RIM and Google compete to acquire Nortel’s patents

Readers with long memories will remember Nortel’s glory days of the 1990s, when it expanded rapidly by supplying equipment on the back of significant investment in competitive telecoms networks unleashed by the first wave of telecoms market liberalisation. It was badly hit by the dot.com crash, but managed to struggle through the noughties before filing for creditor protection in January 2009. Whilst the global financial crisis may have been the proximate cause of its filing, for Nortel the crisis had started much earlier.

Whilst Nortel’s glory days are in the past, there remains enduring value in its patents. The reason is the commercial power of patents: a patent grants the holder the right to exclude all others from using the patented invention, giving them a exclusive monopoly for the life-time of the patent (typically 20 years). This monopoly can be exploited in a number of ways: worked by the patent holder, enforced to keep others off the market, exclusively licensed, non-exclusively licensed or cross-licensed with others to get access to their technologies.

The last strategy (that of cross-licensing) in the perhaps the most interesting as patents are increasingly being used as strategic weapons by the largest global players – often the response to a patent action will not merely be defence of the action, but the launch of other actions relation to other patents or in other territories as a prelude to settlement and cross-licensing deals.

It’s this strategic power that explains Google’s $900m initial bid and unconfirmed reports yesterday that RIM has also entered the bidding for Nortel’s remaining 6,000 patents.

Meanwhile, in order to try to encourage patents to be held in the UK, the recent budget announced that the UK would continue to press ahead with implementing its ‘patent box’ tax incentive scheme.