Google bids $900 million for Nortel patent portfolio, will use it as shield against patent trolls (update)

Google and Nortel have agreed on the princely sum of $900 million to start off a "stalking horse" auction -- wherein outside parties are still free to outdo Google's bid -- for the acquisition of Nortel's rather vast patent portfolio. The sale comes as part of the latter company's bankruptcy selloff and involves some 6,000 patents and patent applications, which encompass both wired and wireless communications, semiconductors, data networking, voice, and the internet -- going so far as to even touch on web search and social networking. The thing is, Google's not really enamored with these tidbits of intellectual property to the tune of nearly a billion dollars. No sir, a rather bitter blog post from the company this morning makes it quite clear that Google's acting in order to bolster its own intellectual property library and to "create a disincentive for others to sue." Both Android and Chrome get obliquely mentioned in Google's announcement as benefiting from the move, which should be completed by June of this year pending other bids and regulatory approvals.

Update: Microsoft has noted that it has "a worldwide, perpetual, royalty-free license to all of Nortel's patents that covers all Microsoft products and services, resulting from the patent cross-license signed with Nortel in 2006." That license will also transfer with the sale of the patent rights. All that means is that Microsoft cannot be sued for infringing on that bundle of rights as it is already licensed to use them. That means Microsoft is extremely unlikely to participate in this auction -- other than, of course, as a means to prevent others from obtaining the same rights.

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Apr 04, 2011 10:53 ET

Nortel to Sell Patent Portfolio

- Enters into Stalking Horse Sale Agreement with Google Inc. for US$900 million in cash
- Planned sale includes approximately 6,000 patents and patent applications covering a broad range of wired, wireless and digital communication technologies
- Subject to Canadian and U.S. court approvals, auction expected in June 2011

TORONTO, ONTARIO--(Marketwire - April 4, 2011) - Nortel(1) Networks Corporation (OTCBB:NRTLQ) announced today that it, its principal operating subsidiary Nortel Networks Limited (NNL) and certain of its other subsidiaries, including Nortel Networks Inc. and Nortel Networks UK Limited (in administration), have entered into a stalking horse asset sale agreement with Google Inc. for the sale of all of Nortel's remaining patents and patent applications for a cash purchase price of US$900 million.

The agreement includes the planned sale of approximately 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.

This agreement follows a confidential, multi-round bidding process involving several interested companies and consortia from around the world.

"This is an unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market", said George Riedel, Chief Strategy Officer and President of Business Units, Nortel. "We look forward to what we hope will be a robust auction, following the requisite court approvals, currently expected to be held in June 2011".

Details of Sale Process

Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice. Following completion of the bidding process, final approval of the U.S. and Canadian courts will be required.

In addition to the processes and approvals outlined above, consummation of the transaction is subject to the satisfaction of regulatory and other customary conditions.

As previously announced, Nortel does not expect that the Company's common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.