From the monthly archives:

June 2011

All appears quiet on the Nortel auction front with no public news or statements since Monday. Should we be surprised by this? We don’t think so.

Our sources state that that there may have been as many as 100+ expressions of interest, slimmed down to around 40 companies that were allowed access to conduct DD. Add to that some late entrants and this would suggest multiple bidders. More than 10 would be very hard to manage, up to 10 genuine competitive bids looks very possible.

Add to that, we expect bidders to bid on many different bases, for all or different parts of the portfolio.

Add to that, we expect that the sellers will want to consider if bidders can be combined, including getting two bidders to co-own the portfolio, or part of it, to optimise the return for creditors in a two for the price of one attempt, which should work at least in legal theory (a bit like being co-married to the same wife or husband, it would not be entirely satisfsctory but if she/he were perfect in private then you might cope with the public embarrassment–I think).

Making an educated guess, expect the sellers to issue a public statement in the next 48 hours announcing the numbers of bids received and their likely timeline for this round to be completed, expressing delight (or something similarly self-congratulatory) at the success of the process to date and very little else.

We expect to be blogging about this for a few weeks yet. Of course we could be entirely wrong and this post could be overtaken by events within hours. But we are talking here about an asset that could represent a large increase in the returns to Nortel creditors. Cynically speaking, we don’t see Cleary Gottlieb calling a halt to to process any time soon.

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Rockstar Bidco: The Speculation Continues

by Charlie Rothbart on 28 June 2011

In our previous post, we speculated that the hidden force behind this unknown entity is likely to be an IV-type company, or another troll. Having pondered this some more, we wonder whether Rockstar Bidco is in fact a shell set up to bid at the auction on behalf of a well known company with a larger market share.

As to how so much secrecy has been permitted, we do not know, but we doubt whether the Department of Justice (DoJ) would need to give anti-trust approval for bids made by trolls. It seems that RPX did not require DoJ approval to qualify as a bidder, so why would Rockstar Bidco?

In fact, the Tangible IP team has been wondering why anti-trust approval has been required at all during this process, as usually the DoJ doesn’t get involved with patent sales.

It is possible that the anti-trust reviews could have been requested by Nortel’s bankruptcy attorney to avoid post-auction complications, or, more likely, that the DoJ was concerned that the auction would lead to possible unfair monopolies within the mobile industry, but the exact reasons remain unconfirmed. It can, however, be inferred from other articles (for instance this one by IAM) that the DoJ was the instigator.

This could be to do with either:

  1. The competitive relevance of the Nortel portfolio to such a significant proportion of the market, both in terms of the patent claims and the potential effect on Standards, or;

  2. As a precaution against the potential for the larger players (Google, Apple, Intel et al) to rig the bidding, a practice strictly forbidden by the Sherman Act of 1890**

** A summary on the FTC’s anti-trust website of this prohibition in the Sherman Act states that “…certain acts are considered so harmful to competition that they are almost always illegal. These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids.”

Those who contravene this rule can be subject to criminal prosecution by the DoJ: “Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids.”

The guidance on the FTC website explains that “Bid rigging can take many forms, but one frequent form is when competitors agree in advance which firm will win the bid. For instance, competitors may agree to take turns being the low bidder, or sit out of a bidding round, or provide unacceptable bids to cover up a bid-rigging scheme. Other bid-rigging agreements involve subcontracting part of the main contract to the losing bidders, or forming a joint venture to submit a single bid.”

One does not need to stretch the imagination too far to conceive of scenarios where the bidders in this auction could be tempted to rig the bidding in return for favourable licensing terms post-sale, so perhaps this has been the DoJ’s motivation. Although if this is the case, surely all bids would need to be reviewed by the anti-trust regulators, which has not been the case.

Whatever the motivation, it remains doubtful that the DoJ would review bids from trolls in an anti-competitive light, in which case, Rockstar Bidco is not a troll. It would also seem unlikely that the department is reviewing the bids to prevent rigging, as not all bids have been reviewed. So through the process of elimination, we are left with option number 1 above, which would imply that Rockstar Bidco has access to a portfolio significant enough to warrant a pre-auction, anti-trust investigation. But whose portfolio does Rockstar Bidco have access to?

There have been reports that Microsoft is behind this unidentifiable company, and we wonder also whether Qualcomm could have something to do with it, but it look as if we may not be able to find any more information about this increasingly infamous Rockstar until after the approval hearing on 11 July.

In the mean time, we patiently wait for news from the auction, which is likely now to be into its second day in NYC.

More to come soon…

 

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Nortel’s legal fees hit $128 million

June 27, 2011

  Nortel’s legal advisers, Cleary Gottlieb Steen & Hamilton are doing rather well out of Nortel’s bankruptcy. As of 30 April 2011, Cleary had billed Nortel $128 million for their services so far, with reports that some 300 of the firm’s lawyers have been involved with the proceedings. And with the auction only being held […]

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Rockstar Bidco

June 27, 2011

It was revealed just before the weekend that two more companies have gained approval from US antitrust regulators to bid for the Nortel patent portfolio: Intel Corp. and Rockstar Bidco LP. Since the news broke we have been trying to find out as much as we can about Rockstar Bidco LP, but have unfortunately managed […]

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Nortel-the result, we think

June 26, 2011

Practising putting up an 8 man tent for our family holiday this year was excellent as relaxation time to sit back and think through the likely outcome (s) from tomorrow’s auction. I’ve got two scenarios I was struggling to decide between. Scenario 1 is a large corporate bid for all of the portfolio. In this scenario, […]

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Cloak & Dagger–IV, bidding or not?

June 26, 2011

We’ve been trying to assess IV‘s role in the Nortel auction and whether they are bidding or not. Although there is no public statement of interest from them, this should be no surprise as IV do very little openly. We asked Avancept and ipVA’s own Tom Ewing, an IV watcher who’s successfully unpicked and publicised many of their […]

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Nortel-runners and riders

June 24, 2011

The auction takes place (well at least it starts) on Monday 27th. The results may not be disclosed for few days afterwards, from what we can tell the sellers have up to 5 days to decide on the winning bid(s). This is our view on the bidders, their motivations to bid and their likelihood of winning. […]

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The Nortel Auction House Rules

June 23, 2011

The auction of Nortel’s patent portfolio was due to be held last Monday but was postponed for one week due to the huge amount of interest from potential bidders (according to Nortel). Coincidentally, there have been a number of objections made to the court in Delaware regarding the procedural rules of the auction and the […]

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Apple multi-touch interface patent granted-watch out!

June 22, 2011

http://www.macworld.com/article/160664/2011/06/apple_iphone_patent.html More to follow on this one. I’ll maybe ask Rob to comment as an Apple-maniac.

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Nortel sale-can’t wait

June 22, 2011

It is interesting that there is so little information and insights into the Nortel sale so far on the web. Lots of reporting of facts but little of what is likely to be going in in the background. Who is interested, why, what are they respectively likely to bid for (all or part) and of […]

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