A group of technology companies including Apple, Microsoft and Research in Motion have paid $4.5bn in cash for a collection of strategically vital patents from Nortel in a blow to Google and its fast-growing Android operating system.
Google had opened the bidding for the remaining portfolio of the bankrupt Canadian telecoms equipment maker in April, with an offer of $900m for the more than 6,000 patents which cover wireless, 4G, data networking, internet and semiconductor technologies.
The search group needs better intellectual property defences for its widely used Android smartphone software, as technology companies become increasingly litigious in their application of patent rights as a form of competition.
“No major industry player is as needy in terms of patents as Google,” said Florian Mueller, an IP analyst and open-source software advocate, citing 45 patent infringement suits surrounding Android and its hardware partners. “Google lost an unprecedented opportunity to acquire a major bargaining chip that would strengthen it at the mobile industry’s intellectual property negotiating table. I’m afraid it won’t get a similar opportunity in quantitative and qualitative terms anytime soon.”
Kent Walker, senior vice-president and general counsel at Google, on Friday said: “This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers.”
The sale began about a year ago and is subject to court approval in the US and Canada. Nortel said it expects a hearing to be held on July 11 and the deal to be closed in the third quarter.
The deal is for the last and most valuable of Nortel’s assets and should bring the bankruptcy case to a close. Equity investors will not see any returns, the company said.
Also in the consortium are Ericsson, Sony and EMC. The portfolio includes covering wireless, 4G, data networking, internet and semiconductor technologies.
George Riedel, chief strategy officer at Nortel, said: “The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world.”
The patents encompass “nearly every aspect of telecommunications and additional markets as well, including internet search and social networking”, Nortel said.
Kasim Alfalahi, chief intellectual property officer at Ericsson, said: “The Nortel patent portfolio reflects the heritage of more than 100 years of its R&D activities and includes some essential patents in telecommunications and other industries. We believe the consortium is in the best position to utilise the patents in a manner that will be favourable to the industry”.
People involved in the auction, in which Lazard advised Nortel, said they did not know how the consortium intended to divide the spoils. Analysts said that to avoid antitrust concerns, handset makers Apple and RIM were likely to license the technology broadly.
But it could charge steep amounts for those licenses from Android handset makers, because they and Google have fewer patents relevant to smartphones, Mr Mueller said.
The ultimate pricetag was more than double what had been expected and topped what people familiar with the process said had been an increased bid by Google.
“Patents have become the currency of the knowledge-based economy,” said Alex Poltorak, chief executive of IP services firm General Patent Corp. “As of today, patents graduated from an obscure and arcane area of law to the frontlines of business.”
Additional reporting by Andrew Ward