Nortel Plays Its Last Hand as it Solicits Bids for LTE Patents

I’m trying to make sense of the latest strategic leaks form the cratered, smoking compound once known as Nortel Networks.

Dow Jones Newswires reported last week that, “according to people familiar with the matter,” Nortel has yet to decide whether it will sell its remaining patent portfolio, which includes a large number of potentially valuable LTE patents, or to license them as part of the newfangled lawyer-driven business model that is all the rage in the courtrooms of East Texas.

Here’s an excerpt from the Dow article, as published online by the Wall Street Journal:

Nortel, which is being advised by Lazard and Global IP Law Group, is divided internally over whether to sell some or all its patents or whether to retain ownership and monetize the portfolio through a licensing program, according to people familiar with the matter. “There are still people at the company that want to license (the patents),” said a person familiar with the matter, adding that the portfolio consists of about 4,000 issued patents worldwide.

The solicitation of bids is aimed at determining how much the patents might fetch in an outright sale, the person added. “If they don’t get much interest,” the company will push for a licensing strategy, the person said. Ultimately, the fate of the portfolio rests with creditors.

But there’s the key to understanding what is likely to happen. If you were a Nortel creditor — and, for all I know, some of you might actually be Nortel creditors — which option would you prefer? Would you rather sell the patent portfolio, perhaps for somewhere in the vicinity of $1 billion (a nice neighborhood, by all accounts) to somebody like Research In Motion; or would you take your chances on a licensing business that will defer your financial gratification and realize diminishing returns on assets that will depreciate over time?

All things considered, you smart folks would want to pursue the sale, presuming you can attract a sufficiently attractive bid for the patent portfolio. That’s what I suspect all this talk about going into the licensing business is intended to achieve.

Nortel’s advisors at Lazard and Global IP Law Group aren’t saddling up for their first rodeo, and they want to set the stage for a bidding war that will ensure Nortel’s creditors get full value for what remains of the once-formidable company’s remaining intellectual property. They’re already soliciting bids, employing a stringent NDA that insists upon confidentiality regarding signing of the NDA itself as well as of the talks it facilitates.

Nortel and its creditors will be hoping an attractive offer precludes the company from having to become an IP-licensing outfit.

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