Nortel patents to shape wireless tech for decade to come

OTTAWA — The treasure trove of Nortel wireless technology patents that a consortium including Research In Motion Ltd. (TSX:RIM) has acquired will help shape your next smartphone and the network it will run on for the next decade.

OTTAWA — The treasure trove of Nortel wireless technology patents that a consortium including Research In Motion Ltd. (TSX:RIM) has acquired will help shape your next smartphone and the network it will run on for the next decade.

Duncan Stewart, director of research at Deloitte, said as smartphones grow ever more popular, the patents behind the technology in them will grow ever more important.

And Waterloo, Ont.-based RIM’s participation in the consortium will give it access to key technology.

“It is probably one of the two or three areas that patents are being used more and more often as ways of gaining a competitive advantage,” he said.

“These are crucial things that are going to be at the core of networks almost certainly for at least the next decade.”

Stewart said Nortel was ahead of the game in wireless technology with patents for advanced networks that are only now just coming to market.

“Those networks weren’t being built in 2005 and 2006 — if they had been, Nortel’s financials probably would have done better,” he said.

The consortium, which includes RIM, Apple, EMC, Ericsson, Microsoft and Sony, won the auction Friday with a bid of US$4.5 billion. RIM’s share was $770 million.

The group beat out Google (Nasdaq:GOOG), which had been the stalking horse bidder in the auction. Google, a leader in Internet search, has been gaining market share in the wireless market with its Android operating system for smartphones and tablet computers.

Stewart said some have suggested that the consortium bought the patents to block Google from owning the portfolio, but he suggested if Google really wanted the patents, they could have bid more.

David Ullmann, an insolvency and intellectual property lawyer with law firm Minden Gross, said the consortium members may have been concerned the patents might fall into the wrong hands.

“Certainly litigation by entities colloquially known as patent trolls in the United States has become something of an epidemic,” he said.

But, Ullmann noted, that at $4.5 billion, it was difficult to believe that the purchase was a purely defensive move.

“There must be inherent value for them in this stuff as well,” he said.

Much is still unknown about how the consortium will handle the ownership structure of the patents, so just who will own what in the portfolio of the more than 6,000 patents and patent applications including Internet search, social networking and nearly every aspect of modern telecommunications is unclear.

Stewart noted that ownership could be divided among the consortium members in several different ways, but speculated each member may be allowed to use all of the patents.

RIM has struggled in recent months with disappointing financial results, the launch of its PlayBook tablet and a plan for layoffs at the company. Once the most valuable company on the Toronto Stock Exchange, RIM shares trade for a fraction of high of more than $140.

The company has said it is coming to the end of a transition period and expects to return to form quickly.

Stewart noted that some may have been critical of the company’s decision to spend the money for the patents, but noted that the company would have likely been criticized if it didn’t take a run at them.

“Everybody says Apple is smart and RIM is stupid — why is Apple smart for buying these patents and RIM is stupid for buying the same ones?” he said.

“The answer is because people think Apple is doing well right now and RIM is doing badly.”

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