THE DEAL: Internet company Google is paying $12.5 billion to buy a struggling cellphone company, Motorola Mobility, for its collection of patents. It’s to shield companies that make phones based on Google’s Android software from patent-infringement lawsuits filed by other phone makers.
POINTS TO A PROBLEM: Patent filings and lawsuits distract companies and sap resources that are better spent on other things.
WHAT HAPPENED?: An arms race has slowly escalated. Companies found that the best defense against a patent lawsuit from a rival was to have a patent portfolio to wield as a deterrent. It’s reminiscent of the nuclear standoff between the U.S. and the Soviet Union.