Google To Pay $900m For Nortel's Huge Patent Hoard

Google has kicked off the battle for Nortel's last remaining major asset, its hoard of patents. Industry giants from Apple to Ericsson to ZTE are said to be interested in the portfolio, which some analyst expect to fetch over $1bn. Google has agreed to pay $900m, but as a 'stalking horse' buyer, its bid could be topped by a rival.

Focal Points:

• If the sale goes Google's way, the search giant will become a far more serious wireless patent holder overnight, gaining over 6,000 items, many of them considered important IPR in new technologies like LTE and OFDMA. According to Reuters, Nortel owns seven of the 105 patent families likely to be essential to LTE. By comparison, Nokia holds 57 and Ericsson 14. Some of the assets could be harnessed directly for Android, Google applications frameworks or cloud networks, but others will be valuable mainly to give it a stronger negotiating position against rival IPR majors like Oracle or Microsoft.
• Google wrote in a recent corporate blog posting referring to its legal battle with Oracle over Java patents in Android: "One of a company's best defenses against … litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories."
• Nortel's statement describes its patent mountain as touching "nearly every aspect of telecommunications and additional markets as well, including internet search and social networking." It said the $900m offer had been the result of multiple rounds of bidding from several interested parties.
• Sale of its patents is the last major step to completing Nortel's exit from bankruptcy protection, which has been delayed several times. At one time there was speculation that it might emerge from Chapter X1 as a rump company focused on IPR licensing, but it seems there is better value for its creditors in making a sale.
• Nortel's patent portfolio is sufficiently large and valuable to make a material difference to the IPR balance of power in 4G - a balance that is already the subject of intensive legal activity, most recently with Ericsson's decision to sue ZTE over licensing. Success for a non-traditional mobile player on the LTE front, such as Google, could be a catalyst for a change in 4G licensing norms. Google, like Intel, is likely to be more interested in opening up patents to stimulate a massive base of devices that could use its services, rather than becoming a royalty business in its own right.
• The other main bidders for the assets were said to be Apple and Nokia, though as in previous Nortel sell-offs, some players may wait to show their hands once the stalking horse bid has set the base price. RIM has previously expressed interest in Nortel's IPR, but is unlikely to be able to fend off the giants.
• Nortel separated many of its formidable pile of intellectual property assets from the sale of other units, notably its 4G, CDMA and GSM businesses to Ericsson. It then divided these into six groups in different technology areas, which could have been sold separately had a single buyer not been found.

Also on the patents front, HTC has acquired a rather smaller group from ADC Telecommunications, now a subsidiary of Tyco Electronics. HTC will pay $75m for 82 patents, including 14 that are still pending. Most are reported to relate to unspecified 4G technology developments.