FTC Antitrust Investigation Widens Scrutiny Of Google Smartphones

By Alexandra Burlacu | Oct 14, 2012 09:55 AM EDT

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The U.S. Federal Trade Commission (FTC) has been conducting a broad antitrust investigation for more than a year looking into Google's search practices, but recently it has added another probe into Google's competitive behavior.

This time, the focus of the FTC investigation is on phones. More specifically, the FTC is looking into the patents that apply to smartphone technology, and the behavior of Google's recently acquired Motorola Mobility unit.

According to a New York Times report, citing "people briefed on the investigation," the FTC issued subpoenas back in June seeking information from Google and smartphone rivals, including Microsoft and Apple. The Commission reportedly questioned representatives of the companies a few weeks ago.

Google owns standard-essential patents, i.e. patents covering communications and data-handling technologies that are considered essential for the basic operation of smartphones and tablets. The investigators are looking into the company's policies regarding the licensing of such patents, as well as Google's litigation with other companies that it claims are infringing on its patents, said the Times' sources.

Google's Motorola unit promised technology standards organizations that it would license the patents to others on fair, reasonable and non-discriminatory (FRAND) terms to encourage the growth of the industry, benefitting all companies.

Back in June, however, Bloomberg reported that the FTC had opened an investigation in this area. The agency's probe has progressed since then, and the use of standard-essential patents has been brought as an issue in several court cases, as well as before Congress.

"Holdup and the threat of holdup can deter innovation by increasing costs and uncertainty for other industry participants, including other patent holders," FTC commissioner Edith Ramirez argued in a Senate testimony in July.

"We take our commitments to license on fair, reasonable and nondiscriminatory terms very seriously, and we are happy to answer any questions," Google said in a statement on Tuesday, Oct. 9.

Google is not the only company holding standard-essential patents, but when it agreed to acquire Motorola Mobility for $12.5 billion it picked up another 17,000 patents, including a massive trove of important patents related to wireless devices that Motorola had pledged to license. Google's move to acquire Motorola Mobility was partly to defend itself and the smartphone makers that use its Android software against rivals who were already armed with patents.

A few months before Google's acquisition of Motorola, Apple and Microsoft led a six-company consortium that outbid the search giant and paid $4.5 billion for 6,000 patents from Nextel Networks, a bankrupt telecommunications company. Apple has been fighting a smartphone patent war against rivals, relying on its patents on design and the way a person interacts with a mobile device. Such patents, however, are not considered standard-essential.

The FTC investigation, meanwhile, suggests the agency is keeping a close eye on the patent buildup by major technology companies. However, the FTC is not the only agency to raise concerns about Google's handling of standard-essential patents.

When the Justice Department approved Google's acquisition of Motorola and the consortium's purchase of Nortel's patents earlier this year, it also issued a statement highlighting the "clear commitments" by Apple and Microsoft to license standard patents on fair terms. When it came to Google, the Department was less convinced.

"Google's commitments were more ambiguous and do not provide the same direct confirmation of its standard-essential patent licensing policies," the Justice Department said in its statement.