A coalition of six companies, including Apple (NASDAQ:AAPL), Ericsson (NASDAQ:ERIC), Microsoft (NASDAQ:MSFT) and Research In Motion (NASDAQ:RIMM), won Nortel Networks' patent portfolio for $4.5 billion in a bankruptcy auction, outbidding Google (NASDAQ:GOOG) and Intel.
The winning consortium also included Sony and EMC Corp., the IT storage and cloud computing firm. Nortel said it will have a joint hearing with U.S. and Canadian bankruptcy courts July 11 to approve the sale of its more than 6,000 patents and that it will work with the consortium to close the sale in the third quarter. In separate statements, RIM said it will pay $770 million for its share of the patents, and Ericsson said it will pay $340 million for its share.
The highly anticipated auction was the last significant sale of assets by Nortel, which filed for bankruptcy in January 2009. Additionally, the patents cover a wide range of technologies, including wireless video, Wi-Fi, social networking, semiconductors and, most notably, LTE. "The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world,'' George Riedel, Nortel's chief strategy officer, said in a statement.
For Google, which made the opening "stalking horse" bid of $900 million in April, the conclusion of the auction was a significant letdown. In an email sent to news outlets, Kent Walker, Google's general counsel, said the outcome of the auction is "disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers."
Google had framed its bid as an attempt to defend itself against frivolous patent lawsuits. The company also reiterated a call for reform of the patent process. "If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community--which is integrally involved in projects like Android and Chrome--continue to innovate," Walker wrote in a company blog post in April. "In the absence of meaningful reform, we believe it's the best long-term solution for Google, our users and our partners."
Kasim Alfalahi, Ericsson's chief intellectual property officer, said in a statement that "the consortium is in the best position to utilize the patents in a manner that will be favorable to the industry long term." Ericsson has played a major role in scooping up Nortel's assets; Ericsson won most of Nortel's CDMA and LTE assets for $1.13 billion in 2009 and also won Nortel's North American GSM business.
Paul Ratcliffe, a patent lawyer at Attentive Law Group who wasn't part of the auction, said the auction appeared to boil down to Google and a group of companies that wanted to prevent Google from acquiring the patents. He said he had expected the final price to be above $2 billion, but not above $4 billion. However, he said that ultimately the companies in the consortium must have concluded that the price was worth it, just to avoid having the patents used against them.
"This was clearly defensive in the sense that they wanted to make sure that the patents were in the hands of companies they can interact with, as opposed to the patents being asserted against them at a much higher price," he told FierceWireless.
Ratcliffe said that because the group includes two key device makers--Apple and RIM--it's likely the patents will be licensed to similar companies to avoid antitrust concerns. He also speculated that because the patent portfolio is so large, it will be broken into several categories for licensing.
- see this release
- see this NYT article
- see this Bloomberg article
- see this WSJ article (sub. req.)
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