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Nortel Sells Patents for $4.5B

News Analysis Ray Le Maistre, Editor-in-Chief 7/1/2011

A consortium of major companies comprising Apple Inc. (Nasdaq: AAPL), EMC Corp. (NYSE: EMC), Ericsson AB (Nasdaq: ERIC), Microsoft Corp. (Nasdaq: MSFT), BlackBerry and Sony Corp. (NYSE: SNE) has won the auction to buy Nortel Networks Ltd. 's remaining patents and patent applications for US$4.5 billion.

The consortium, which triumphed following a multi-day auction, will share more than 6,000 patents and patent applications covering multiple mobile technologies (including Long Term Evolution (LTE)), optical, voice and processors.

Nortel notes in its announcement about the auction result that the patent portfolio "touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking."

Nortel notes there was "significant interest" from "major companies around the world" in the patents. Other names linked to the patent sale prior to the auction include Google (Nasdaq: GOOG), Intel Corp. (Nasdaq: INTC) and patent-holding specialist RPX Corp. The auction process was triggered by a $900 million bid by Google in April. (See Stage Is Set for Nortel's Patent Auction and Google Bids $900M for Nortel's Patents.)

The consortium members have not split the cost of the patents equally, however. RIM is paying $770 million, while Ericsson notes that its contribution is $340 million.

The sale to the consortium requires court approval, with a hearing set for July 21. Nortel expects the sale to close during the third quarter of 2011.

— Ray Le Maistre, International Managing Editor, Light Reading

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NoCopper 12/5/2012 | 5:00:39 PM

re: Nortel Sells Patents for $4.5B

I was thinking that Ciena did acquire all the optical patents that came along with the MEN acquistion. Did Ciena select and pick only a subset of the optical patents or is "optical" related to someting else here?

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Pete Baldwin 12/5/2012 | 5:00:38 PM

re: Nortel Sells Patents for $4.5B

The sale almost closed on Canada Day ...

Regarding the patents -- Here's a list of what appears to be all Nortel patents as of 2006:

http://www.nortel.com/corporat...

Some of them deal with optical fiber, optical amplifiers -- so maybe a lot of those were in the leftover pile after the MEN sale.

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NoCopper 12/5/2012 | 5:00:38 PM

re: Nortel Sells Patents for $4.5B

Thank you Craig, very helpful link.

Doing a quick search on "coherent" did actually bring up some patents, but I guess the key patents on coherent are owned by Ciena now.

 

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pdonegan67 12/5/2012 | 5:00:37 PM

re: Nortel Sells Patents for $4.5B

 

I had previously speculated on the probability of a consortium-based approach but one centered around traditional telecom players competing head on, and one-on-one, with the industry’s new Internet-oriented leaders.

I got the consortium part right but the composition wrong. In the end, Apple and Microsoft have made common cause with Ericsson, the wireless industry leader. The pockets of the arrivistes proved far too deep to allow Ericsson to directly replicate its 1999 acquisition of Qualcomm’s CDMA infrastructure assets and critical IPR portfolio on the eve of the 3G era. Ericsson gains a similar strengthening of its position in 4G through this consortium. It has to share its access rights this time round, albeit not with any companies that are direct competitors in its core business of mobile network infrastructure and services.

The two biggest absentees from the consortium are Huawei and Google. But they are big enough that they can bear the exclusion and still be highly competitive - either with cash or further patent development of their own.

ALU and NSN would doubtless have liked some level of involvement but as pure-play infrastructure vendors their exclusion is probably not as detrimental to their prospects as it would have been if they had their own smartphone and devices play.

Samsung is also excluded but already has a very strong 4G IPR portfolio of its own. From that perspective, Samsung loses some part of the competitive advantage that it held versus Microsoft and Apple from this deal rather than emerging as a net loser. And Samsung also retains that IPR edge over Google and many other players in the terminal space.

At first glance this might appear to be an era-defining milestone. Then again, perhaps all it does is reaffirm and encapsulate mobile industry trends that have been evident for the last three or four years.

 

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Rush21120 12/5/2012 | 5:00:35 PM

re: Nortel Sells Patents for $4.5B

A good day for NorTel in it's final flash.

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sarahthomas1011 12/5/2012 | 5:00:33 PM

re: Nortel Sells Patents for $4.5B

This doesn't bode well for Google and future legal battles.

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pdonegan67 12/5/2012 | 5:00:32 PM

re: Nortel Sells Patents for $4.5B

To repeat what I said- "At first glance this might appear to be an era-defining milestone. Then again, perhaps all it does is reaffirm and encapsulate mobile industry trends that have been evident for the last three or four years."

And valued at $4.5 billion, I'd have thought that the importance of the patent portfolio, and the preferential rights that a subset of players have secured over it, could reasonably be construed as decidely non-trival.

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jepovic 12/5/2012 | 5:00:32 PM

re: Nortel Sells Patents for $4.5B

Era-defining?

I think you are grossly overestimating the importance of Nortel's telecom patents. After all, the company went bankrupt because it wasn't competitive.  I think the main idea for Ericsson was to prevent competitors from catching up - a defensive move. 340 MUSD is not a lot of money - similar to a few month's of R&D expenses.

Also, you are assuming that all parties in the consortium will get access to all patents, which I find far from obvious. Perhaps they have a list already of how to split them up?

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fanfare 12/5/2012 | 5:00:31 PM

re: Nortel Sells Patents for $4.5B

I disagree.  I think donegan may have a point.  NT failed, but this does not mean that the R&D that was not even ready for trials, let alone production, did not have some valuable jewels in its chest.  In fact, the price seems to indicate that indeed, there was some pretty significant research being done at NT, though they did not have the time nor the $$ to bring the ideas to fruition.  Either way, it doesn't matter since neither you nor I know the details of all the research, and I'm betting the engineers from those companies have some idea along those lines.

At one time, NT was a leader in FO tele-tech.  There were a lot of good science minded innovators working for the company.   Many patents get filed for tech that is not ready for prime time at the time they are filed.

 

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rahat.hussain 12/5/2012 | 5:00:30 PM

re: Nortel Sells Patents for $4.5B

craig,

several questions that one would expect to be answered by diligent reporters:

1) is this the list that was just auctioned? or was this the complete list of all patents issued to nortel, ever?

2) i would think that many of the optical patents went with the men sale to ciena, no?

3) would be good to know if ciena got exclusives on those patents, or did ericsson just scoop all these patents for $350M?

4) i am assuming this sale was exclusive? no?

odo

 

 

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