In my last post I discussed the ongoing litigations between Apple and Samsung, specifically in relation to  standards-essential patents.

It has now been announced that the EU Commission has launched a formal investigation into the 3G licensing practices of Samsung and the alleged contravention of the “irrevocable commitment it made to the European Telecommunications Standards Institute (ETSI).”

The Agreement on Trade Related Aspects of Intellectual Property (TRIPS) requires signatory states to ensure that their national patent legislation obliges patent rights holders to license, on fair, reasonable and non-discriminatory terms (FRAND) their standard-essential patents.

Yet Samsung has asserted a standard-essential 3G patent against Apple, and as a result the Commission is investigating to ascertain whether this is an anti-competitive practice in contravention of Article 102 EU, which prevents the distortion of the common market by an abuse of an entity in a dominant position.

A notable feature of this investigation is that it was not (apparently, or at least publicly) requested by Apple, which is the usual sequence of events in circumstances such as these: the Commission is acting entirely on its own initiative.

The instigation of this investigation demonstrates to the commercial world that the mechanisms in place to protect the consumer and to further the aims of the EU Treaties in maintaining the single Community market really do have teeth. Whether Samsung will be bitten remains to be seen, although it is hard to see how it can be avoided.

As yet, Samsung has not commented on the news, and it remains to be seen if the parties even attempted to negotiate a licence in line with the FRAND obligations.

For the telecommunication industry, lawyers, patent attorneys and policy makers alike, this will be an interesting process to watch, and one which could have significant implications for FRAND, competition law and the plethora of patent litigation that is currently battering the telecommunications market.

Now that the holiday season is well and truly behind us and we are all making (and often, breaking) our usual resolutions to eat less, drink less, exercise more, and generally be better human beings, we are presented with an opportunity to glance ahead into the coming year and think about what we expect to see in 2012 (if, like me, you do not believe the Apocalypse rumours).

2011 will be the year that remembers patent wars in the telecommunications industry as being rife, with patents viewed globally as an increasingly large and unnecessary barrier to innovation and commercial competition. But we expect that this pattern will continue throughout 2012, especially with the commercialisation of new technologies, such as the rolling out of 4G, which is likely to bring a whole new wave of litigation with a new cast of actors (and probably some of the old cast too).

New Technologies

Apart from the implementation of 4G, what else can we expect to see in 2012?

IBM recently predicted that by 2017, passwords as a primary means of access will be rendered obsolete:

“Devices to authenticate your identity by biometric means will become commonplace in the next five years and passwords will become a thing of the past.”

IBM also predicts that the use of mind control (to operate machinery, as opposed to main-streaming Jedi Mind Tricks) will also begin to soar over the next 5 years. If this is the case, one can expect players in these technological fields to be producing and possibly enforcing vast amounts of mind-control-related IP during 2012.

Of course, no Predictions-About-the-Coming-Year post would be complete without a mention of the Olympics, which is coming to London this summer. Not surprisingly, innovation and IP even got a mention from BBC’s Phil Fearnley, general manager at BBC Future Media. In The Guardian, Phil has promised that

“Viewers will see innovations in the way IP and broadcast streams and the way data and video will interact.”

and that

“The Olympic Games in London in 2012 will be remembered as the first truly digital Olympics.”

We will also see the rise (or demise) of the ultrabook this year, with Intel pushing hard to revolutionise the laptop and PC market in the age of the tablet. We expect some interesting, game-changing technologies to be revealed along the way.

Policy

Having seen patent ‘reform’ in the US in the shape of the America Invents Act, and the Hargreaves Review in the UK (a process mainly focusing on copyright which is still on-going), one can expect that the piles and piles of patent litigation suits between the likes of Google, Oracle, Samsung, HTC and Apple, to name but a few, will only increase the pressure on policy makers to step-up the pace of review of patent laws, on both sides of the Atlantic.

On this side of the Atlantic, much closer to home – at least it is if you don’t listen to President Sarkozy – is the potentially imminent birth of the EU patent. The Legal Affairs Committee in December gave its approval for the “EU Patent Package”, which includes a unitary patent, a new language regime and a unified patent court. Despite the teething problems which often follow any newly created judicial process, this activity is likely to keep IP firmly in the main stream press during 2012.

