Google could face pressure to write down the $5bn (£3.2bn) value of the patents in its Motorola subsidiary, as the mobile arm faces fines from Europe's antitrust commissioner for trying to use them to block sales of Apple's iPhone in Germany.
The European commission's antitrust unit raised a formal statement of objections this week, which could be followed by a substantial fine, after Motorola tried to use a number of its standards-essential patent (SEPs) to try to stop sales of iPhones with 3G network capability in Germany.
Using such patents to try to block rival products from companies that are willing to license them, as Apple was, constitutes "abuse of a dominant position", the unit said.
Standards-essential patents have to be used to make a phone or device meet standards such as 3G and 4G phone standards, the wireless Wi-Fi connection or the video encoding method H.264. Holders of such patents agree to license them on "fair, reasonable and non-discriminatory" terms, in return for becoming part of the standard and receiving repeated small licence fees.
But Motorola has used its SEPs to seek court bans on Apple and Microsoft products and now faces strictures and possible fines from Joaquín Almunia, the competition commissioner, who has yet to make an announcement relating to complaints by Microsoft. The commission's position makes the patents less valuable in court battles.
Google bid $12.5bn for Motorola Mobility in 2011, citing its strong patent portfolio as a defensive move against Apple and Microsoft, which were gunning for Android handset-makers including Samsung, HTC and Motorola in patent infringement cases.
In July 2012, a couple of months after the acquisition was complete, Google valued Motorola's patents at $5bn in an SEC filing.
The commission's finding comes just weeks after a US court cut Motorola's demands for $4bn in annual royalties from Microsoft to just $1.8m, following a year-long battle over patents relating to Wi-Fi and a video encoding standard in the Xbox games console.
The decisions in the US and Europe mean that Motorola's portfolio of about 17,000 patents represents "totally and utterly awful value", said Richard Windsor, former equities analyst at Nomura who now heads the Radio Free Mobile consultancy. "I suspect the days of usefulness of SEPs are numbered, which is going to make life increasingly difficult for the Android community in particular. The winners here are Microsoft and Apple both of whom offer good value for investors, even if the shorter-term outlook looks difficult."
Florian Müller, a patents blogger who has consulted for Microsoft, said Google's strategy had "failed pathetically. Microsoft has signed up almost every Android device-maker as a paying patent licensee, and Apple's patent enforcement is continuing."
Microsoft, he said, "always preferred licensing over litigation" while Apple's focus on Samsung "makes sense given the ongoing 'two-horse race' [in which those two companies dominate smartphones]."
Benedict Evans, technology and telecoms analyst at Enders Analysis, said it was hard to know how Google had valued the patents.
"They may have calculated that SEPs do bring in some money. We really don't know. The purchase price of Motorola is more like $7.15bn, taking in the cash it got, tax writeoffs and $2bn from selling the Home set-top box division last year. The patent part seems to have been a complete fiasco. So it's like Google being fined $7bn for inventing Android."
Google did not comment on the European commission decision or its patent valuation.
Katie Dove, a Motorola Mobility spokeswoman, said: "We agree with the European commission that injunctions should only be sought against unwilling licensees and, in this case, Motorola Mobility followed the procedure established in the German supreme court's Orange Book ruling. Apple had to make six offers before the court recognised them as a willing licensee."
