Google Inc (GOOG) Files Lawsuit Against Rockstar

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In a bid to protect its patents related to Android and partners using the platform, Google Inc (NASDAQ:GOOG) recently filed a lawsuit against Rockstar. Google has asked the San Jose court to declare that its Nexus group of devices does not violate any intellectual property of Rockstar.

Earlier, Rockstar had accused Google and its partners of infringing seven patents, which it bought from bankrupt Canadian company Nortel in 2012. Rockstar is a consortium formed by Apple (AAPL), Microsoft (MSFT), Blackberry, Ericsson and Sony (SNE).

Rockstar is a patent holding NPE (non-practicing entity). In 2012, Rockstar spent $4.5 billion, of which $2.5 billion came from Apple itself, to buy a number of patents owned by the defunct Nortel.

The patents, which Rockstar now owns, mainly deal with basic smartphone functionalities such as “mobile hotspot functionality,” and “Messaging and Notification.” Since the purchase of patents, Rockstar has been trying hard to license them but met with little success. It faces the risk of losing the huge investment made by its members.

In order to survive, the company is filing lawsuit against the likes of Samsung, Asus, HTC and other device makers who use Android platform. However, Google’s attempt to save its partners may face procedural headwinds, as in the case of Cisco whose attempt to save its customers from patent violation claims in April this year was overruled by a federal court.

Nevertheless, we believe that Android’s growing popularity will drive top-line growth going forward. Google is a market leader in online advertising and has been trying to explore various ways to diversify its revenues and fight competition. Google continues to acquire smaller companies with specialized technology to boost its different offerings.

Google reported gross revenue of $14.89 billion in the third quarter of 2013, up 5.6% on a year-over-year basis. The company has expressed its intention to increase investment in its core products in the future.

Currently, Google has a Zacks Rank # 2 (Buy).

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