Litigation and the Focus on IP

Of course, the Samsung and Apple litigation is set to continue well into 2012, as will the Android-related litigation between HTC, Samsung et al., which is likely to keep the attention of the mainstream press fixed firmly on patents for some time.

For me, one of the most interesting cases to watch in 2012, which has spilled over from 2011, is  Oracle v Google. The outcome of this litigation could see Google’s Android partners having to pay significant licensing fees to Oracle, or Google may be forced to re-write the Android platform to avoid Java patents. Either outcome would cause a significant stir for Google and manufacturers of Android phones and tablets, not to mention the world of IP. This is of course assuming that Oracle is victorious, which may well not be the case.

2012′s Winners and Losers

2011 was a tough year for some of the biggest names. We expect the likes of Apple and Google to continue on their trajectory for world domination without too many snags along the way, but Nokia and RIM are examples of companies to keep a concerned eye on this year.

• Can Nokia’s Symbian continue to contribute to the balance sheet?

• Will 2012 see RIM finally RIP?

• And how will Microsoft prevail in the mobile market with Windows 8 when it is up against the ever-growing Android and the so-far-unstoppable iOS?

It is true to say that the most reliable prediction for 2012 is that it is going to be a very interesting year for us here at Tangible IP…

As IP professionals, we are ever hopeful that the commercial world will start to notice on a much broader scale the value and importance of IP to business. During 2012, we will keep on promoting the value of IP strategies and helping our clients realise the maximum value possible from their IP and other intangible assets, whilst patiently waiting for the proverbial light to come on above the opportunities most are missing out on by over-looking their IP.

We hope that the continuing and increasing attention of the main stream press on patents and infringement litigation in the telecommunications industry will eventually serve as a catalyst for IP and turn the attention it receives at board level from being not just a cause for concern, but a valuable commercial asset.

But for now, we wish you all a very happy and prosperous New Year. Let the journey begin.

Introduction

Apple and Samsung are now 7 months in to their own chapter in what was coined by The Economist in October 2010 as the Great Patent Battle. The market heavyweights are now embroiled in litigation over their smartphones and tablets in 9 countries worldwide: US (District of California), Netherlands, Japan, Germany, South Korea, UK, Australia, France and Italy.

To the inward looking consumer, the battle feels more like a tit-for-tat argument than an outright attack on operability, although Apple has succeeded in obtaining injunctions against the sale of Samsung Galaxy products where Samsung has failed (at least so far) to restrict the sale of the iPhone.

So what is it all about, and why is Samsung currently being prohibited where Apple is managing to avoid court sanctions?

Many questions arise from this battle (which is actually to do with a wider variety of  intellectual property than just patents – let’s call it the IP War), some of which we will address later, but first let’s look at the IP that is at the heart of the litigation(s).

Intellectual Property

The brawling started back in April 2011 when Apple filed suit against Samsung in the US, claiming that the Samsung’s smartphones and tablets “slavishly copied” Apple’s iPhone and iPad designs. The relevant IP alleged to have been infringed involved trademarks (relating to icons for Apps), 3 design patents (D618,677, D593,087 and D504,899) relating to the user interface and the shape of the device, as well as a European patent (EP2,059,868) which covers the method of scrolling on the device – also a patent granted to Apple in the US – amongst (many) others.

For more information regarding the patents involved, Foss Patents has produced a thorough account including the citation numbers of the design patents, utility patents and trademarks at the heart of the claims.

It wasn’t long before Samsung fought back, counter-claiming that Apple infringed patents owned by Samsung relating to the user interface (including methods of displaying information on the screen, customising the home screen, as well as, rather pettily,  the icon that is displayed when the phone is in airplane mode).

Although all of the claims thus far are clearly disruptive, one wouldn’t imagine that they are too hard to work around (which potentially would not be as expensive a pursuit as litigating in multiple countries). In fact, Samsung has in the last week revealed its newly designed tablet, aimed at avoiding the sales ban imposed by the courts in Germany.

