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Google 'Goes for the Mustard Gas' in IP Deal

Stocks in this article: GOOG IBM AAPL MSFT

MOUNTAIN VIEW, Calif. ( TheStreet) -- After losing out to Apple (AAPL), Microsoft (MSFT) and Sony (SNE) in the tussle for Nortel patents, Google (GOOG) reportedly tripled its modest IP arsenal after buying a slew of patents from software and hardware giant IBM (IBM).

Analysts, though, say that the deal might not afford enough to ward off mobile computing rivals who hold bigger patent portfolios. Credit Suisse recently estimated that Google held around 650 patents before the deal; IBM, by comparison, received almost 6,000 in 2010 alone.

"With 500 or 600 patents, they have enough for the Internet world, but they don't have enough for the wireless world," said Roger Entner, founder of Recon Analytics. " The IBM deal is a reaction to the loss of the Nortel patents -- they didn't get the nukes, so they went for the mustard gas."

Noting that a number of the IBM patents focus on search, Entner added that Google is likely bolstering its Android OS, which is currently locked in a battle with Apple's popular iPhone. "Wireless is about turning a phone into a mobile computer with a mobile search engine on it," he told TheStreet. "Google is simply trying to get the patents that would make the iPhone a bit less magical."

A spokeswoman for the search heavyweight confirmed that Google had purchased patents from IBM in an email to TheStreet on Monday. "Like many tech companies, at times we'll acquire patents that are relevant to our business needs," she said. "Bad software patent litigation is a wasteful war that no one will win."

The SEO by the Sea Web site reported that Google acquired more than 1,000 patents from IBM in July, encompassing technologies such as data mining, Web-based queries and document classification.

Google did not divulge specific details of the purchase or the number of patents involved, and IBM declined to comment on the deal.

Analysts still say that Google's move is critical for the future, enabling the company to barter tech patents with the rest of Silicon Valley and avoid intellectual property lawsuits.

"What Google is doing is buying its entry fee into the patent club," said Entner. "What they want is basically to have enough patents to go to the telecom family and say 'let's do a cross-licensing deal.'"

The Google/IBM deal underscores the patent war currently engulfing Silicon Valley, particularly in the booming smartphone market. Google recently lost out to a consortium comprising Apple, Microsoft, Sony, EMC (EMC), Ericsson (ERIC) and Research in Motion (RIMM) in the $4.5 billion bidding war for more than 6,000 Nortel patents and patent applications.

Google shares ticked up $2.54 to $606.23 on Monday, while IBM's stock fell $1 to $180.85.

--Written by James Rogers in New York.

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