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Google's $900 Million Hedge vs. Patent Plaintiffs

• Carmarley Dennis
  Apr 18 2011, 03:58 PM
  By Nate Raymond
  
  Source : The American Lawyer
  
  There are lots of ways for operating companies to reduce the threat of patent litigation. You can form patent licensing pools with other operating companies. You can sign licensing deals with patent aggregators such as Acacia and Intellectual Ventures. You can team up in defensive alliances like Allied Security Trust, or you can become a member of RPX, which buys up patents that might otherwise be asserted against the companies that pay its fees.
  
  Google, which has been reeled into the smartphone patent wars via its Android operating system, has another idea: gobble up a huge IP portfolio to use as leverage against would-be plaintiffs. The search giant, represented by Wachtell, Lipton, Rosen & Katz announced Monday that it has made a $900 million "stalking horse" bid for a portfolio of 6,000 patents and patent applications from the bankrupt Nortel Networks Corporation. The patents cover wireless, 4G, data networking, voice, Internet, service provider, and semiconductor technologies, among other things.
  
  Nortel, advised by Cleary Gottlieb Steen & Hamilton, filed the agreement with Google in Delaware federal bankruptcy court. George Riedel, Nortel's chief strategy officer, said in a statement that the auction is an "unprecedented opportunity to acquire one of the most extensive and compelling patent portfolios to ever come on the market.
  
  "Large patent portfolio purchases are rare but do happen from time to time. Former Kirkland & Ellis partner John Desmarais launched Round Rock Research last year through the acquisition of more than 4,000 patents from Micron Technologies. But Google's move, unlike Desmarais's, appears to be a defensive play.
  
  "If successful, we hope this portfolio will 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," said Google general counsel Kent Walker in a blog post.
  
  Walker said that having a formidable patent portfolio is one of a company's best defenses against patent litigation. "Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories," he said. The Nortel portfolio has drawn wide interest. Of the 105 companies Nortel approached, 40 conducted due diligence on the patents, according to a Nortel filing.
  
  Nortel said it selected Google as the stalking horse after receiving confidential bids from "several interested companies and consortia from around the world." The acquisition isn't yet a done deal. The auction will take place in June, and Reuters reports that such companies as ZTE, Ericsson, and RPX are expected to make offers to compete with Google's bid.
  
  

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