July 12, 2011

Nortel Patents Sell For $4.5 Billion

Apple Inc., Microsoft Corp., Research in Motion Ltd. and three other tech companies received court approval on Monday to buy wireless patents from Nortel Networks Corp. for $4.5 billion.

Nortel Networks Corp. filed for bankruptcy protection from creditors in January 2009 and courts in the two countries are overseeing the disposal of the company's assets.

Judges in the U.S. and Canada approved the sale of 6,000 patents and applications, which went for three times more than what analysts thought it would gather.

Lisa Schweitzer of Cleary Gottlieb Steen & Hamilton LLP, which represents Nortel, told a Delaware Bankruptcy Court hearing that the auction was "record breaking in terms of this case and in the patent industry generally."

The auction started with a bid of $900 million by Google Inc.

According to analysts, the price paid after 19 rounds of bidding indicated the lengths Apple was willing to go to try and grab the patents out of Google's paws.

Analysts said the winning group would likely try to maximize their return on the patents by using them to litigate against others, with Google and its Android mobile phone software first on the list.

Intel Corp. and RPX Corp. were also among the bidders. 

The patents range in wireless, data networking, optical, voice, Internet and semiconductor technologies. The most prized relate to emerging 4G standards like long-term evolution (LTE).

Several companies were resolved by reiterating the sale did not negate licensing agreements involving the patents included in the sale.

Delaware bankruptcy judge Kevin Gross said it would be a "$4.5 billion mistake" not to approve the sale.

The money will become part of the Nortel estate and will eventually be distributed to creditors.

David Botter of Akin Gump Strauss Hauer Feld LLP, which represents the official committee of creditors, told Reuters that "This is truly a 'wow' transaction."

According to Schweitzer, the transaction is expected to close in about a month.

The Rockstar group got antitrust clearance on June 23 for the transaction.  However, the American Antitrust Institute has asked the Justice Department for "an in-depth investigation" into the consortium's patent portfolio purchase.

The July 1 announcement of the auction outcome pushed some of Nortel's bonds above par, indicating traders are speculating the money from the sale could lead to certain bonds being paid in full.


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