Reuters has begun an interesting conversation on the value of the patents in the Google purchase of Motorola Mobility. In short … let’s not be so flippant using the $12.5B figure as evidence of an IP valuation bubble. In 2009, the IRS allowed losses incurred by one company to be deducted by an acquiring company. Motorola’s continuing operating losses prevented them from benefitting from legitimate tax deductions. It appears Google will now have around $10B in tax benefits (R&D, tax losses and carry-overs) at its disposal over the next several years.
And the future carries still more tax benefits. Transfer pricing rules make it easy to relocate Motorola’s IP (it’s a paper transaction) and its corresponding revenue to tax friendly jurisdictions. Google is quite familiar with these rules, as it currently holds $17.5B in cash outside the U.S.
As IPBlog has stated before, the purchase price allocation on this acquisition will be quite interesting.