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Nortel Sells Patents For $4.5 Billion

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Nortel Networks

A consortium of six heavy hitters in the technology world has beat stiff competition from the likes of Google and Intel to secure 6,000 patents from bankrupt telecoms firm Nortel Networks.

The consortium includes Apple, Microsoft, Research in Motion, EMC, Ericsson and Sony. At the beginning of April, Google made an initial bid of $900 million for the patents, but this figure was blown out of the water in the auction yesterday when the consortium ended up paying $4.5 billion (£2.8 billion) for the patent portfolio – well above the expected selling price of $1-2 billion.

Nortel owned 6,000 patents, of which 2,600 were in the United States. Many of Nortel’s patents were in wireless and telecommunications technologies, as well as other areas like Internet search and social networking – which Google would have love to get its hands on. The reason for such a large bidding war is the exponential growth of lawsuits between technology companies in recent years – especially in the smartphone area – and these patents should provide some security to companies such as Microsoft, Apple and RIM in this area. The patents also covered the prized area of mobile broadband technology such as 4G standards like long term evolution (LTE).

                    Nortel Networks consortium

"The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world," said George Riedel, chief strategy officer at Nortel.

Having lost out, Google could now face some difficult times ahead with its Android operating system set to come under more pressure. Microsoft is already receiving royalties from a number of companies using Android on the basis they were infringing patents it owns. Oracle is currently preparing to sue Google for infringing a number of Java patents with Android.

While all the financial details of the deal were not revealed, RIM said they paid $770 million while Ericsson paid $340 for their portions of the patent portfolio. Apple and Microsoft – as is their wont – declined to comment on how much they paid. How the patents will be split up is also a mystery but it is likely that should a patent be licensed, each company will get royalties in proportion to the amount they contributed to the winning bid.

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