Motorola Deal Buys Google Patent Protection: Schmidt

Google's $12.5 billion acquisition of Motorola Mobilitygives the Internet search company patent protection while putting it squarely into the smartphone hardware business, Executive Chairman Eric Schmidt told CNBC Monday.

But the acquisition won't affect how Google does business with the other phone makers that use its Android operating system, including HTC, he added.

"We are going into the hardware business, but we’re going to keep it separate and we’re going to treat everybody else on a fair basis," he explained.

Android has had more than 550,000 activations a day and is succeeding "precisely because there are so many partners," he said. "If we somehow p--- them off ... it would be a disaster to the Android strategy."

Google is also taking advantage of Motorola Mobility's 17,000+ patents, a portfolio Schmidt called "second to none" at a time when Google faces "significant patent challenges from people who want to stop our products."

Schmidt said he supports the overhaul to the U.S. patent system President Obama signed into law Friday but said it doesn't go far enough.

"We still have a problem where too many overbroad patents are used to shut down other companies," stifling the startups that don't have the resources Google has to buy a patent-rich company like Motorola Mobility.

While Google's growth has its advantages, it has also brought scrutiny. Last week Schmidt testified before a Senate subcommittee on antitrust, which he told CNBC Monday gave him an opportunity to "talk about how we made decisions that basically solve user problems."

However, Google is different from Microsoft , another company that has undergone antitrust scrutiny.

"Google has not been Microsoft and will never be Microsoft," he said. "It is true because of the role Google plays we really are much more careful now. We have teams of lawyers and product people and so forth at all our conversations."

He added that "our products are mostly free. So it’s hard to complain about pricing. So I think we’ll be just fine."