Nortel Patents Sale

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    Posted: 01 July 2011 02:36 AM

    Nortel announced that they had concluded an auction to sell of its patents and patent applications to a consortium consisting of Apple, EMC, Ericsson, Microsoft, RIM and Sony. The final winning bid was $4.5 billion and includes over 6,000 patents and patent applications covering wireless, 4G, networking optical, voice internet, semiconductors and more.
    “Following a very robust auction, we are pleased at the outcome of the auction of this extensive patent portfolio”, said George Riedel, Chief Strategy Officer and President of Business Units, Nortel. “The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world.”
    We had previously reported that Apple had been interested in buying up the patents off Nortel Networks which had filed for bankruptcy in 2009. The interest in the portfolio was significant due to the broad reach of the patents, especially in the area of wireless networking and LTE technology. Google was also said to be one of the early interested parties by placing an opening bid of $900 million on the patents.

    One research firm has estimated that there are 105 patent families deemed essential to deployment of LTE (4G) technology, with Nokia controlling 57 of those families. Ericsson is said to control 14 families, while Nortel, Qualcomm, and Sony are each reported to control about seven families. The companies that are part of the winning bid will presumably provide access to these patents to those companies.

         
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    Posted: 01 July 2011 02:42 AM #1

    madmaxroi - 01 July 2011 05:36 AM

    Nortel announced that they had concluded an auction to sell of its patents and patent applications to a consortium consisting of Apple, EMC, Ericsson, Microsoft, RIM and Sony. The final winning bid was $4.5 billion and includes over 6,000 patents and patent applications covering wireless, 4G, networking optical, voice internet, semiconductors and more.
    “Following a very robust auction, we are pleased at the outcome of the auction of this extensive patent portfolio”, said George Riedel, Chief Strategy Officer and President of Business Units, Nortel. “The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world.”
    We had previously reported that Apple had been interested in buying up the patents off Nortel Networks which had filed for bankruptcy in 2009. The interest in the portfolio was significant due to the broad reach of the patents, especially in the area of wireless networking and LTE technology. Google was also said to be one of the early interested parties by placing an opening bid of $900 million on the patents.

    One research firm has estimated that there are 105 patent families deemed essential to deployment of LTE (4G) technology, with Nokia controlling 57 of those families. Ericsson is said to control 14 families, while Nortel, Qualcomm, and Sony are each reported to control

    about seven families. The companies that are part of the winning bid will presumably provide access to these patents to those companies.

    A consortium….interesting. Which firms ponied up what percentage of the HUGE 4.6 billion bundle? How do they share the technology? Straight cross-licensing? Restricted?

    And where, oh where is Google? A little ‘ganging up’ here by the winners?

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  • Posted: 01 July 2011 02:47 AM #2

    Red shirted ensign - 01 July 2011 05:42 AM

    And where, oh where is Google? A little ‘ganging up’ here by the winners?

    The idea here is to partner with your weak competitors.

         
  • Posted: 01 July 2011 03:07 AM #3

    adamthompson3232 - 01 July 2011 05:56 AM
    Mercel - 01 July 2011 05:47 AM
    Red shirted ensign - 01 July 2011 05:42 AM

    And where, oh where is Google? A little ‘ganging up’ here by the winners?

    The idea here is to partner with your weak competitors.

    So based on this logic it looks like Apple is real winner and then pushed some of the liability out to some weaker players to save some coin. I buy that. It’s so hard to know what IP is really worth but obviously Apple is in a pretty good position to understand this IP as well as anyone out there.

    Exactly right.  Apple wanted to ensure they were party to ownership at less than full price.  Apple keeps more of its cash and cared less that RIMM or MSFT or Ericsson, et al, owned a piece of it.

    Too, the sale should probably have an easier time with regulatory scrutiny/approval with multiple buyers.

    [ Edited: 01 July 2011 03:13 AM by ByeTMO ]      
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    Posted: 01 July 2011 03:49 AM #4

    adamthompson3232 - 01 July 2011 05:41 AM

    On a more serious note, interesting that the consortium is made up of so many companies and GOOG is nowhere to be found. What does this mean? I always hear that GOOG is very weak on IP yet they somehow let this one get away?

