Google got exactly what it needed today to close the book on its $12.5 billion acquisition of Motorola Mobility. With approval from both US and European authorities, Google is set to acquire one of the biggest Android hardware makers and a portfolio of 17,000 patents (assuming the deal is also approved by China, Taiwan, and Israel).

But regulators on both sides of the pond went out of their way to warn Google not to abuse the patents, with the Justice Department comparing Google's patent statements unfavorably with what Justice views as more responsible statements made by Apple and Microsoft. In effect, regulators from both the US and Europe said there wasn't enough evidence to prevent Google's acquisition of Motorola today, but warned that Google's future actions could invite antitrust scrutiny.

Earlier today, EU Competition Commissioner Joaquin Almunia was quoted as saying "This merger decision should not and will not mean that we are not concerned by the possibility that, once Google is the owner of this portfolio, Google can abuse these patents, linking some patents with its Android devices. This is our worry. We might be obliged to open some cases in the future. This is not enough to block the merger but we will be vigilant."

The US Justice Department's antitrust division, meanwhile, used one press release to announce the approval of the Google/Motorola buy as well as separate patent acquisitions not involving Google: specifically, Apple's purchase of Novell patents and the $4.5 billion sale of Nortel patents to Apple, Microsoft and Research In Motion.

It almost sounds as though antitrust officials wanted to disapprove the Google/Motorola buy, but couldn't find compelling enough grounds to do so. Instead, Justice reserved a few choice words for Google, saying the company has not made sufficient promises to license essential patents in fair, reasonable, and non-discriminatory (FRAND) terms. The FRAND concept is used to make certain patents available to competitors at reasonable licensing rates, if those patents are designated as being essential to complying with industry standards.

“During the course of the division’s investigation, several of the principal competitors, including Google, Apple and Microsoft, made commitments concerning their SEP [standard essential patents] licensing policies," the Justice Department announcement said. "The division’s concerns about the potential anticompetitive use of SEPs was lessened by the clear commitments by Apple and Microsoft to license SEPs on fair, reasonable and non-discriminatory terms, as well as their commitments not to seek injunctions in disputes involving SEPs. Google’s commitments were more ambiguous and do not provide the same direct confirmation of its SEP licensing policies."

Regulators seem to be worried that Google will use Motorola patents to charge unfairly high licensing rates in an attempt to shut out competition. What actually constitutes a fair rate is under debate. Apple has objected to paying Motorola fees equal to 2.25 percent of the full retail price of an iPhone, and asked regulators to set standard rates on FRAND patents.

The 17,000 Motorola patents Google is acquiring include "hundreds" of essential wireless patents that Motorola committed to license through standard-setting organizations, the Justice Department said. After criticizing Google's lack of specific commitment to FRAND licensing terms, the Justice Department warns "The division will not hesitate to take appropriate enforcement action to stop any anticompetitive use of SEP rights.”

In response to a request from Ars, Google pointed us toward a letter it sent to the IEEE (Institute of Electrical and Electronics Engineers) last week detailing Google's plans for Motorola patents. "Since we announced our agreement to acquire Motorola Mobility last August, we’ve heard questions about whether Motorola Mobility’s standard-essential patents will continue to be licensed on FRAND terms once we’ve closed this transaction. The answer is simple: they will," Google said.

The Google letter promises to honor Motorola's existing commitments, and not charge more than 2.25 percent of a product's selling price for patent licenses—the same rate Apple is objecting to. Google said it "reserves its rights to seek any and all appropriate judicial remedies" against competitors who refuse the offered licensing terms.

The importance of fair patent licensing

Justice officials explained that licensing patents through standards-setting organizations [SSOs] is a critical process for preventing stagnation in various technologies, from 3G and 4G cellular standards, to wireless broadband technologies like WiFi and WiMax, and video compression technologies such as H.264. "As with other industries, these standards facilitate compatibility among products and provide consumers with a wider range of products and capabilities than would otherwise be available," Justice officials said. "After industry participants make complementary investments, abandoning the standard can be extremely costly. Thus, after the standard is set, the patent holder could seek to extract a higher payment than was attributable to the value of the patented technology before the standard was set."

Justice's investigation into the Motorola and Nortel deals "focused on whether the acquiring firms would have the incentive and ability to exploit ambiguities in the SSOs’ FRAND licensing commitments to hold up rivals, thus preventing or inhibiting innovation and competition," the department further said. Ultimately, the department concluded that "each of the transactions was unlikely to substantially lessen competition for wireless devices." In the case of RIM and Microsoft, this is due to the companies' low market shares, and the fact that Microsoft has already struck various cross-license agreements with Android-based hardware vendors.

In the case of Motorola, the reason is quite different. Justice officials apparently concluded not that Google will take a fair patent strategy developed by Motorola and make it unfair, but that Google will inherit an aggressive patent strategy and not make it any worse.

"The evidence shows that Motorola Mobility has had a long and aggressive history of seeking to capitalize on its intellectual property and has been engaged in extended disputes with Apple, Microsoft and others," the Justice Department said. "As Google’s acquisition of Motorola Mobility is unlikely to materially alter that policy, the division concluded that transferring ownership of the patents would not substantially alter current market dynamics."

Apple, meanwhile, is purchasing patents from Novell that are important to Linux and other open source software, but Justice officials said approving this particular transaction was simpler because of "Apple's commitment to honor Novell's OIN [Open Invention Network] licensing commitments."

While Apple and Microsoft made fairly straightforward statements pledging not to sue competitors using the patents in question, Justice officials said Google's letter to the IEEE does not offer enough assurance, summarizing it as follows: "Google has stated that its policy is to refrain from seeking injunctive relief for the infringement of SEPs against a counter-party, but apparently only for disputes involving future license revenues, and only if the counterparty: forgoes certain defenses such as challenging the validity of the patent; pays the full disputed amount into escrow; and agrees to a reciprocal process regarding injunctions."

Microsoft and Apple said they will not seek injunctions or exclusion orders against competitors based on the essential patents, but Justice officials contend that "Google’s statement ... does not directly provide the same assurance as the other companies’ statements concerning the exercise of its newly acquired patent rights. Nonetheless, the division determined that the acquisition of the patents by Google did not substantially lessen competition, but how Google may exercise its patents in the future remains a significant concern."

Google publicly acknowledged the US and European approval of its Motorola acquisition in a blog post which said the merger will "supercharge Android" and "enhance competition," but did not comment today on the specific concerns raised by regulators. The acquisition is not quite closed yet. "We are now just waiting for decisions from a few other jurisdictions before we can close this transaction," Google said. China, Taiwan, and Israel are still reviewing the deal.