Nortel's Patent Assets

We've reported from time to time on the planned sale of Nortel's patent assets which have attracted the interest of a number of companies, particular the portfolio related to the sale of the assets related to the forthcoming LTE (long term evolution) and SAE standards. Reports indicate that Nortel may have seven patents of the 105 declared relevant patent families.

An exclusive report in Reuters indicates that the sale should be completed in the next few weeks. Front runners include both Apple and Google who are probably looking to build up their telecommunications-related patent assets as a bargaining chip to gain access to patent essential to the operation of mobile telecommunications. InterDigital is apparently also interested, whilst Reuters could not elicit a comment from Canadian telecommunications company RIM which had apparently previously a view that the patents were a national asset to Canada.

The value of the patents to newcomers in the telecommunications field, such as Apple and Google, is clear. Apple will be budgeting for licensing fees for access to essential patents to be able to implement telecommunications standards. Any patents they obtain can then be thrown into the pot to reduce the payments. Google are presumably currently relying on HTC for the IP rights - but would no doubt welcome access to a larger telecommunications portfolio in the mid-term to reduce any payments for cross-licence agreements to which they might need to sign up. No doubt a number of patent trolls or NPEs will sniffing around to see whether the portfolio has sufficient value to be able to make a return on the investment, as Joff Wilde has reported here.

Reuter's reports that Nortel's 4000 patents have been split up into different packages covering different technologies, including wireless handset and infrastructure, as well as optical networks, Internet advertising and computers. Given the need for interoperability in the telecoms field and Nortel's possession of seven highly relevant patents, it seems that these seven patents may be highly valuable. However, purchasers may be disappointed if the patents are ever litigated, as there may be potential prior art not considered by the patent office which could severely damage the value of the patents as both IP.COM and InterDigital have had to learn over the years. Both have had to live with patent rights that have been limited after a court action.

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Patent Sale, Standards, Telecommunications, Nortel

NORTEL's LTE Patents

There's a lot more going on about Nortel's patents and a lot of confusion about whether they have been sold or not. The latest message is that they have not been sold. The author erroneously picked up the story from another source and has since been corrected. The auction that took place after NSN's initial approach. The approach from Nokia Siemens Networks was a stalking horse and under US bankruptcy law any other bidders must bid for the same "package of assets" - which did not include the patent rights, as NSN did not want them.

There's a report over on seeking alpha that Canadian company Research in Motion are arguing that the LTE patents are a national treasure and should be kept in Canadian hands.

There's more about stalking horse bidders in US Chapter Bankruptcy over here.

Royalty Rates in the telecommunications industry

The issue of royalty rates in the telecoms industry has always been one surrounded in mystery. My attention has been drawn to a contribution on a industry newsletter Light Reading (of which I had never heard). It dates from May 2008 and suggests that Nortel is (was) looking at a royalty rate of 1% per handset for access to its portfolio of patents essential to the LTE standard. This seems about right from my knowledge of the industry. Nortel has not got any handsets to sell and so there seems to be little to be gained from cross-licensing in the industry.

Nortel is, of course, bankrupt and has just sold much of its business to Nokia Siemens Networks, but according to Light Reading not the rights to its patents (see here). Light Reading reports that ChaseMorgan have calculated that the rights to the patents could end up being up to $2.9 billion, although a more reasonable value might be $950 million.