A Frustrated Google “Stalks” Nortel Networks' Patent Portfolio

Dan Whalen is a JD candidate at Osgoode Hall Law School.

In a “stalking horse” bid, Google has offered US$900-million for the patent portfolio of fallen telecommunications giant Nortel Networks. Although Google has openly admitted that part of its motive is simply to deter lawsuits, the move has industry analysts marvelling at the extent of the company’s dedication to this goal.

Up for grabs is a collection of roughly 6,000 patents and patent applications for wired, wireless and digital communications technology. The portfolio is touted as the last significant set of assets that Nortel has to sell off. Once a Canadian powerhouse and Ottawa institution, Nortel filed for bankruptcy in January 2009 following the burst of the dot.com bubble. Nevertheless, the patent portfolio is expected to garner many bids. Says George Riedel, Nortel’s chief strategy officer: “This is an unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market.”

In the company’s blog, general counsel for Google admitted that their bid’s goal is twofold: “[W]e hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community – which is integrally involved in projects like Android and Chrome – continue to innovate.”

Observers seem to think that the truth lies closer to one side of this dual purpose. On the one hand, Google has lamented that it trails behind other industry players like Apple and Microsoft in terms of the number of patents it holds. However, as Charles Golvin, principal analyst with Forrester Research has pointed out, many patents among the portfolio lie beyond Google’s core competencies; this is not to say that the company is venturing into new business areas, but that the portfolio would provide useful leverage in the future. Indeed, the Internet giant has endured a boom in litigation from patent trolls and industry competitors as it has ventured into the mobile phone domain with its Android software. Offers Golvin: “I think many of these lawsuits are meant to slow down innovation especially when they come from a competitor.”

Google’s bid is a “stalking horse asset sale agreement,” which translates to the reality that other truly interested parties must offer up more money for the portfolio. It is expected that the final sale price will be over US$1-billion and could go as high as US$2-billion. Whether Google follows the bids to the top will serve as a key indicator of just how committed it is to gaining such leverage and how fierce the patent wars have become.