    I think that was the point.  I believe Microsoft and Apple, mostly, wanted to make sure GOOG remains weak in IP, so in this case, they ganged up.  Smart move.  Android is already being attacked on several fronts (the pending Oracle lawsuit is a big one), and Microsoft is actually making money off of every HTC Android phone being sold.  So it was in everybody’s interest to NOT let Google get any of these patents.

    The 6,000 patents are probably very diverse, so they probably all put up the amount for the patents that affected them the most.  I’m guessing AAPL spent close to $2B on this (my rough guess is $1B Microsoft, $500M Sony, $770M RIMM, $340M Ericsson, EMC chipping in some $100M, and Apple putting up the rest).  It’s a lot of money, but at the current rate, this is just 4 week’s worth of AAPL’s earnings.

    Notice that RIMM paid a pretty penny.  Spending so much of their stash at this point (they had $3B recently, so this is roughly 25%), probably means Apple/Microsoft were playing hardball even within the group, forcing everybody to pay their “fair share”, or risk get thrown out. 

    EMC being part of the group is also interesting.  Why in heck would EMC be interested in telecom patents?  Maybe this just bought them the right to cross license patents with other members of the group?

         
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    Posted: 01 July 2011 04:51 AM #5

    Interesting!  Apple does “share” from time to time but I wasn’t thinking they’d go the consortium route for this one. 

    Anyway, it’s a very savvy move, and everyone owns the same stuff so it’s win-win all around.  This is one heck of a “strategic” investment (you don’t think this has anything to do with Tim Cook’s comments from a recent CC, do you?).  Easily paid from Apple’s gigantic cash pile, and because of its consortium nature, the antitrust regulators probably weren’t nearly as worried.

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  • Posted: 01 July 2011 06:07 AM #6

    An Apple Masterpiece today :D Partner with non innovative competitors to save the patents they wanted , paying less, everyone has all the patents now !!

    Great Rockstar Bidco :D :D

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  • Posted: 01 July 2011 07:33 AM #7

    Consortium led by Apple buys Nortel’s patents for $4.5 billion

    By Philip Elmer-DeWitt

    “No major industry player is as needy in terms of patents as Google,” wrote FOSS Patents’ Florian Mueller after Nortel announced the results of the sale late Thursday. “There are already 45 patent infringement lawsuits surrounding Android, and makers of Android-based devices have to pay royalties to dozens of right holders.”

    In January Mueller called Android a “suit magnet,” and subsequent events have proved him right. He summarized the latest round of litigation and licensing agreements in an analysis published earlier this week.

    “In light of Android’s patent problems it’s surprising that Google didn’t outbid everyone else,” he wrote Friday. “It could have afforded more than $4.5 billion but it doesn’t appear to be truly committed to Android.”

    In an e-mail to news organizations, Google called the outcome of the patent auction “disappointing.”

    There was probably a lot of back room maneuvering that we’ll never know about and there are probably a lot of complex agreements that have yet to be revealed, but it’s pretty hard to read this as anything but a devastating loss for Google. Sony, RIMM, Ericcson and EMC are probably inconsequential to Apple. But the fact that Apple teamed up with Microsoft is significant. Apple either sees Android as a greater threat than Windows Phone 7, or they see Windows Phone 7 as inconsequential, or both.

    [ Edited: 01 July 2011 07:39 AM by FalKirk ]      
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    Posted: 01 July 2011 09:12 AM #8

    Wil this let them go on the offensive immediately and attack (sue) Google or is this only protection against future innovation? Somehow I imagine Jobs and Ellison sitting around having a good laugh saying “let’s get the f*ckers!”

         
  • Posted: 01 July 2011 11:22 AM #9

    The patents went for three times the amount expected. Yet the more I read about this matter, the happier I am that Apple acquired these patents. It appears that Apple paid the lion’s share (although I don’t know if the contribution from Microsoft has been made public yet) and it’s most likely that Apple controls the consortium.

    Google is a loser. Intel is a loser. I guess anyone not in the consortium is a loser.

    A lot of these patents touch on LTE, a technology that is just getting started and is expected to become ubiquitous. Wow, talk about leverage.

    We’ll have to wait and see what really went down here, but right now, this appears to be a home run for Apple.

