Nortel's LTE patents generating big interest

Lynnette LunaAs Nortel Networks mulls what to do with its valuable LTE intellectual property, the vultures are beginning to circle.

Nortel, which filed for bankruptcy last year and subsequently sold off its various businesses, is said to be exploring strategic alternatives to maximize the value of its thousands of patents. The company is reportedly considering several options including auctioning its patents, a joint venture with a new partner or long-term licensing agreements with various wireless companies.

Nortel held on to the majority of its patents in the sale of its CDMA and LTE wireless assets to Ericsson for $1.13 billion this past summer, and analysts have speculated the company would pursue a sale or auction. Exactly how much the more than 4,000 patents are worth is unclear, though some industry experts estimate the patents could sell for $1 billion if a bidding war is triggered.

A bidding war is a distinct possibility. Last week, Wi-LAN revealed it is in initial discussions with Nortel's bankruptcy trustees and that many investment banks have approached the company to make a play for Nortel's IP. Chairman and CEO Jim Skippen, an aggressive patent litigator, told Reuters that Wi-LAN is "quite interested in the LTE or the 4G wireless portfolio," but said the company may have to float a separate business backed by investment banks to be able to afford the acquisition.

Canada's Wi-LAN became a standalone patent company about five years ago when it couldn't make a go as a wireless equipment provider. Do a quick search on the company, and you'll see a long list of companies--Nokia, RIM and Samsung, to name a few--Wi-LAN has successfully sued or settled with over patent infringement claims. During the company's quarterly conference call with analysts, Skippen said Wi-LAN now holds more than 800 patents in key wireless areas--such as in OFDM technology--and consumer electronics.

Wi-LAN expects revenues to increase in 2010 by about $10 million to between $40 million and $45 million. And it continues to bulk up its litigation budget. Research Capital analyst Nick Agostino told the Canadian Press that Wi-LAN must either acquire more patents it thinks aren't being properly utilized by other companies or obtain them through litigation settlements. Getting its hands on Nortel's LTE patents could translate into significant growth, given the technology will be used by nearly every major operator around the world.

Meanwhile, Skippen's old company, patent-licensing firm Mosaid Technologies, another Canadian company, also is readying itself to compete for Nortel's patents, reported Reuters. Investment banks have also approached that company, the CEO said.

Of course, the danger in having standalone patent companies owning valuable LTE patents is the fact that these companies are looking to be compensated handsomely, and they have little incentive to negotiate or join patent pools because they have no LTE equipment to sell themselves. But sometimes there is some horse trading patents involved in licensing deals.

My prediction is that if Nortel does indeed auction its LTE patents, we will see an unprecedented number of firms--private-equity and technology companies--that don't normally play in the patent world line up for a chance at owning these and pitting themselves against technology heavyweights that have a stake in the LTE market. Given the market potential of LTE, this may be one of the most lucrative opportunities in history when it comes to technology licensing. --Lynnette