual assured destruction,” he said, citing the microprocessor industry and the OEM industry as examples. “These fights are an arduous and expensive way to do it."

However, industry watchers have expressed concern that the messiness of the patent situation in the wireless industry could drive this expense even higher. For instance, Apple may have paid as much as $600 million to license patents from rival handset maker Nokia, not counting ongoing royalties that the Cupertino, Calif., company has agreed to pay.

Apple recently won a significant initial ruling with the International Trade Commission, which found that HTC had violated two of the company's patents. The iPhone maker's deep pockets have led one patent expert to speculate that Apple is not interested in a licensing deal with HTC. As of the end of June, Apple had a massive $76 billion in cash reserves, almost twice that of Google.

Meanwhile, Google Chairman Eric Schmidt has pledged the company's support to HTC in the ongoing legal battle.