Nortel not just Canadian company, IP not solely created in Canada: U.S. lawyer

TORONTO — It’s a fallacy to think of Nortel Networks as just a Canadian company and that its intellectual property was created solely in Canada, a lawyer for its U.S. subsidiary said Tuesday at a cross-border bankruptcy trial that will decide how remaining assets are shared among creditors.

TORONTO — It’s a fallacy to think of Nortel Networks as just a Canadian company and that its intellectual property was created solely in Canada, a lawyer for its U.S. subsidiary said Tuesday at a cross-border bankruptcy trial that will decide how remaining assets are shared among creditors.

“I think we can all agree now that Nortel was actually a multinational enterprise, global in nature, with separate corporate entities, separate groups of creditors spread around the world,” said James Bromley from Wilmington, Del., by videolink.

While Canada certainly had a large role in research and development, Nortel’s R&D took place all over the world, Bromley added in the second day of final summations for a trial that began in May.

“The U.S. role was incredibly important, particularly during the glory days . . . from the mid ’90s to the 2000s, at which time U.S. R&D was just short of the same amount of R&D that was being conducted in Canada.”

Bromley also said it’s a fallacy to say Nortel’s business was run from Canada, as lawyers for the Canadian parent and the court-appointed monitor argue.

While the board of directors and many of Nortel’s senior executives were in Canada, the “largest and most profitable business units were operated out of the United States. That is undisputed.”

He added that the United States had “more Nortel employees, therefore more Nortel retirees, more Nortel disabled, than anywhere else.”

“When we talk about NNI (Nortel Networks Inc.), it had an incredibly large and vibrant organization here in the United States — made up of humans and individuals, just as much as anywhere else.”

Competing groups of creditors have been focusing on the legal interpretation of a 10-year-old agreement to determine how to divvy up about $4.5 billion from the sale of Nortel’s patents

In total, the trial is expected to determine how $7.3 billion of remaining Nortel assets are allocated among the various legal entities that are undergoing court-supervised windups in several jurisdictions.

Bromley said that every one of the Nortel business units that went into court protection had its own liabilities and creditors.

He argued that creditors of a parent company aren’t entitled to the assets of its subsidiary until the subsidiary’s creditors are “paid in full.”

“That is the cornerstone of the insolvency regimes in each of the three major jurisdictions (represented in the trial),” Bromley said.

He added that the Canadian parent, Nortel Networks Ltd. or NNL, would have run out of cash within months of the restructuring in 2009 if it weren’t for funds transferred from the U.S. arm to the Canadian arm.

“It did that to help facilitate the sales process,” Bromley said.

“We find it difficult to accept that, not withstanding providing nearly a half-billion dollars of post-petition financing to NNL, that the monitor’s decision is that we should get next to nothing out of the IP sale.”

Bromley said that the court-appointed monitor is correct to say that the Canadian company owned all the rights to the intellectual property but only because it owned 100 per cent of Nortel US.

He added that the each of the subsidiaries in a 2004 agreement between various Nortel subsidiaries had exclusive “beneficial ownership” to the intellectual property within its territory while the Canadian parent only had “legal title.”

Earlier, a lawyer for Nortel’s U.K. pensioners said all the patents and intellectual property at the centre of the months-long trial were jointly owned by all the Nortel entities because they were the product of the entire organization’s work and investments.

The U.K. pensioners argue for a pro rata approach that would divide up money from the sale of the patents among the various insolvent remnants of Nortel, which would then pay their creditors.

That position is partially supported by the Canadian pensioners and former Nortel employees but it also supports the position of the court-appointed monitor, which argues that the parent had sole ownership of the intellectual property under the terms of a 2004 agreement.

The decision about how to divide the money rests with two judges who are presiding over the closing arguments by video link in Toronto and Delaware.

Monday and Tuesday had been set aside for closing summaries but the judges said they were prepared to return to court on Wednesday if more time were required.

At its height, Nortel was the most valuable company on the Toronto Stock Exchange and employed more than 90,000 people around the world.