         
  • Posted: 01 July 2011 11:27 AM #10

    ChasMac77 - 01 July 2011 12:12 PM

    Wil this let them go on the offensive immediately and attack (sue) Google or is this only protection against future innovation? Somehow I imagine Jobs and Ellison sitting around having a good laugh saying “let’s get the f*ckers!”

    That’s right.  You can bet Larry called his buddy Steve and shared a little of Oracle’s playbook.  And organization chart:

    Google is screwed.

         
  • Posted: 01 July 2011 11:33 AM #11

    Mercel - 01 July 2011 02:27 PM
    ChasMac77 - 01 July 2011 12:12 PM

    Wil this let them go on the offensive immediately and attack (sue) Google or is this only protection against future innovation? Somehow I imagine Jobs and Ellison sitting around having a good laugh saying “let’s get the f*ckers!”

    That’s right.  You can bet Larry called his buddy Steve and shared a little of Oracle’s playbook.  And organization chart:

    Google is screwed.

    Therefore it’s even more puzzling why GOOG is up so much today!?

         
  • Posted: 01 July 2011 12:04 PM #12

    Hannibal - 01 July 2011 02:33 PM

    Therefore it’s even more puzzling why GOOG is up so much today!?

    Google is getting very positive press with its design makeover (I like it too) and Google Plus initiatives.  Google’s failure with Nortel’s patents raises questions on how committed it is to Android.

         
  • Posted: 01 July 2011 12:52 PM #13

    Mercel - 01 July 2011 03:04 PM

    Google is getting very positive press with its design makeover (I like it too) and Google Plus initiatives.  Google’s failure with Nortel’s patents raises questions on how committed it is to Android.

    DawnTreader has been saying (pardon me, DawnTreader if I’m misrepresenting your position) that Android was a distraction and that Google’s future was in Chrome. Kinda agree that Android is going sideways on Google, but I can’t say that I have any faith in their Chrome initiative either.

    I posted some of Andy Ihnatko’s thoughts on Google the other day. He thinks they are making fundamentally bad decisions. He even wondered if they would be in mobile at all in three to five years.

    Google has all this money flowing from search (just like Microsoft has all that money flowing from Windows and Office) and they can’t seem to find their way in any other venture.

    Critics often view Apple as a series of one-hit wonders, but I’d say that it’s quite the opposite. They have a long-term plan that they are following step-by-step-by step and the reason all of their products are wonders is because all of their products fit together so neatly into that one master plan.

    Clean up your operating system with Snow Leopard. Create the iPhone. Integrate it with iTunes. Add the App Store. Add the iPad. Add the Mac App Store. Add Lion - integrate Mac’s into your mobile line. Add iCloud - co-ordinate and integrate all of your products, each with the other.

    Geez. Step by step by step. Each step building on the other and making the other stronger. Each step enabling Apple to build further out on the previous step.

    Do you see any of this with Google? Or Microsoft? Or Intel? Or, well, do you see any of this with any other company? Who else is demonstrating this type of laser-like focus?

    Lord help me, this is why I love Apple. They lead and they lead and they lead and all they ask in return is that everybody just get the hell out of their way. Microsoft and Rim and Palm and Nokia would never have given us an iPhone. Not in a hundred years.

    Microsoft and HP and all denizens of Windows hell-on-earth would never have given us the iPad. Not now, not never.

    Apple is the new pathfinder. They may - nay, I say they will - go down as one of the greatest companies of all time. And the exhilarating - and also dismaying - fact is that no one seems to have a clue how to copy their success. Perhaps Steve Jobs really is a one of a kind, once in a lifetime business genius. Lord, I hope not.

         
  • Posted: 01 July 2011 01:49 PM #14

    Can someone who understands patent licensing explain to us how this portfolio is worth $4.5B? Some questions:

    * Does it means that Android handsets can’t shift to a 4G network in the future?

    * Does it mean AAPL pays less licensing fees to other phone developers (or that those other developers have to pay AAPL)?

    Trying to understand the broad ramifications of this and haven’t seen a very deep explanation anywhere. If anyone has just a link to something like that, it’d be great.

    Cheers.

         
  • Posted: 01 July 2011 02:43 PM #15

    Fal. 

    I agree with you:  Apple is a GREAT American company.  And it is conferring intangible benefits to the USA beyond the products it sells to the world—kind of like an ambassadorship, really.

    Just wait until the Apple HDTV!  :-D I’m very bullish on this now.