In an unprecedented move, on June 30, 2011, a group of global companies including Apple and Microsoft paid $4.5 billion for the entire patent portfolio of the bankrupted Nortel Networks. This patent portfolio includes more than 6,000 patents worldwide and covers technologies such as wireless, wireless 4G, data networking, optical, Internet search, semiconductor, and social networking. As Nortel was once a global telecommunication leader, its patent portfolio contains a largest single collection of patents covering the LTE (long-term evolution) standard, which appears to become the dominant standard for the 4G wireless communication.
This high-profile patent auction attracted who-is-who in the high-tech world, including US companies like Google, Apple, Microsoft, and Intel as well as Chinese communication giants Huawei and ZTE. Google also announced a $900 million bid when it entered the bidding process. However, at the end, Google was disappointed by losing a bid that it may regret in the years to come. The winning group includes six high-tech companies: Apple, EMC, Ericsson, Microsoft, RIM, and Sony.
Among the winning companies, half of them (Apple, Microsoft, and RIM) are smart phone and tablet players. Apple, Microsoft, and RIM all have their own smart phone operating systems. Apple and RIM are also smart phone makers, while Microsoft partnered with Nokia early this year to make smart phones. By making this patent purchase, all of these three companies, especially Microsoft, showed their resolves and priorities in competing in the smart phone market with an eye on the next generation wireless technology. To the contrary, Google, the owner of the smart phone operating system Android, lost this important opportunity to shore up its commitment. This may weaken the Android-based smart phone eco-system, if the lack of such patent protection hinders the market competitiveness of Android smart phones and tablets in the future.
To a certain degree, the antitrust concern may prevent these winning companies from actively asserting the purchased patents for profits or market shares. In addition, Nortel was a member of the LTE standard working group, which obligated the Nortel’s LTE patents to be licensed under the reasonable and non-discriminatory (RAND) terms. However, the defensive use of these purchased patents may immune these companies against attacks from competitors and harassment from NPEs, while using their own patents to pursue competitive advantages. Of course, the full impact on the smart phone competitive landscape is still to be seen. These events again showed the world how much these leading technology companies value their intellectual property, particularly patents. It is truly not an overstatement to say that the IP is becoming the life line of successful high-tech companies.
