Global Internet giant Google has bid $900 million for a warchest of patents from bankrupt Nortel Networks, in an initial stalking horse bid that's expected to draw in higher competing offers.
Google, which runs the world's most popular search engine, wants the Nortel patents to help it fight a growing wireless patent war against well-armed mobile superpowers. The company has pushed its Android mobile phone software to the top of the wireless heap, attracting litigation in the process.
Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories, Kent Walker, Google's general counsel, wrote on the company's blog.
Nortel, which filed for bankruptcy protection in January 2009, was a pioneer in wired and wireless network technology and the assets include some 6,000 patents and patent applications for wireless, data and optical networking, voice, Internet, semiconductors and other technologies.
As the mobile market gets increasingly litigious it comes as little surprise that Google is interested in assets that could help it defend its Android mobile platform against rival patent claims, said Ben Wood, an analyst at CCS Insight.
Oracle is suing Google over Android, while Apple is fighting Taiwan's HTC in what is widely seen as a proxy attack on Android, which runs on HTC smartphones as well as devices from Samsung Electronics, Motorola Mobility and others.
More established mobile vendors have cross-licensing deals with each other. That keeps their patent fees low but makes entrance expensive for newcomers like Apple and Google.
Interest in the Nortel patents has been robust, but a deal was been delayed as Nortel's liquidators and potential buyers haggled over price.
Other expected bidders include Chinese telecom network company ZTE, Ericsson, which bought most of Nortel's wireless operations, and RPX, which licenses patents on behalf of member clients for a fee.
This is an unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market, Nortel's chief strategy officer, George Riedel, said in a statement.
The patent sale is a last gasp for Nortel, once a Canadian technology darling with some 90,000 employees and a market capitalization of more than $250 billion.
Nortel, which has sold most of its physical assets, said Google was chosen after multiple bidding rounds involving companies and consortia from around the world.
The patent war is getting tougher and expensive, said IDC analyst Francisco Jeronimo. He said it was unclear how widely the Nortel patents have already been licensed.
Google's bid sets a minimum price for other bidders to use as a starting point for their own proposals.
Nortel will file the agreement to a bankruptcy court in Delaware and outline how it will run the auction, which it expects to hold in June.
(Additional reporting by Tarmo Virki in Helsinki; editing by Pav Jordan and Janet Guttsman)