Final bids are due within weeks for blocks of patents owned by Canada's once mighty telecom giant Nortel Networks, including some that could change the balance of power among mobile operators.

The rare intellectual-property portfolio sale is part of bankrupt Nortel's auction of assets, most of which have already been sold.

Sources expect the sale to draw wireless telecom newcomers Apple and Google, which want to build up patent war chests as they fight incumbents such as Nokia, which want to protect their patent positions, in the courts.

There has been one round of bidding on those patents, this has been completed, said one source, who declined to be identified because the process is private. And what Nortel has done is divide the patents up into different lots covering different kinds of technologies.

Nortel, which filed for bankruptcy protection in January 2009, holds more than 4,000 patents that analysts say are worth more than $1 billion in total. Two sources with knowledge of the auction process say they have been grouped into six buckets of related technologies and that final bids are due within weeks.

Nortel declined comment, saying the process is confidential.

PATENTS AS POWER

The patents cover wireless handsets and infrastructure, as well as optical and data networking, Internet, Internet advertising, voice and personal computers.

The patents likely to draw the most attention relate to third- and fourth-generation wireless technology such as Long Term Evolution, with device-makers such as Research In Motion, Motorola, and Apple seen as likely bidders.

It is certainly a very significant stockpile of potent weaponry, and whoever lays their hands on it is going to gain significant advantage, said Alexander Poltorak, chief executive of General Patent Corp, which advises companies on intellectual property strategy and valuation but is not advising anyone involved in the Nortel patent auction.

The auction, run by Lazard and Global IP Law Group, has been underway for about seven months, two sources said.

RIM, which discussed buying the patents in mid-2009 and argued in favor of keeping Nortel's assets in Canadian hands, declined to say whether it is involved in the auction. Apple and Google could not be reached for comment.

The Canadian government, which recently blocked BHP Billiton's $39 billion bid for Potash Corp, is considered unlikely to intervene in the patent sale.

Technology companies use patents as a source of revenue and to increase their bargaining power in cross-licensing agreements. They often take each other to court to enforce rights to particular inventions.

It's unusual for an asset like that to come to market, InterDigital Chief Executive William Merritt said of the portfolio.

Wireless developer InterDigital Inc has said it is in a consortium bidding for Nortel's Long Term Evolution patents for a system to increase wireless speed and capacity.

Incumbents are using all tools in their disposal to battle the newcomers. You need a strong mobile portfolio. You cannot design around core inventions, Merritt said.

General Patent's Poltorak said member-based groups such as RPX (Rational Patent Exchange) and Allied Security Trust might also eye the patents to ensure favorable licensing terms for members using the technology.

RPX declined to comment on the process. Allied did not respond to requests for comment.

NORTEL EMPIRE

The patent sale is one of the final gasps for Nortel, which at one time boasted a market capitalization of more than $250 billion and had some 90,000 employees.

By November, it had raised around $3.2 billion for creditors by selling off telecom holdings.

Swedish network equipment maker Ericsson bought most of its North American wireless operations, its multi-service switch business and a Chinese joint venture. Ciena Corp bought its optical networking and carrier ethernet business.

The Canadian government is taking over its Ottawa campus.

Potential patent buyers will study how widely Nortel's 4G-related patents have been licensed, since the company went into bankruptcy protection before 4G was commercially viable.

Nortel owns seven of the 105 patent families likely to be essential to 4G technologies LTE and SAE (Service Architecture Evolution), according to research firm Fairfield Resources.

Nokia holds 57 of these essential patent families and Ericsson has 14. Nortel is on par with Qualcomm and Sony Corp.

(Additional reporting by Tarmo Virki in Helsinki; editing by Janet Guttsman and Peter Galloway)