With $4.5bn bid, group led by Apple and Microsoft claims Nortel patents

In a patent auction unprecedented in size and scope, a consortium of high-tech heavyweights banded together to buy Nortel Networks Corporation's trove of more than 6,000 remaining patent assets for a record-shattering $4.5bn.

The winning bidder, a team of six tech companies that called itself Rockstar Bidco LP, consists of Apple Inc., Microsoft Corp., Research in Motion Ltd., Sony Corp., Ericsson AB, and EMC Corp. The consortium will take control of the patents, which cover everything from online search and tablet computers to social networking and 4G LTE mobile technology, pending approval from U.S. and Canadian bankruptcy courts.

Google, the only contender whose identity was known when the auction kicked off on Monday, came away empty-handed. The search behemoth, eager to ward off would-be patent infringement plaintiffs and bulk up its relatively modest patent portfolio, had entered into a "stalking horse" agreement with Nortel to supply the minimum auction bid at $900m.

Google was advised on the bidding process by lawyers at Wachtell, Lipton, Rosen & Katz, including lead counsel Philip Mindlin, corporate partners Adam Emmerich and Benjamin Roth, antitrust partner Ilene Gotts, and restructuring and finance partner Gregory Pessin.

"This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition," said Kent Walker, Google's senior vice president and general counsel, in a statement. "We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers."

Cleary Gottlieb Steen & Hamilton managed the auction for Nortel, which took place at the firm's New York office from June 27 through June 30. Leading the Cleary team on the bankruptcy aspects were partners Lisa Schweitzer and James Bromley. Partners Paul Shim and Paul Marquardt provided M&A advice, partner Craig Brod assisted on corporate matters, and counsel Daniel Ilan helped on IP matters. Partner Jeremy Calsyn provided antitrust advice. (All are in New York except Marquardt and Calsyn, who are in Washington, D.C.)

David Berten, whose Chicago-based Global IP Law Group was selected by Nortel to advise it on monetizing its patents, noted that the $4.5bn selling price was unprecedented. "I don't know of any other stand-alone patent sale that's been higher than a billion dollars," he says.

Ericsson, which contributed $340m to the transaction, was represented by Paul, Weiss, Rifkind, Wharton & Garrison partners Marilyn Sobel, Stephen Shimshak, Peter Rothenberg, Joseph Simons, Charles Googe Jr., and Lawrence Witdorchic, according to the firm.

Apple was advised on the auction by lawyers at Weil, Gotshal & Manges, including partners Marcia Goldstein, Kyle Krpata, and Ronit Berkovich, according to a person connected to one of the other firms involved in the auction.

No further information on which firms advised the other members of the winning consortium was available as of Friday afternoon.

Many observers expected Microsoft to stay on the sidelines given its position that existing licensing agreements with Nortel already gave it access to the patents on the block. Along with several other companies, including Hewlett-Packard Co. and Nokia Corp., the software giant had filed objections to the auction before the U.S. Bankruptcy Court in Delaware earlier this month. Those objections have yet to be resolved.

But Berten says that it's not unusual for licensees to become buyers--an opportunity that Microsoft apparently didn't want to pass up. "Lots of times there are advantages to owning patents that a licensee doesn't have," he says. "They can do their own licensing, for example."

A hearing on the auction results is scheduled for July 11 in Delware bankruptcy court. Should the court bless the outcome, the deal is expected to close in the third quarter of this year.

(Published by The Am Law Daily - July 1, 2011)

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