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…

 

{ 3 trackbacks }

Six Winners Including Apple, Microsoft Pay $4.5 Billion For Nortel Patents | Microsoft Powerpoint
07.01.11 at 7:09 am
Six Winners Including Apple, Microsoft Pay $4.5 Billion For Nortel Patents | Market To Phones
07.01.11 at 9:38 am
Rockstar Bidco reigns supreme at the Nortel Patent Auction | Tangible IP
07.01.11 at 12:12 pm

{ 1 comment… read it below or add one }

Andrew Watson 06.28.11 at 6:05 pm

Charlie. I did wonder about MSFT and Qulacomm. Qualcomm really should be interested in this portfolio but have been publicly very quiet. Qualcomm has been quite dominant in Standards relating to 3G and is known to be already building a 4G LTE portfolio to aim to dominate that Standard. So that’s a strong possibility in my mind along with MSFT. Though why both would feel the need to remain anonymous is not clear when others have gone public.

IV remains a possibility I think, if only because of the collective weight of its members. Though as you say the same could be said for RPX and they didn’t have to seek approval as far as we know. Maybe we are leaning towards one of MSFT or Qualcomm?

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