Nortel Networks Corp. (NRTLQ) is just about wound down in its bankruptcy. The company’s operations have effectively all been sold off, at extreme discounts. In this bankruptcy there is one last sale or group of sales still remaining. Nortel’s vast patent portfolio is the last piece of the puzzle. The ultimate value of the patents remains up for debate, but there are more than 3,000 patents and some feel the value may be around $1 billion.
Discussions we have had with technology professionals in recent weeks and throughout 2009 have thrown out many names including Research-in-Motion Ltd. (NASDAQ: RIMM) as one of the likely active bidders. R-I-M, a Canadian company as well, is likely interested in a long-term evolution patent portfolio, although other patents may be of interest as well. There are dozens more in potential bidders from companies, to industry groups and coalitions, and even individuals.
A group called RPX Corp., which has Intel Corp. (NASDAQ: INTC), Cisco Systems Inc. (NASDAQ: CSCO), Microsoft Corporation (NASDAQ: MSFT) and more than 30 other tech giants as members, is one that cannot be ruled out. This company acts as a go-between or virtual intermediary with its RPX Defensive Patent Aggregation service geared to lower the cost and the risk of patent assertion and litigation by non-practicing entities.
Another likely candidate is LM Ericsson Telephone Co. (NASDAQ: ERIC). The wireless network sale of Nortel had been contested, and Nortel ended up licensing some long-term evolution patents and rights to Ericsson but the ownership stayed under Nortel.
QUALCOMM Inc. (NASDAQ: QCOM) was another name thrown to us last year as a potential bidder, although that may be more to hedge its CDMA and related standards if the long term evolution patents are ultimately used for future wireless standards. If you have followed patent law for the last decade you have seen major infighting between QUALCOMM and other tech and communications giants.
Another name which has been thrown out is the NTP, Inc. company, which you will remember was the company that scored an empire-building sum from R-I-M. The status of this entity and its direction is unfortunately something that has gone off our radar.
This week, Dow Jones noted that Mosaid Technologies Inc. and Wi-LAN Inc., both Canadian-based patent license companies, are among the interested parties.
If you go back to the Alcatel-Lucent (NYSE: ALU) merger, despite the notion that Lucent was heading into its own death-spiral, there were many concerns about its huge patent portfolio locked up inside of Bell Labs. That patent portfolio was effectively allowing a French acquirer to secure thousands of patents on multiple aspects of intellectual property in the world of communications. At the time of that merger, some felt that the patent portfolio was one of the few real assets behind the motive for the acquisition.
As of December 31, 2007 (mind that date as many operational sales have since been seen), Nortel claimed some 3,650 US patents and about 1,650 patents in other countries extending across Wireline, Wireless, Datacom, Enterprise and Optical technologies and services. Nortel also noted that it has received patents in the U.S. and elsewhere covering standards-essential, standards-related and other fundamental and core solutions, including patents directed to CDMA, UMTS, 3GPP, 3GPP2, GSM, OFDM/MIMO, LTE, ATM, MPLS, GMPLS, Ethernet, IEEE 802.3, NAT, VoIP, SONET, RPR, GFP, DOCSIS, IMS, Call-Waiting Caller ID and many other areas. In short, you can see that many companies, sectors, and industries have significant overlaps here.
Patent law is tricky, complex, and extremely complicated. Patent royalties are often the crown jewels of many companies that never actually have a single operation other than patent ownership. The term ‘patent troll’ wasn’t created just for laughs. Then there is the ‘patent workaround’ game where entities dissect patents and come up with a product or process that rework the entire framework of achieving roughly the same endgame.
There are probably dozens of other public technology and communications firms in North America and beyond which are interested in various aspects of the patent portfolio. Some will probably argue that the future of many patents is murky. Just keep in mind that intellectual property and the licensing is a multi-billion business. It is also a field where the owners of the IP claim far more is stolen or worked around without compensation.
Regardless of what the ultimate value of Nortel’s patent portfolio ends up being, this is ultimately the end of the decade-long Nortel death-spiral saga. As far as the timing of and winners of any such auctions, stay tuned… Anything can happen in bankruptcy court.
JON C. OGG