This week, Google announced it’s $12.5 billion purchase of Motorola Mobility, once the largest mobile phone handset manufacturer in the world. A telling development in just how much the market has become dominated by the big three – Google, Apple and Microsoft, in less than a decade. Indeed, recent figures show that Google’s Android software now captures 48% of the smartphone market and the real obstacles to increasing that market share, appear to be Apple’s iPhone and the constant litigation which has embroiled the smartphone market. The latter is perhaps the main reason why Google decided to bid for Moto. It initially wanted the huge library of patents currently issued to Motorola but in the end, seems to have decided to spend that little bit extra to get the whole company.

While Google wants to ‘supercharge’ the Android market, it’s also going ahead with this deal as a form of pre-emptive defence against the litigation that Apple and Microsoft have waged against (OEMs) who are offering the Android platform, such as Motorola, Samsung and HTC. Apple has already tried to stop Samsung selling it’s Galaxy Tab 10.1 in Europe and Google must be worried about Apple going after Android-based mobile products in the same way.

Although the deal has not closed yet, when it does, Google will take control of Motorola’s 12,500 patents and 7,500 patent applications. The deal should give Google a broad protection which covers all the OEMs against lawsuits ((In particular, Motorola’s patents for the 3GPP and 3GPP2 phone specifications, both of which are used by Apple’s iPhone and iPad) and where needed, license out technology to earn revenue too.

So, although this deal has it’s obvious IP protection merits, Google has to tread very carefully in not alienating the other original equipment manufacturers (OEMs) who currently use Android on their handsets. That is where the real risk lies and it could either help Windows Phone 7 to gain market share against Android or actually help Android entirely replace Windows Phone 7.

Before we delve deeper in to that conundrum, how is Google actually doing versus Microsoft and Apple?

The official statistics show that Google’s year-on-year smartphone shipments are up 379% which has seen its software used on platforms such as Samsung, HTC, LG, Sony Ericsson and of course Motorola.

How does Microsoft compare? Well, it’s market share in the smartphone market has slumped to 1.6% from 4.9% a year earlier. Perhaps for this reason, it is easy to understand why Microsoft has chosen a smarter approach of focusing on distribution platforms. For example, back in May, Microsoft bought Skype in a $8.5 billion deal and then announced a smart venture with Facebook that will introduce video chat onto the social networking platform.

Apple on the other hand, has seen its iPhone sales rise to record levels of 20.34 million, a 142% jump in growth compared to a year previous. Apple’s supply chain economics make it extremely tough for competitors to get an edge on it’s technology and Google knows this. (In fact, this deal provides Google with some serious advantages in the form of hardware production, development of Android and other applications that Motorola has built for the Android platform.)

So the real question is how this deal with Moto, allows Google to battle against Windows Phone 7, as an Android alternative for manufacturers on the one hand and on the other, compete against Apple’s handsets themselves. The key surely, has to be finding a way not to alienate the other OEMs. Why?

Well, although Android will remain open source, we have to ask – will Google give Motorola enhanced support and therefore, make the other OEMs feel vulnerable to being squeezed out? Is this in effect classed as competition against those other licensees? The risk there would be that they adopt a rival OS like Windows Phone 7 perhaps? The next move from HTC, LG and Samsung will be very telling.

One other way of looking at it is that perhaps the manufacturers have also adopted Windows Phone 7, have done so because they wanted to guard against the constant legal battles surrounding Android? Maybe, with Google’s new patent war chest, they will be more likely to feel confident dropping Windows Phone 7 altogether in favour of Android?

So, IP protection aside, how Google deals with the other OEMs, will perhaps be the most important move in this development.