Google to Help Vendors Fight the “Apple Thing” (GOOG, AAPL, MSFT, SSNLF, HTCKF, MMI, ORCL)

On a visit to Taiway yesterday, Google Inc. (NASDAQ: GOOG) chairman Eric Schmidt told smartphone makers that the company will support its manufacturing partners “because we think the Apple thing is not correct.” The “thing” that Schmidt refers to is the concerted effort that Apple Inc. (NASDAQ: AAPL) is putting into filing patent lawsuits that Apple believes protect its intellectual property and that competitors believe are an effort to squelch competition in smartphones.

The lawsuits are a big deal, particularly now that Microsoft Corp. (NASDAQ: MSFT) has been able to extract licensing fees from smartphone vendors including Samsung Electronics (OTC: SSNLF) and HTC Corp. (OTC: HTCKF). Apple has succeeded in stopping or slowing the release of products that compete with the company’s iPhone in German, Australia, and elsewhere. Google, which receives no revenue from its Android smartphone operating system, has not been the direct target of any Apple lawsuit, but there are plenty of proxy targets.

Google’s announced $12.5 billion purchase of Motorola Mobility Holdings Co. (NYSE: MMI) could give Apple its first opportunity for a direct attack on the search engine giant. Oracle Corp. (NASDAQ: ORCL) has already filed a lawsuit against Google and Android, claiming Android infringes on seven Java patents that Oracle now owns through its acquisition of Sun Microsystems.

Late Apple founder and CEO Steve Jobs told his biographer that he would “destroy Android” because it was stolen and that Apple would spend its entire cash hoard of some $40 billion if need be to prove its claims. Now that Google has said that it will stand by its Android customers, attorneys everywhere must be reading up on patent law.

Google also needs to calm any fears among Android customers that Motorola smartphones will get any special treatment once the company is folded into Google. Samsung and HTC have already released new devices using Microsoft’s Windows Phone operating system and Google needs to make sure that Android retains its pre-eminent position among the smartphone makers.

The payments that Samsung and HTC now make to Microsoft means that Android is no longer a completely free piece of software. Google’s interest in the operating system has been as a platform for serving mobile advertising. Microsoft has its own advertising platform, and so does Apple. Each wants to grow that business, but to none is mobile advertising more important than to Google. Virtually all the company’s revenues and profits come from ad sales, and the largest growth in ad sales is in mobile. Without a platform like Android, Google could easily be marginalized in the mobile sector, and the company can’t afford that.

Paul Ausick