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With both Apple and Intel now cleared by the US Department of Justice to bid on the Nortel patent portfolio, it looks almost certain that the once-delayed, greatly anticipated auction of the assets will go ahead on Monday at the New York offices of law firm Cleary Gottlieb. In anticipation, over on the Tangible IP blog they have put together a couple of very handy pieces focusing on the event. The first takes a look at the rules under which the auction will operate; the second identifies potential bidders and evaluates their chances of success. In terms of possible bidders, they go for: RIM, Apple, Ericsson, ZTE (or a Chinese consortium), Google, Intel, RPX Corp and Intellectual Ventures. Of these they make Apple, Google, a Chinese consortium and RPX the favourites.
Having spoken to a few people about the state of play at the IPBC earlier this week, I would make Apple and Google the top choices, followed by Intel, Ericsson and RPX. Of those five, my guess is that Google wants the portfolio most. The Nortel portfolio is not just about mobile telephony, there is a lot of other stuff in there as well. When its R&D function was up and running, Nortel had its fingers in a lot of pies. I was told, for example, that there are a few potentially very interesting patents relating to browser technology in there as well. My sense is that Google will not want to be outbid on this. That means the price is going to have to be astronomical for the company to walk away empty-handed. Of course, other companies may well want to test Google’s resolve, but in the end a defensive purchaser does not change anyone else’s current position. A purchaser looking to assert can do damage – both financial and strategic - to other people. But any such bidder will get to a point where that damage is not worth the cost of acquisition. Google has the financial power and may well have the desire to get to that point. It is very significant, I think, that the company chose to make its bid public – it wants everyone else to know what they are up against.
The Tangible IP people are looking for a bid from China. I was also thinking along those lines. But according to people I have spoken with, the Chinese may not have the cash reserves available. Intellectual Ventures is also mentioned, but I do not see the benefit to IV of getting involved. It would have to conclude a large number of licensing deals in order to get a decent return on a billion dollar plus investment. As for RPX, if it starts bidding my guess is that it will be on behalf of one or just some of its clients, along the lines I discussed earlier this year, rather than for all of them. What we may see, though, is IV and RPX buying some of the patents the auction winner obtains but does not want. I’d expect that to happen, rather than for the portfolio to be split up during the auction itself.
Anyway, this is all speculation. We are going to know soon enough. What is certain is that the Nortel portfolio has put patents at the front end of decision-making in a number of companies. The sums involved clearly make that the case. And for every actual bidder, there will be quite a few others that have thought about taking part, but decided not to. Once a company has been through such a process with patents once, it is much more likely to do it again in the future.
As for Nortel shareholders, they can only look on bemused (and maybe very angry) as an asset of their bankrupt company is at the heart of a ten-figure battle between some of the world’s most cash-rich corporations. Why on earth couldn’t the Nortel board make more of it while they were in charge?
Patents, IP business, IP valuation