With Friends Like Google…

How do you solve a problem like Google? In the midst of a political environment that views every new technology with suspicion, you’d think that targets of regulation would be on their best behavior.

Many are, of course: Twitter, Amazon, Facebook, Apple, and Microsoft are trying hard to convince policy makers that they’re really good corporate citizens. Twitter’s not going to be part of targeting vulnerable voters with fake political ads in this election cycle because it’s not going to run any political ads at all.

Facebook is committed to avoiding political censorship by permitting politicians to run any ads they want. These opposite approaches are aimed at the same result: silencing critics without damaging the bottom line.

Apple buddies up to the Administration by keeping some manufacturing in the US; Microsoft goes after government cloud computing contracts; and Amazon touts its creds as a job creator with a great culture.

Google is Too Cocky to Care

Google is perpetually in the headlines over its appetite for personal information. When your business model is organizing the world’s information, everything is fair game, even intellectual property.

Some may say “especially intellectual property” because the old hands of Internet culture have always regarded patents and copyrights as nuisances, relics of a bygone age that need to be discarded because “information wants to be free, man.

While we might think Google would show some intellectual property respect to its policy allies – such as the smaller companies that pressed its case in the net neutrality, sex trafficking, privacy, and copyright enforcement battles – the little guys get no mercy.

Take Pity on Sonos

Sonos is the smart speaker pioneer that figured out how to synchronize wireless speakers, manage the volume levels of speaker groups, and set them up on a Wi-Fi network without hassle. They were also an ally in Google’s net neutrality fight despite its complete lack of relevance to their business.

Sonos is focused on consumer-managed networking exempt from FCC regulation, therefore it’s immune to Title II. It probably saw net neutrality support as a low-risk maneuver to curry favor with the powerful while burnishing its consumer image and keeping its investors, many of whom held Google shares, quite happy.

While Sonos had the smart speaker market all to itself for a time – first mover advantage – it now sees voice-activated home controllers such as Alexa and Google Home as threats. All Sonos is good for is playing high-quality audio from a number of streaming services, while Alexa and its imitators can turn your lights on, keep you home heated and cooled, and give you voice control over their music streaming services.

Collaboration Turns to Piracy

Sonos worked closely with Google to support Google Play Music on Sonos speakers in 2013. This project was non-trivial because it required Google to understand proprietary details of the Sonos system.

As the New York Times reports: “For the project, Sonos handed over the effective blueprints to its speakers.” Sonos maintains that Google then incorporated Sonos technology into Chromecast Audio, Google Home, and Android without licensing its patents.

I have experience in this area as I’ve been granted patents on Wi-Fi synchronization and setup, and my reading of the Sonos complaint suggests that the company should win on the merits. Winning in court carries a big caveat: this kind of litigation is extremely expensive, so Google can bury Sonos by dragging out the case unless the parties can settle quickly.

Sonos Just Wants to Collect Reasonable Fees

In the seven years that the parties have been working together, they’ve had ongoing discussions about licensing the patents in question. Google’s approach is to run out of the clock by pretending to be serious about licenses while diddling as it waits for the patents to expire.

For a company of Google’s size, simply buying the plaintiff is bound to be one of the tactics on the table. This would also give Google leg up on Amazon, another company that uses Sonos tech without a license.

The fact that Sonos chose to sue only one violator in this round rather than both is a testament to the risk patent litigation poses to scrappy innovators like Sonos. Up to this point, Google has been enjoying the milk for free without buying the cow, so its preference is for the status quo to continue.

The Monopoly Playbook

Google is following the tech monopoly playbook strategy IBM pioneered with its historic suit against Memorex in 1970. IBM filed a meritless “theft of trade secrets” suit against a competitor that sold less expensive IBM-compatible disk drives.

After the case was settled and dismissed with prejudice, IBM continued to harass Memorex until the smaller company sued IBM for antitrust violations. This case dragged on until the court issued a directed verdict in 1980.

In 1982, Memorex was acquired by Burroughs because the decade of litigation had left it incapable of continuing on its own. In addition to litigation expenses, the suit preoccupied the attention of management, causing the company to miss opportunities.

The Justice Department was missing in action during the Memorex ordeal and similar suits on the parts of Telex and others.

