Nortel Patent Sale Could Face Canadian Review

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The Nortel PieThe US$4.5 billion deal for a consortium of companies including Apple, Microsoft, and Research In Motion to buy some 6,000 patents from Nortel could face a review by Canadian regulatory authorities. While Google, Apple, and other U.S. companies sought approval from U.S. antitrust regulators to bid on the patents, the deal itself could fall under the Investment Canada Act, which requires that large investments from foreign companies benefit the Canadian economy or be blocked.

Under this Act, regulators are required to review any and all foreign investments in excess of C$312 million (approximately US$323.2 million), according to The Wall Street Journal. Though the patent sale is just that, a sale, it could still qualify for review as a foreign investment.

Or not.

The Journal also reported that the book value of the patents had been listed by Nortel as C$0 (roughly US$0). If that is the value that applies to regulatory consideration, no review would be necessary.

Another trigger for review would be if assets in a deal generated more than C$73 million in annual revenue, licensing revenue in this case. Unnamed sources told The Journal, however, that the patent portfolio never generated more than C$10 million, and if so, that would also bypass the need for a review.

Even if a review is necessary, the deal wouldn’t necessarily be blocked — it simply needs to be approved by the Minister of Industry, and US$4.5 billion coming into Canada is likely to be viewed as favorable to the Canadian economy when compared to a bunch of patents sitting around in binders in a defunct company’s library.

But wait, there’s more: One of the companies involved in the consortium is Research In Motion, a Canadian company. Turns out that RIM coughed up US$770 million (roughly C$743.3 million) of the total buyout price, meaning that money won’t be changing countries at all (though international financing and accounting might or might not change that), though it’s a small enough portion that it doesn’t affect the equations involved in deciding if a review is required anyway.

Comments

iVoid

“Nortel as C$0 (roughly US$0)”

Did we really need to be told that $0 Canadian is the same as $0 American?

smile

Bryan Chaffin

I couldn’t resist! :D

webjprgm

grin You never know, the conversion might be of the form y = m*x + b, so if b != 0 ...

jfbiii

As much as it strikes me that a sale is not the same as an investment (because it’s a transfer rather than buying a stake) it also seems unreasonable to declare the portfolio has no value. That valuation seems like the kind of thing you would want to do with, say, a used car, to avoid paying taxes. It also seems likely to me that the worst Canada could do would be to refuse to recognize the sale as valid, and so the consortium could be unable to assert the portfolio in Canada. But if the US recognizes the patents as valid they would still apply here. Of course, I’m no lawyer. The above just seems like common sense.

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