Ironically, Nortel Networks is generating more excitement as near-posthumous purveyor of technology patents than it was able to generate during its declining years. By Peggy Albright.
The Canadian infrastructure company, which was worth about $250 billion in 2000 before the post-bubble economic recession began eating away at its business, filed for bankruptcy last year and has since sold off most of its operations in piecemeal fashion.
Managed today by a just anadviser or two, Nortel has finally whittled itself down to its last but most important assets: its intellectual property. The possible availability of the IP is tantalising potential buyers, which are already coming out of the woodwork in hopes of bidding on the goods. For the time being, however, interested companies must sit tight to await word from Nortel about its plans.
Whatever happens to its IP, one thing is for sure, and that is that Nortel’s situation is far from typical. In fact it is rare and perhaps unprecedented that an IP portfolio of its potential value might be put on the market. The portfolio represents several thousand patents from a company that had a tradition of technology leadership and produced high-quality inventions, including meaningful IP in the emerging wireless domain of LTE.
“This may be one of the all-time great opportunities,” said Lew Zaretzki, executive vice president for advisory services at ThinkFire, an IP advisory firm to major technology companies and investors. Nortel is not one of Zaretzki’s clients, but he is tracking it through this process.
“Whatever they do, in my industry of IP, it is likely to be historic,” he said.
Even the process Nortel is going through to determine the disposition of its IP assets is unusual. Normally a company’s executive leadership has the ultimate authority over what to do with its IP. And normally a company would conduct its licensing negotiations with the utmost secrecy. But in this case, Nortel does not have autonomy to make unilateral decisions and the process is being played out in the public domain through the courts.
Right now, Nortel’s advisers are going through their patents one by one to determine the portfolio’s value. That process should be completed this spring.
Then the company will have to work with its creditors and within the context of the court to decide whether to 1) keep the IP assets to leverage their value through a potentially lucrative, revenue-bearing licensing program; 2) sell them all; or 3) apply a hybrid strategy to keep some and sell others.
If some or all the assets end up destined for sale, the parties will then orchestrate the bidding process. Whatever course is ultimately pursued, it will be the course that brings the most value to Nortel’s creditors. And it’s not just a matter of money. Two of its creditors are the British Pension Protection Fund and the Canadian pension plan representing liabilities of more than $4.3 billion in retirement funds for former Nortel employees in the two countries.
“It actually matters to people,” Zaretzki said.
The IP has already gained the attention of two Canadian patent-licensing firms, Mosaid Technologies and Wi-LAN, which have each, separately, begun evaluating the portfolio. Mosaid, for its part, is not convinced Nortel will sell.
“I think there’s an equally likely chance or at least a significant chance that they will not part with these assets and they may go down the route of a public licensing company,”Mosaid’s CEO, John Lindgren, said during his company’s earnings conference call last week.
Many companies that produce technology products would benefit from the IP. For example, Canada’s Research In Motion could pick up certain Nortel IP as a great way to improve its own patent portfolio, reduce royalty costs its occurs from other companies and improve margins. Any number of foreign firms could try to do the same.
While the suspense today focuses on which companies might end up with which patents, the ultimate impact will be felt in the coming years asNortel with its creditors or new patent owners start establishing their licensing policies and enforcing the IPRs.
Given the new trend in the industry for patent-licensing companies, in particular, to pursue litigation as an income strategy, any business that needs to license LTE technologies will need to know how this all turns out.
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