Google Inc, already the subject of antitrust inquiries, likely opened itself up to more regulatory scrutiny with its proposed $12.5 billion cash acquisition of Motorola Mobility Holdings Inc.

Legal experts said government agencies will want to review how Google's largest takeover ever will affect competition in the mobile phone market. Google is already under investigation by the Federal Trade Commission over whether it uses its strength in online searches to thwart competitors.

It seems inevitable that the U.S. government will have to come into the mobile space and lay down some ground rules, said Eric Goldman, an associate professor at Santa Clara Law. Way too many dollars are at stake.

Google, the maker of Android mobile phone software, portrays the takeover as a way to stay competitive against such rivals as Apple Inc and Microsoft Corp.

Last month, Google lost out to Apple, Microsoft, Research in Motion Ltd and three others in an auction to buy bankrupt Nortel Networks Corp's wireless patents.

Google Chief Executive Larry Page said on a conference call Monday that Motorola's patent portfolio would protect Android from anti-competitive threats.

They're going to go on the offensive by saying they're the victim here, said Daniel Crane, a law professor at the University of Michigan.

In one sense, that could be true. While Google is dominant in Internet searches, it is less strong in mobile phones.

It really shows the steps that competitors are taking in a very competitive marketplace, said David Olson, a professor at Boston College Law School. It also shows how patent law requires large companies to have a huge patent portfolio for hardware they're going to use for their software.

CONCERN RAISED

The likely concern regulators would have is that Google will vertically integrate its Android software with Motorola's hardware and attempt to shut out other hardware manufacturers, such as Samsung Electronics Co and HTC Corp, that license Google's software.

But because Android is an open source software, that's unlikely to happen, said Herbert Hovenkamp, professor of law at the University of Iowa.

It's not clear to me how you can turn an open source software into an exclusionary device, he said.

Richard Brunell, director of legal advocacy at the American Antitrust Institute, agreed that Google would not likely stop licensing Motorola's competitors but said the company could foreclose them in other more subtle ways.

Google has already received positive support of the deal from Android licensees such as Samsung and HTC.

Smart phone companies have a common interest that they want the Android platform to be more defensive from the (intellectual property) perspective, said Hendi Susanto, a technology analyst at asset manager Gabelli & Co. Also, they want a strong relationship with Google.

Another legal issue could be how Google uses the patents it acquires from Motorola.

It's possible that they may end up combining patents in such a way that they are able to block competitors out of certain technologies, said Beau Buffier, a lawyer with Shearman & Sterling LLP. I don't think that will be a major focus of the review, but it's something the Department of Justice would scrutinize.

Legal experts said that while legal issues tied to the Motorola takeover are different from FTC concerns, they may feed into a concern about Google's power.

I don't think it further complicates issues that are being looked into, said Olson. How they're using their software remains the same. But Android will now have bigger market share and the deal makes Google a bigger target generally for regulators.

(Reporting by Andrew Longstreth and Lily Kuo; Editing by Richard Chang)

(This story has been corrected in paragraph 17 to show name of lawfirm is Shearman &Sterling LLP, not Shearman & Stearling)

Google Motorola