The claims which should be more damaging in this fight, are those that relate to the 3G technology such as the high speed packet access patent (owned by Samsung) and other patents relating to the operation of the devices. It seems that Samsung has the upper hand here, with more patents in these areas in its artillery, however as yet not one sanction has been imposed against Apple. Perhaps as soon as this happens, the negotiations will be able to re-open to discuss cross-licensing. Or perhaps this is not the intention of either party.

As it stands today,  it looks as if this fight is set to continue. It was announced today that the hearing in Australia has been scheduled for March 2012. Who knows what else might raise its head between now and then.

As an aside, which is not really at the crux of this post, but that caught my eye and made me smile, is Samsung’s defence to the alleged infringement of the ’899 patent; Samsung have cited Stanley Kubrick’s 1968 film 2001: A Space Odyssey as prior art. Apparently, in the film, a “device” is shown (quotation marks are used here to highlight that being a science fiction film, it wasn’t really a ‘device’…) which much like the Apple and Samsung tablets, has an overall rectangular shape with a dominant display screen, narrow borders, a predominantly flat front and back surface, and a thin “form factor”.

So Samsung is alleging that Apple has actually copied the design of the iPad from Kubrick. Whatever your thoughts about this argument, you have to admit it is an interesting defence. I wonder whether LG now have to watch out with the design of their thinnest TVs??

Anyway. Moving swiftly on…

Questions

This battle raises a lot of questions about many different aspects of both IP law and practise, the market within which Apple and Samsung operate, and the respective parties’ strategies. What could/should they be doing to better deal with this brawl?

The next post will address these questions in more detail and pose some answers as to what we at Tangible IP think is really going on.

SAP’s TomorrowNow had a program which allowed for the automation of software downloads from Oracle’s customer-service websites, which, according to some of the evidence heard at trial, even once caused Oracle’s computer systems to crash.

The Californian jury awarded Oracle a whopping $1.3 billion in damages after an 11 day trial, which according to Bloomberg was not only the largest award ever given for copyright infringement and the largest given by any US jury in 2010, but also equal to the Q4 net income of SAP.

Excessive?

Many would say it was, and that most IP infringement awards generally are, and it would seem that U.S. District Judge Phyllis Hamilton has reached the same conclusion as those on the less-dramatic side of the damages line, saying that “The verdict grossly exceeded the actual harm to Oracle” and the award was “contrary to the weight of the evidence, and was grossly excessive.”

I tend to agree with Judge  Hamilton. (And I will do my best to refrain from making any comments about the pragmatism of her decision being anything to do with the fact that she’s a ‘she’… although it may well deserve a small mention?)

The reason for Judge Hamilton’s decision to reduce the maximum figure SAP has to pay to $272 million makes a lot of sense. It was found that the previous award was not proportionate to the actual damage to Oracle, and that based on the evidence, Oracle was seeking damages for lost licensing royalties. In reality, though, would Oracle have ever granted SAP a licence had it asked for one, bearing in mind that SAP is one of its biggest competitors in business-management software?

I’ll leave that as a rhetorical question. It suffices to say that Oracle has never really been known for its philanthropic nature, but then again it would have to be a strategic decision to license core business to a competitor, so one could easily forgive Oracle in these circumstances for not doing so (in the theoretical world where SAP actually approached Oracle seeking a licence). But it follows naturally that SAP should not have to pay damages based on a hypothetical licence.

Oracle now has until the end of September to accept Judge Hamilton’s ruling. Whether this will this mark the beginning of a more pragmatic and realistic approach by the courts to infringement damages, only time will tell, but the significant reduction by Judge Hamilton from the original award of $1.3 billion to a maximum of $272 million is a good step in the right direction.

Due to the fact that the majority of bidders involved in this auction have not yet released official statements (perhaps because of next week’s approval hearing), this report may lack the juicy, blow-by-blow account of the auction that many of you are looking for, so if anyone fancies sending me a copy of the recording of the auction so that I can fill in any gaps, please feel free to do so…

Monday 27 June

It is believed that Intel opened the bidding in response to Google’s stalking horse bid of $929 million, with a $1.5 billion bid at around 9am on Monday.

The RPX-led consortium, which included Huawei, dropped out after only the first round, and apparently tried (unsuccessfully) to partner up with another bidder.

