Nortel Patents Sold for $4.5 Billion to Consortium Which Includes Apple

From Macrumours:

Nortel announced that they had concluded an auction to sell of its patents and patent applications to a consortium consisting of Apple, EMC, Ericsson, Microsoft, RIM and Sony. The final winning bid was $4.5 billion and includes over 6,000 patents and patent applications covering wireless, 4G, networking optical, voice internet, semiconductors and more.

“Following a very robust auction, we are pleased at the outcome of the auction of this extensive patent portfolio”, said George Riedel, Chief Strategy Officer and President of Business Units, Nortel. “The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world.”

We had previously reported that Apple had been interested in buying up the patents off Nortel Networks which had filed for bankruptcy in 2009. The interest in the portfolio was significant due to the broad reach of the patents, especially in the area of wireless networking and LTE technology. Google was also said to be one of the early interested parties by placing an opening bid of $900 million on the patents.

One research firm has estimated that there are 105 patent families deemed essential to deployment of LTE (4G) technology, with Nokia controlling 57 of those families. Ericsson is said to control 14 families, while Nortel, Qualcomm, and Sony are each reported to control about seven families. The companies that are part of the winning bid will presumably provide access to these patents to those companies.

A few things to note about this. First, this is a perfect example of the barreirs to entry patents can create.¹ This will create a “walled garden” to outsiders, barriers to entry that help those in the club to form a quasi-oligopoly. I would not be surprised if the FTC scrutinizes this as anti-competitive; typical of the schizo state to grant monopolies and then to penalize their use on the other hand.²

Also, if I did my math right, the value being paid is $750,000 per patent. Let’s say Nortel spent say $30k on average to obtain and maintain each patent (for a big company like Nortel this may be about right; can be cheaper if you are more efficient). That is a ROI of 25x (2500%).

Update: See also Betabeat, $4.5 Billion Purchase of Nortel Patents is a Potent Reminder How Broken the System has Become. And in an odd twist, instead of bidding in round numbers, Google first bid “$1,902,160,540 — a reference to Brun’s constant — and later bidding $2,614,972,128 for the Meissel-Mertens constant, they ended up submitting a bid for $3.14159 billion“, or pi billion dollars (see Google Bid Pi Billion Dollars For Nortel Patents). Also: Google’s “Pi” In The Face, by MG Siegler, writing on TechCrunch.

[Mises]

1. See Patent Cross-Licensing Creates Barriers to Entry; Apple vs. Microsoft: Which Benefits more from Intellectual Property?; Microsoft Copyrights –> Patent Dominance; Google’s Defensive Patent Acquisition. [↩]
2. See State Antitrust (anti-monopoly) law versus state IP (pro-monopoly) law; Antitrust vs. Trademark Law. [↩]