The company was hurt by changing market conditions and an accounting scandal that sent its stock price plunging. Its shareholders will get virtually nothing through the restructuring since its liabilities are greater than its remaining assets.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Glen Carritt organized a United We Roll Canada convoy around May 2019 that travelled in 2019. An independent review said he breached council code of conduct rules multiple times. (File photo by Advocate staff)
Former Innisfail town councillor breached code of conduct many times, says review

Consultants say 29 of 36 alleged breaches by Glen Carritt had merit

Members of the Red Deer RCMP downtown patrol monitor for drug activity and property crimes. (Advocate file photo).
Two peace officers are training to join Red Deer’s downtown police patrol unit

This “integrated” unit will be the first in Alberta

Students and staff at Gateway Christian School wore pink Wednesday in support of Pink Shirt Day, a worldwide anti-bullying initiative that was started in 2007. (Photo courtesy of Red Deer Public Schools)
Students, central Alberta community celebrate Pink Shirt Day

Mayor of Sylvan Lake Sean McIntyre supports anti-bullying cause

City of Red Deer has nearly doubled its active COVID-19 case count since Feb. 10 and has 75.6 per cent of the Central zone’s active cases. (File photo)
Another new high: Red Deer hits 574 active COVID-19 cases

Province reports 13 new COVID-19 deaths, 430 new cases

A homeless shelter was promised Red Deer to help the city deal with downtown issues. The city and province finally released a signed agreement on what the facility will offer, a year after a $7 million commitment was made for the project by the province. (Advocate file photo).
City and province take next step in bringing a 24/7 shelter to Red Deer

It will include a detox and counselling services

Meteor spotted over Edmonton, Alta., on Feb. 22, 2021 by several, who took to social media to share their surveillance camera captures. (@KixxAxe/Twitter)
VIDEO: Fireball meteor streaks across sky, spotted by early-morning risers in Alberta, B.C.

Videos of the quick streak of light flashing across the sky before 6:30 a.m. MST

Calgary Flames goaltender David Rittich (33) makes a save on Toronto Maple Leafs left wing Jimmy Vesey (26) as Flames' Christopher Tanev (8) and Joakim Nordstrom (20) defend during first-period NHL action in Toronto on Wednesday, February 24, 2021. THE CANADIAN PRESS/Frank Gunn
‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

‘Misunderstood’ Nylander ties game late, scores winner as Leafs beat Flames 2-1 in OT

Team Canada skip Kerri Einarson yells to her sweepers at the Scotties Tournament of Hearts in Calgary, Alta., Friday, Feb. 19, 2021.THE CANADIAN PRESS/Jeff McIntosh
Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

Young Quebec team in the hunt to join Einarson, Homan in Hearts’ championship round

A crane is used to lift a vehicle following a rollover accident involving golfer Tiger Woods, Tuesday, Feb. 23, 2021, in Rancho Palos Verdes, Calif., a suburb of Los Angeles. Woods suffered leg injuries in the one-car accident and was undergoing surgery, authorities and his manager said. (AP Photo/Mark J. Terrill)
Golf without Woods? Battered leg brings it closer to reality

Golf without Woods? Battered leg brings it closer to reality

Montreal Canadiens head coach Claude Julien looks towards the ice as his team takes on the Ottawa Senators during second period NHL action in Ottawa on Tuesday, Feb. 23, 2021. The Canadiens have fired head coach Julien and associate coach Kirk Muller. THE CANADIAN PRESS/Sean Kilpatrick
Montreal Canadiens fire head coach Claude Julien, associate coach Kirk Muller

Montreal Canadiens fire head coach Claude Julien, associate coach Kirk Muller

Canada midfielder Sophie Schmidt (13) attempts a shot on goal during the first half of a SheBelieves Cup women's soccer match against Argentina, Sunday, Feb. 21, 2021, in Orlando, Fla. THE CANADIAN PRESS/AP-Phelan M. Ebenhack
Canadian women exit SheBelieves Cup on losing note, blanked 2-0 by Brazil

Canadian women exit SheBelieves Cup on losing note, blanked 2-0 by Brazil

Supporters pray outside court in Stony Plain, Alta., on Wednesday, Feb. 24, 2021, as a trial date was set for Pastor James Coates of GraceLife Church. He is charged with holding Sunday services in violation of Alberta's COVID-19 rules and with breaking conditions of his bail release. THE CANADIAN PRESS/Jason Franson
Trial date for jailed Alberta pastor charged with breaking COVID-19 health orders

Trial date for jailed Alberta pastor charged with breaking COVID-19 health orders

Alberta Premier Jason Kenney shakes hands with Jason Nixon, government house leader and environment minister, after Nixon is sworn into office in Edmonton on April 30, 2019. THE CANADIAN PRESS/Jason Franson
Alberta eyes recall legislation, focuses on COVID-19 aid in spring sitting

Alberta eyes recall legislation, focuses on COVID-19 aid in spring sitting

CFL commissioner Randy Ambrosie attends a a news conference in Surrey, B.C., on Thursday, February 28, 2019. The CFL faces more challenges in its 2021 return than it did last year when it was forced to cancel its season due to the COVID-19 pandemic. THE CANADIAN PRESS/Darryl Dyck
CFL will have to appease more levels of government to get 2021 protocols approved

CFL will have to appease more levels of government to get 2021 protocols approved

Most Read