Tuesday 28 June

By the end of the second day, the Ercisson-RIM-Microsoft-Sony-EMC consortium stopped bidding and also began looking to partner with another bidder.

Apple joined the consortium as the auction headed into its third day. There are rumours that this consortium of six, Rockstar Bidco, only formed after the bidding exceeded $3 billion, implying that Apple had set its maximum bid at or just below $3 billion. This seems to be rather a modest figure for a company with $66 billion in cash reserves, although perhaps this reflects the maximum value of the portfolio to Apple.

According to sources of the Guardian, the bidding continued in “fast and furious $100 million allotments until they got to $3 billion, at which point Google asked for permission to bid more…”

Wednesday 29 June

By Wednesday, Intel had dropped out of the bidding, presumably because the bids had far exceeded the $3 billion mark.

Google and Apple both began heated negotiations over the next 24 hours in an attempt to convince Intel to join their respective teams. Rather unsurprisingly (and unfortunately for Intel), Intel chose Google.

This left the bidding war a virtually two-sided affair: Rockstar Bidco against Ranger Inc. (the entity through which Google made its initial stalking horse bid).

The Guardian has written a great article detailing the weird and wonderful bidding techniques employed by Google, which included figures relating to Pi, Brun’s constant, and The Meissel-Mertens constant (amongst others). This quirky technique has been described as either very strategic, an attempt by Google to show off its mathematical prowess, or simply an indication that Google was bored. (Those of you with some basic knowledge of mathematics may have realised that this does not quite fit in with reports that the bidding increased by $100 billion increments, but until more official documents are released it is difficult to verify the facts).

Nevertheless, the reason for this bidding technique is, as they say, academic.

Google bid through to $4 billion but then suddenly stopped. Sources apparently told Reuters that Google “…had set a ceiling of around $4 billion for the patents, despite having $36.7 billion in cash at the end of its last financial quarter. Intel, its partner in the bid, had about $4 billion in cash.”

If Google had set itself a limit of $4 billion, it is surprising that it did not continue bidding once it had joined forces with Intel, especially given that the portfolio in the end sold for ‘only’ $4.5 billion. To be fair to Google and Intel, the Rockstar consortium came to the bidding table with some $100 billion in cash reserves, but I can’t help thinking that Google missed out on a huge opportunity here, for the sake of half a billion dollars (which, let’s face it, is pocket change for Google).

In April, Google’s General Counsel, Kent Walker, blogged about using the Nortel portfolio to “not only create a disincentive for others to sue Google, but also help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate.”

Google is yet to release a statement, but has been reported as referring to the outcome of the auction as ‘disappointing’.

Either Google has missed out terribly by failing to walk away with at least a share of this portfolio, or it has something very strategic in mind to navigate its way through the mobile industry, which is now a patent minefield for Google and its Android.

Thursday 30 June

The bidding came to an end after 20 rounds and four days, with Rockstar Bidco’s bid of $4.5 billion closing the proceedings.

What’s next?

It has been reported since the auction that Google will keep looking for patents to add to its artillery to enable it to ward off patent infringement suits in the smartphone arena, and to use as bargaining tools in on-going litigation (Google is said to be involved in 45 such lawsuits at the moment), but how easy this will be to do compared with the opportunity Nortel’s bankruptcy presented remains to be seen.

There is doubt amongst the technological and IP world that a portfolio of this quality will be so readily available again, at least not for a very long time, especially given that so many of the Nortel patents related to ETSI standards and core LTE technologies.

So for the time being, it would seem that Google’s weakness in the mobile technology field is set to continue: it has some 700 patents in its mobile portfolio, but few relating to the future technologies that make handsets more powerful and mobile networks faster.

For Rockstar Bidco, however, things have just got very interesting. In an article by the FT, Kasim Alfalahi, chief intellectual property officer at Ericsson, said: “The Nortel patent portfolio reflects the heritage of more than 100 years of its R&D activities and includes some essential patents in telecommunications and other industries. We believe the consortium is in the best position to utilise the patents in a manner that will be favourable to the industry.”

