Nortel completes patent liquidation to Apple, Microsoft, RIM, Sony: now what?
Bankrupt Canadian telecommunications company Nortel Networks Corp. announced on Friday that it has completed the sale of its 6,000 patents for $4.5 billion to the consortium of Apple, EMC, Ericsson, Microsoft, Research in Motion, and Sony. The consortium won the auction for Nortel's patents on July first.
Immediately following the closure of the auction, Research in Motion announced it had contributed $770 million to the bid, and Ericsson announced it had contributed $340 million, for a combined 1.11 billion. According to a recent 10-Q filing with the Securities and Exchange commission, Apple had the majority stake in the bid, throwing in $2.6 billion, leaving the remaining $800 million to be split between Microsoft, Sony, and EMC.
The disbursement of these patents represents a huge fragmentation in who owns the fundamental technologies used in wireless telecommunications and internet technology, and how they're enforced. Like most major corporations in the United States, all the companies in the consortium are constantly engaged in patent litigation, sometimes with one another. So it's important to look at who the consortium was bidding against to see where these patents could be used.
Google made the stalking horse bid for Nortel's patents, and Google's Senior Vice President & General Counsel Kent Walker said it was a defensive move that would "create a disincentive for others to sue Google" over Android and Chrome.
Intel also expressed interest in Nortel's patents, and received regulatory approval from the Federal Trade Commission to participate in the auction. But after the sixth round of bidding in the auction, Intel was outclassed, and teamed up with Google to attempt to outbid Apple and Rockstar Bidco, the consortium of RIM, EMC, Ericsson, Sony, and Microsoft who ultimately teamed up with Apple to win the auction.
The auction's other party, NORPAX, LLC, a group of more than 20 tech patent holders affiliated with RPX Corporation, was reportedly knocked out of bidding very early. This group represented a sort of "anti patent troll" interest, as RPX works to minimize the threat of patent litigation for many of the largest tech companies, such as HP, IBM, Intel, LG, Microsoft, RIM, Samsung, so its presence in the auction was mostly benign.
Obviously, if the companies involved in the consortium have come up with a cross-licensing patent pool to share their newly-acquired intellectual property, this auction has made Google and Intel slightly more vulnerable to suit. But because the portfolio is so vast, a broad range of companies could be exposed.
Nortel on Friday said its patents touch "nearly every aspect of telecommunications, and additional markets as well, including Internet search and social networking."
Nortel's mention of social networking brings attention to the vulnerabilities this auction has created for high-value companies such as Facebook, Twitter, and Linkedin, to name just a few.
The US Patent and Trademark Office has not yet posted changes in ownership for the former Nortel patents, but it will soon become clear how the 6,000 patents were spread out, and who their official owner will be.