Google’s Shady Move with Java

When Google discovered that it was losing market share in search because smartphones were catching on, it decided to enter the market for mobile operating systems by buying Andy Rubin’s Android, Inc. in 2005. Android wanted the ability to run Java apps, so Google’s Eric Schmidt approached his former employer Sun Microsystems for a license.

Schmidt was willing to pay the requested 30 – 50 million dollar fee, but balked at Sun’s non-monetary license terms. Java was licensed under the GPL used by the Linux kernel that required enhancements to be returned to the community order to maintain compatibility. Google didn’t want to share.

After Java and Sun were acquired by Oracle, Google set out to make its own version of Java based on a moribund open source project that used its preferred Apache license terms, allowing a mixture of open source and proprietary elements. Oracle sued, prevailing in the Federal Circuit; but the case is headed for the Supreme Court.

YouTube Uses Piracy for Leverage

As it’s undisputed that Google copied thousands of lines of Oracle’s code, the decision of the Federal Circuit should prevail. But Google has clouded the case in smoke about some of the details of the stolen code, and anything can happen when courts rule on cases with a great deal of technical content.

Google’s YouTube pays artists the lowest royalty fees in the streaming business. Per play, the Napster service pays 25 times as much to artists as YouTube, 1.7 cents per play to 0.07 cents.

YouTube offers this meager payout on a take-it-or-leave-it basis, knowing that very little is required from it in under Section 512 of the DMCA in terms of copyright enforcement. Artists know that their works will be available on YouTube whether they grant licenses or don’t.

Google Is a Unique Problem for Regulators

Most antitrust monsters lose their vitality over time and don’t require much in the way of intervention. As abusive as IBM and Microsoft were at their peaks, technology-driven market forces allowed robust innovators to bypass their strangleholds on transient markets.

I’m not so sure that past results guarantee future developments in this case. While we’ve had some powerful monopolies in the past, I don’t think any of them had as many tentacles as Google.

Its control of search gives it leverage to promote services that augment search results, such as search ads, maps, reservations, and various forms of shopping. Its control of browsers and mobile operating systems gives it leverage to use for developing behavioral advertising, location-based services, and the kinds of applications that grew out of Microsoft’s control of desktop operating systems.

Google’s Reach is Too Vast to Measure

Its control of web analytics gives it placement in most of the world’s significant websites. It builds its own Ethernet switches, Internet routers, data centers, and undersea fiber optic cables. And now it’s finding ways to vacuum up medical data from doctors and hospitals.

Information technology in the 21st century is a race to organize and process information. Google saw this coming from its beginning and made sure to focus on collecting more data so it could process and monetize more data.

The information market caught lawmakers by surprise, in part because it had existed on a small scale for a long, long time. Running a successful political campaign has long been enabled by data about voting demographics and individual preferences.

The Information Market is on Steroids

But all of that is on steroids now and lawmakers are struggling to find ways to regulate this market. Google saw that coming too, so it has a plan for managing regulation.

The plan has two parts: the first is a revolving door between the company and lawmakers in Washington, Brussels, and the state capitols.  320 Googlers moved between the company and the US government during the Obama era.

The second is control of ideas: Google has funded  more than 150 academic departments, think tanks and civil society groups, including both leftwing pressure groups such as the notorious Electronic Frontier Foundation and Public Knowledge and free-market think tanks with libertarian credentials. When Google loses a class action suit, EFF benefits from cy pres awards as well.

When lawmakers consider new approaches to antitrust, the discussion is informed by intellectual work funded by Google and analyzed by former and future employees. It’s no wonder Washington would rather fiddle with net neutrality than grapple with privacy or omni-directional acquisitions.

Impartial and Fresh Approaches Desperately Needed

It’s an overstatement to say that the Internet has changed everything, but it has certainly reshaped and expanded information and influence markets. Not only is more data being collected about people and our ideas, this data becomes more powerful when it’s aggregated.

It’s not just easier for firms to learn what we want, it’s easier for them to analyze all the creative ideas that have been generated in the past. Intellectual property is more important than ever because it makes fortunes rise and collapse. We need to protect it and license it with the new tools.

Corporate breakups don’t solve the problem of firms with minimal ethics exploiting creative works to nudge people toward bad decisions. Thoughtful, well-informed, technically savvy decision makers have to develop effective strategies.

A tip for the politicians of the future who want to address the markets for information and influence: don’t forget to buy your Google Ad Words or you’ll never get elected. And don’t worry so much about Facebook and Twitter; Google is the real problem.