Exactly how they intend to use this portfolio we are still to find out. We do not yet know how the deal has been structured, who owns what and how, and what exactly this will mean for Google, Qualcomm, and other large players in the mobile and wireless industries.

What all this means for the winners, the losers, and those who failed to take part at all will be revealed in our next post…

The auction kicked off on Monday 27 June, and only came to an end on Thursday 30 June, according to the court documents.

The news brings with it the revelation that Rockstar Bidco, whose identity has been the subject of much debate over the past week, is in fact a consortium led by Apple, which includes RIM, Sony, Ericsson, EMC and Microsoft.

This is now old news (it’s been circulating the internet since the early hours). What we really want to know is how this agreement has been structured, what the implications are for both the winners and the losers, and why EMC is involved at all. (Although please don’t take this list of questions to be exhaustive – we can see ourselves blogging about this for at least another week to come!)

The Asset Sale Agreement, dated 30 June 2011,  was signed between the Nortel group of companies and the purchaser of the assets, Rockstar Bidco LP, and is subject to approval by the Ontario Superior Court of Justice on 11 July.

Apple Inc. and Rockstar Bidco have together paid Nortel a good faith deposit of $54 million.

I think the news that has shocked the most is that  Google seems to have walked away empty handed, having opened the auction with the stalking horse bid of $929 million.

It is fair to say that the majority of avid followers of this process expected Google to acquire at least some of the patents to help ward off litigation over its Android OS, which is used in handsets manufactured by both Motorola and Samsung.

But what about the motivations behind the other companies who have joined this consortium? Andrew wrote a great piece on this earlier in the week, so I will keep this brief. It is not much of a surprise to us that Microsoft were behind Rockstar Bidco – we blogged our speculative thoughts on this earlier in the week. The motivation? Easy – to prevent others from winning,  perhaps also with a view to creating cross-licensing revenue.

Again, not a surprise, although we think that their motivation to lead the Rockstar Bidco consortium was to allow them to win without paying too high a premium.

This is a smart move by RIM, who have been in the news recently due to their ‘challenging start‘ to the 2012 fiscal year. What we are surprised about here at Tangible IP is that they were willing to pay some $770 million for their share in Nortel’s patent portfolio. To commit such a large share of their cash reserves (reports state that RIM’s cash reserve is around $3billion) must surely indicate that they expect a very fast ROI, presumably through cross-licensing opportunities.

But what about the other members of the consortium? Both Sony and EMC are harder to second guess. And as I am at risk of blogging continuously throughout today and the entire weekend, I will return to that question later on.

After days of patiently waiting for updates from the Nortel Auction, news has just come in that Nortel has sold its 6000 strong patent portfolio for $4.5 billion.

The portfolio has been sold to six of the bidders: Apple, Microsoft, RIM, EMC, Ericsson and Sony, according to another source, but details of the terms of the sale have not yet been disclosed.

The sale is still subject to court approval, and the many objections raised before the auction was held (and any made subsequently) are still to be heard on 11 July by the court in Delaware, but it looks as if Google was the biggest loser.

We expected Google to take something from this auction, especially as the patents were to be used defensively in the wake of the Android-related suits, but it seems that the consortium of six won through.

We will write in more detail on this later, but in the mean time, for all those who are still wondering who Rockstar Bidco is, we can now reveal that the entity was apparently the name behind which this winning consortium was hiding…

More  later, including on how the portfolio will be divided, who paid what (it’s rumoured that RIM paid $770 million alone) and how this will affect the bidders going forward.

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…

Since the news broke we have been trying to find out as much as we can about Rockstar Bidco LP, but have unfortunately managed to turn up very little information.

The rumours are that Rockstar Bidco LP could be connected to Rockstar Games, although we can’t quite fathom why Rockstar Games would be involved. These rumours continue to circulate, however, as calls to Rockstar Games have apparently provided no clarification whatsoever. Bloomberg reports here.

With help from our trusty spies in the US we have been able to uncover only one morsel of information about Rockstar Bidco LP. It appears that Delaware has two Rockstar Bidcos, both of which were created on 7 June 2011. Beyond this, we know nothing. Rockstar Bidco could not be holding its cards any closer to its chest.

