The dust settling on the $4.5 Billion Nortel patent auction… just to be kicked up again?

Just two weeks ago Nortel announced the outcome of its highly anticipated patent portfolio auction. In an interesting twist, no single buyer walked away with the spoils, but rather a consortium made up of Apple, EMC, Ericsson, Microsoft, Research In Motion, and Sony.

The winning bid was much bigger than many estimates and reached the staggering figure of $4.5 billion. That values the portfolio of over 6,000 patents and applications at a mouthwatering figure of almost $800,000 PER PATENT. Accounting for patent families, this figure raises to closer to $1 million per patent.

While details will continue to emerge from this massive (and complex) transaction, speculation around what this means for the mobile telecomm (and related) IP landscape is rampant. Certainly Google has indicated that they are not amused – Kent Walker, Google’s Senior Vice President and General Counsel said in a statement to the press:

“This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce that current flood of patent litigation that hurts both innovators and consumers.”

Google is already involved in patent litigation around its Android – and that exposure is reaching their partners, such as HTC as well. Obviously the question of what relief the Nortel portfolio would have brought to bear on their current IP pains is not a simple one, but surely the opportunity to so profoundly change the current and future mobile industry IP playing field is one that Google may rue, despite the massive number that settled this auction.

You can be sure that the winners will be working diligently for every opportunity to realize an ROI on this big investment. Importantly, the storm cloud of further patent litigation will loom ever larger over Google and its Android brethren. As in all things, Google has become a perpetual target and one wonders if they perhaps acquire the most risk as a result of all of this.

It is worth noting as well that as the auction progressed, the consortium grew, and the proceedings concluded, Intel and Nokia were notable absentees from the winning team.

Apple stockpiling its IP arsenal?

Apple’s (and other players in consortium?) assault on the Android world is exemplified in last year’s filed lawsuit against HTC. Many experts seem to think this was all about slowing down Android and setting an example for manufacturers. And in choosing HTC, picking a big target with a relatively weak patent portfolio (as a contract manufacturer, they aren’t an IP powerhouse), holding just over 150 U.S. patents. With a new armament to defend the iPhone market share, these Nortel patents could be all about “attack is the best form of defense” again.

The patents in question were Apple’s U.S. Patents, numbered:

7,362,331; 7,479,949; 7,657,849; 7,469,381; 5,920,726; 7,633,076; 5,848,105; 7,383,453; 5,455,599; 6,424,354

These patents mostly cover user interface and user interactivity (sensing and responding to user “input”) but also cover power management and communications “quality and capacity,” and three of them were acquired by Apple from other assignees over the years. These patents are charted below against U.S. mainline class. Also, the signature “swipe gesture to unlock” is covered in one of the patents listed in the complaint.

In our next installment, we’ll explore the possible analysis and preparation HTC is likely doing in defense and also expand on the future for the Nortel patent auction fall-out. One thing seems clear – Google’s reaction to the auction outcome as “disappointing” is likely quite muted to their feelings on the matter and I suspect that we will hear a lot more from this in the coming years, most likely much to Google’s chagrin.

Of course with yesterday's earnings report, Google is hardly licking their wounds.

Nortel News Release: http://www2.nortel.com/go/news_detail.jsp?cat_id=-8055&oid=100272428&locale=en-US&lcid=-1

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Erik Reeves
erik.reeves@sumobrain.com