Google Cramped Out

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The last couple of months have been a rat race for many of the tech companies, they have been falling over each other in trying to obtain patents from the Nortel before it goes under.

The tech giants Google, Apple, Microsoft, Sony and some others were clawing each other and trying to outbid each other. One gets the feeling that they planned on keeping Google out in the cold.

Pooling in assets

A consortium including Apple Inc. and Microsoft Corp. paid $4.5 billion to buy a trove of wireless patents belonging to Nortel Networks Corp.

The group, which also includes Sony Corp., Ericsson AB and EMC Corp., agreed to pay $4.5 billion in cash for the assets, Ontario-based Nortel said in a statement. The companies aim to complete the sale this quarter pending approval from U.S. and Canadian courts, it said.

In April, Google bid $900 million for the Nortel patents ? one-fifth of the final selling price ? to begin the ?stalking horse? auction. After seeing considerable interest from other companies, Nortel decided to wait to hear more offers.

The final price shows the rising stakes of intellectual property in the increasingly competitive and litigious smartphone business.

The purchase will give the consortium control over more than 6,000 patents and applications that cover wireless and Internet technologies.

Bidding war

The bidding process had multiple rounds with about 150 people in the auction room, according to David Descoteaux, managing director of Lazard Ltd., Nortel?s investment banker.

?It was around-the-clock negotiations,? Descoteaux said. ?We went well into the night.?

The deal is the largest of its kind, both in terms of number of patents sold and its price tag, said Alex Poltorak, chief executive of the New York based intellectual property firm General Patent Corp. “Nobody expected the price to go this high,” he said, describing the assets as a “goldmine of patents.”

Carolina Milanesi, head of research at Gartner, said this is a case of making sure that one company alone wouldn’t get these patents and be at a strong advantage. “It also seems to be that it is about competitors getting together to make sure that one company was not Google,” she added.

Nortel, which filed for bankruptcy in 2009, fetched more for the patents than the $3 billion it had previously raised by selling almost all its businesses. RIM, maker of the BlackBerry smartphone, will pay about $770 million for its share of the patents, the Waterloo, Ontario-based company said in a statement. Ericsson will pay $340 million, the Stockholm-based networking-equipment maker said. Steve Dowling, a spokesman for Apple, declined to comment beyond the Nortel statement.

All this fuss is for patents.

Why patents?

From the standpoint of the business community, patents are of utmost importance, since they provide the necessary protection for the newly-developed products or processes.

?With all of the litigation that?s going on, this auction may be a pure protective move on the part of many of these companies? platforms,? said Henry Dewing, an analyst at Forrester Research Inc. ?It?s an unbelievable patent portfolio.?

Nortel’s portfolio includes around 6,000 patents and patent applications in telecommunications, Internet search and social networking, and covers mobile, long-term evolution and data networking as well as optical, Internet, service provider, semiconductors and other patent portfolios.

Companies in the telecommunications industry are increasingly relying on patent litigation to slow the progress of their competitors, a fact that was highlighted by the massive patent battle settlement between Finland’s struggling handset maker Nokia Corp. and Apple in mid-June, when Apple agreed to pay continuing royalties to Nokia as part of a patent-license agreement.

This purchase would not only shield rivals like Apple, Microsoft and RIM but it could be used to challenge Android software.


Google is feeling very disappointed over the matter.

Google, which also runs the world?s largest search engine, had said it was bidding on the Nortel patents as way to protect itself and partners against lawsuits. HTC Corp., Sony Ericsson Mobile Communications AB, and Motorola Mobility Holdings Inc. also make Android devices. After the auction outcome, Google said it could lead to more patent litigation.

?This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition,? Mountain View, California-based Google said in an e-mail. ?We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers.?

Android share of the global smartphone market is estimated to be 38.9 per cent, compared with 18.2 percent for Apple and 14.2 percent for RIM, according a report from research firm IDC.

?No major industry player is as needy in terms of patents as Google,? patent expert Florian Mueller wrote in an email to ?There are already 45 patent infringement lawsuits surrounding Android and makers of Android-based devices have to pay royalties to dozens of addition to HTC, are already paying royalties on Google?s Android to Microsoft.?

The deal is expected to close in the third quarter of 2011, following approval by the U.S. and Canadian bankruptcy courts.

Source: Wall Street Journal, Bloomberg, BBC, CNN

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