Friday, July 1, 2011

Consortium Including Apple Buys Nortel Patents for $4.5B

From the press release:

TORONTO, ONTARIO, Jun 30, 2011 (MARKETWIRE via COMTEX) -- Nortel(1) Networks Corporation NRTLQ +19.05%  announced today that it, its subsidiary Nortel Networks Limited (NNL), and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited (in administration), have concluded a successful auction of all of Nortel's remaining patents and patent applications. After a multi-day auction, a consortium emerged as the winning bidder with a cash purchase price of US$4.5 billion. The consortium consists of Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony.

The sale includes more than 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patents. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking. ...

Patents make strange bedfellows. That is a staggering amount of money, $750M average per member.

As an Apple shareholder, I am pleased that this large portfolio should not serve as a threat to Apple's business. This is balanced by disappointment, though, that a non-trivial portion of Apple's profits went to Nortel's creditors instead of Apple's shareholders.

I am already seeing the curiously predictable drumbeat of complaints that Google did not "protect Android" by buying the portfolio. While I will usually be one of the last people to defend Google, there are a few things to remember:

  • The people criticizing Google have certainly not reviewed Nortel's portfolio to assess whether it would have been a good investment at this price level. At $4.5B, it's far from certain. Google's duty is to its shareholders. Calculated decisions will need to be made as to how "protecting" Android partners and developers serves the shareholders.
  • $4.5B pays a lot of licensing fees against more specific threats.
  • Patents grant the right to exclude others from doing things, not the right to do something. Patents are little defense against NPEs with no operating business to counterattack.
  • Apple outshining Google in its support of its ecosystem is not news. It's corporate culture. (See also: music licensing)



eric said...

The question I have is why Google didn't enter a consortium, either the Strange Bedfellows or one of it's own making (HTC, Moto, LG, etc.) it might just be as you say, money better spent elsewhere but when you attack every competitor around by giving away their core product you're likely not going to have many friends, even among competitors. I wonder which is at work in this case? Just ruminating

New said...

Considering the company's bidding strategy on the Nortel patents, one has to wonder whether Google was ever very serious about its bid. If so, hopefully it learned its lesson: next time, instead of Pi, go with Feigenbaum's constant ($4,669,201,609).