Nortel Networks April 4 has agreed to sell its remaining 6,000 wireless, networking, and other patents to patent-poor Google for $900 million in cash.
Google craves the patents, which Nortel said spans "nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking," to stave off increasingly rampant patent litigation.
"One of a company's best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services," wrote Google's Kent Walker, senior vice president and general counsel.
The kicker is that the deal is a "stalking horse asset sale agreement," which means Google is the starting point against which others companies may bid before the auction. To wit, a higher bigger could emerge to challenge Google for the patents.
Rumors of possible bidders for Nortel's patents ignited shortly after the networking giant filed for bankruptcy in January 2009. Nortel had been selling off pieces of its company for the last several years, including shedding its VOIP business to Genband in February 2010.
But Nortel still has thousand of viable patents that need a home. J.P. Morgan analysts said last December Google and Apple were gunning for Nortel's patents for 4G wireless communications, also known as Long Term Evolution (LTE).
4G networks are far faster than the current 3G networks. This affords considerable opportunities not only for smartphone software such as Google's Android and Apple's iOS platforms. Research in Motion might also be an interested bidder for the Nortel patents, as the company seeks to fortify its falling smartphone business.
Google, which admitted to being patent poor compared to older competitors with deeper portfolios, is the most interested buyer in the early going.
The company is currently weathering a copyright infringement lawsuit from Oracle, which claimed the Android platform unlawfully uses Java code covered in its patents. Patent expert Florian Mueller said Google's weakness in patents left it open to such lawsuits.
Google has been a vocal advocate for patent reform, which calls for a reimagining of the current system in which patent trolls acquire low-quality software patents and wait to demand licensing fees from those who try to use their technology.
"If successful, we 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," Walker added.
Google won't have to wait terribly long to see if it's bid is successful, or challenged by Apple, RIM or some other bidder. Nortel expects it patent auction to commence in June this year, subject to Canadian and U.S. court approvals.