RIM’s Nortel Objectives Fully Exposed

If you’re seeking further enlightenment into the soap opera surrounding Nortel’s disposition of its wireless business assets – auctioned recently to Ericsson for $1.13 billion, but subject to a pending review by the Canadian federal government – and its coveted LTE patents, you could benefit from reading the commendable article Jim Bagnall has written for today’s edition of the Ottawa Citizen.

Bagnall is particularly clear on RIM’s motivations in this drama.

I had said previously, on more than one occasion, that RIM is interested primarily in the LTE patents, which were not sold to Ericsson in the auction for Nortel’s LTE and CDMA operational business assets on July 24.

So, why did RIM awkwardly and belatedly make a desultory claim on the wireless business unit if that property was bereft of the LTE patents? Even though RIM has no pretensions to get into the wireless-equipment game, Bagnall explains why the BlackBerry purveyor was displeased with what transpired in the auction process.

RIM was upset not that the winner of the auction would get Nortel’s CDMA and LTE product portfolio — RIM doesn’t want it — but that the winner, which turned out to be Ericsson, also would receive licenses to the LTE patents. To be clear, Ericsson will not get ownership of the LTE patents, but it will get the rights to use them.

As Bagnall explains, RIM isn’t pleased with that situation. It wants to be the owner of the patents, and it wants the right to license them as it sees fit. Here’s an excerpt from Bagnall’s story:

“We have not made any decisions about what we’ll do with these patents,” (Nortel CEO) Zafirovski said in the interview. “Do we sell them or license them? Obviously, the creditors will be deciding that.”

Zafirovski reckons the patents could be worth several hundreds of millions of dollars, assuming they’re sold.

Obviously, RIM may have to wait some time before it has the opportunity to bid on the LTE patents. The Waterloo firm is also reportedly upset at the wide latitude accorded Ericsson in the LTE patents it intends to license from Nortel.

Assuming RIM acquired the LTE patents in a future auction, their value could be diminished.”

So, RIM has a couple major objectives:

1) It wants Nortel to sell it those LTE patents, and it would prefer not to have to go through an auction process to get them.
This explains why RIM has been taking the battle beyond the court of law and into the court of Canadian public opinion. It wants to see whether public pressure can be applied to compel the Canadian government to take action to ensure that certain assets (LTE patents) remain in Canadian hands, ostensibly to be extended and developed further by a Canadian company (RIM). If it has to go through an auction, so be it, but I’m sure RIM would like to find a way to bypass that process entirely.

2) It wants to roll back the LTE patent-license rights Ericsson obtained as part of its successful auction bid for Nortel’s wireless business. If RIM is to become the owner of the patents, it wants the right to license those patents on its own terms. Again, this explains RIM’s appeal to Canadian nationalism, and to its recourse to the political process to get what it couldn’t obtain through a court-ordered auction for an asset it didn’t really want in the first place.

Beyond those two primary objectives, RIM apparently also would like hire some of Nortel’s LTE employees — patent-bearing ones, no doubt — and to procure Nortel tax assets that RIM could use to reduce its taxable income.

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