How the antitrust regulator is permitted to maintain this ambiguity remains unclear, especially when the rules of the auction itself promote complete transparency regarding the identities of the bidders and their sponsors. All we can assume is that the authorities know a hell of a lot more than the rest of us about Rockstar’s origins and relations.

And what with the incorporation of these two Rockstars being so recent, there is very little hope of finding a paper trail that will lead us to the answers. If you find one, please do let us know.

In the mean time, all we can do is speculate. The Tangible IP team is assuming for now that Rockstar Bidco has been set up by Intellectual Ventures, or another troll.

For now, we will just have to wait patiently to find out if we’re right.

Coincidentally, there have been a number of objections made to the court in Delaware regarding the procedural rules of the auction and the terms upon which a sale will be made. These objections have come from the likes of Motorola, Oracle, Microsoft, AT&T and EADS, and relate to the definitions and permissible transfers of existing licenses. (The original terms of the Sale Agreement state that the patents would be sold subject to all “Commercial Licenses, certain Intercompany Licenses, and all licenses under known Outbound License Agreements and Cross-License Agreements”. It was also agreed that “Unknown Licenses” would not be transferred)

But I digress…the purpose of this post is not to analyse and dissect the definitions of these licenses, nor the implications of these terms; it suffices to say that the majority of the objections raised relate in some way to the transfer of licenses. (AT&T’s objection concerned patents involved with Industry Standards)

In this post we reveal what we know about the auction’s rules and procedures.

Unfortunately, there is not a great deal of information online, but we have fastidiously ploughed through the court documents and can now reveal the following:

• The auction will be held in private at the New York offices of Nortel’s legal advisors, but will be transcribed or recorded on video. We wish it was being shown live and the rights being sold but they seemingly chickened out of this
• Only the ‘purchaser’ (Ranger Inc. – a wholly owned subsidiary of Google) and Qualified Bidders will be entitled to bid
• The portfolio may be sold in a single sale to a single purchaser, or in parts to several purchasers. This probably reflects that like most portfolios the Nortel portfolio will have some beautiful gems, specifically those patents declared essential to Standards (one of which would be worth an awful lot to a player who had little IPR, and probably even more to a troll like IV) and a lot of almost worthless patents
• Companies must bid in excess of $929million under the rules approved by the Court, to top Google’s stalking horse bid. We have not been able to determine how this ties into the ability to bid for part—if I bid $500m for a part, I don’t top the stalking horse bid but the total sale may be more if others bid for part. We can only assume that in this instance a bid for part would be approved by the Court on a pro rata basis
• Each incremental bid at Auction shall provide net value to the estate of at least $5,000,000 over the starting or leading Bid, although this figure is subject to modification by the sellers
• Full disclosure is required regarding the identity of the bidders (and any other entities involved with the bid, including entities sponsoring, financing, participating in or benefiting from the bid, including benefits accrued through licensing) and all material terms of the bids will be disclosed throughout the auction. Why this is important is not really clear: we suppose that the sellers want to ascertain with whom they are truly dealing but it would seem more important just to maximise the sale value. How many auctions bother with knowing who is bidding? Whether this information can be provided confidentially to the seller and therefore not be disclosed outside of the bid process is unknown
• A round of bidding will conclude after each participating Qualified Bidder has had the opportunity to submit a Subsequent Bid with full knowledge of the Leading Bid. Like very high stakes poker, this should ensure optimum returns
• Qualified Bidders and their equity holders have to confirm that they will not and have not colluded with regards to the bidding and/or the transaction. How this will work in practice we have not quite ascertained. Colluded is an interesting term; RPX, we’d suggest, would have to inform its co-ordinated efforts with its members, though how an RPX member like Intel bids alone and via RPX without somehow colluding is intriguing to think about. Think also about this scenario: I’m RIM and most likely unable to financially outmuscle say Apple or Google—could I decide to call Apple and offer to stand aside in return for a license if Apple succeeds? Is this collusion?

Once the bidding has concluded, Nortel and their advisors will select the highest “or otherwise best offer or offers” to determine which Qualified Bidder(s) is/are successful.

Watch this space. Tomorrow we will be discussing the runners and riders, and will make our predictions as to who the successful Qualified Bidder(s) might be….