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We Can Stop Wondering Now - UPDATE |
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Tuesday, July 19 2011 @ 09:00 AM EDT
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Two weeks ago we asked why the Nortel patent sale to Microsoft, Apple, and others wasn't getting Federal Trade Commission and/or Department of Justice Scrutiny (see, Nortel Patent Sale - Why Isn't It Getting FTC/DOJ Scrutiny?). Well, we don't have to ask that question any more. And the government concern is not just in the U.S.; Canada is also looking into the sale.
At about the time we were writing the last article the American Antitrust Institute sent a letter [PDF] to the Department of Justice asking the department to launch an inquiry to the sale. There are indications the U.S. government is taking up the probe.
Why take up the probe? Here is just a little of what the AAI has to say about it:
The consortium membership includes three leading mobile device operating system competitors --
Apple, Microsoft and Research in Motion. They are the three main commercial rivals to Android,
Google's open-source mobile operating system. Each of them already possesses a large portfolio of
wireless technology patents; each is capable of bidding on its own for a significant portion of the
Nortel portfolio. Each of them, moreover, appears to possess the ability and incentive to use its
patents offensively against open-source as well as commercial competitors; their concerted control
over the entire Nortel portfolio would seem to create a much-enhanced collective ability and
incentive to act in that manner, with a decisively exclusionary impact on open-source competition in
particular. Why, in this light, should ANY horizontal collaboration among them (joined by three
others with strong portfolios of their own as well) be allowed with regard to the Nortel portfolio,
particularly in the absence of any transparent safeguards against anticompetitive effects from it?
Three close competitors’ shared control over 6,000 patents surely at a minimum creates significant
risk of spillover collusion, tacit or otherwise.
The AAI describes itself as:
The American Antitrust Institute is an independent Washington-based non-profit education, research, and advocacy organization. Our mission is to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy. We have a centrist legal-economic ideology and promote the vigorous use of antitrust as a vital component of national and international competition policy.
A review of its directors and advisory board reveal that this is an organization with substance and independence. We will keep an eye out for further news of this investigation.
In the meantime, Canada is also looking into the sale. But that review is not certain because of the monetary threshold of the transaction (not what was paid, but the value assigned to the patent portfolio by Nortel).
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The AAI letter:
aai logo
The American Antitrust Institute
July 6, 2011
The Honorable Christine A. Varney
Assistant Attorney General
Antitrust Division
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20536
Re: Rockstar's Bid for Nortel Patent Portfolio
Dear Ms. Varney:
The American Antitrust Institute urges the Department (a) to commence an in-depth investigation
of the proposed purchase of Nortel’s portfolio of more than 6,000 patents and patent applications,
many of which may be vital to the future of mobile communications and computing devices, to
Rockstar Bidco LP, a consortium consisting of Apple, Microsoft, Research in Motion, EMC, Sony
and Ericsson; and (b) to advise the U.S. and Canadian bankruptcy courts presiding over the Nortel
estate of the Department’s commencement of that investigation prior to their joint hearing on the
Rockstar-Nortel transaction next Monday. We are respectfully troubled by the Department’s Early
Termination of the HSR waiting period on this transaction two weeks ago, in sharp contrast to the
Department’s announcement this past April of its intervention into the proposed purchase of
Novell’s portfolio of approximately 882 patents and patent applications, many relating to mobile
communications and computing devices, to CPTN Holding LLC, a consortium consisting of Apple,
Microsoft, EMC and Oracle, “to protect competition and innovation in the open source software
community.”1
Rockstar’s reported $4.5 billion purchase price is five times the reported stalking horse bid from
Google at the outset of the auction process. How could shared ownership of the Nortel portfolio
be worth so much more to the Rockstar group than sole ownership of it would be worth to Google?
This in itself raises questions about the concerted intentions and objectives of the six consortium
members that could not be achieved through independent bidding and eventual individual
ownership or licensing of some or all parts of the patent portfolio at stake. The deal is described as
the "largest intellectual property auction of all time" involving a portfolio "unprecedented in its scale
_______________________
1 Department of Justice Press Release, “CPTN Holdings LLC and Novell Inc. Change Deal in Order to Address
Department of Justice’s Open Source Concerns,” April 20, 2011.
and scope of coverage compared to anything that has come to market before." 2 The assets include
patents "related to the wireless technology known as long-term evolution.”3 Networks based on that
technology, “considered crucial to the future of telecommunications, are created to carry large
amounts of data like streamed video to mobile devices."4
The consortium membership includes three leading mobile device operating system competitors --
Apple, Microsoft and Research in Motion. They are the three main commercial rivals to Android,
Google's open-source mobile operating system. Each of them already possesses a large portfolio of
wireless technology patents; each is capable of bidding on its own for a significant portion of the
Nortel portfolio. Each of them, moreover, appears to possess the ability and incentive to use its
patents offensively against open-source as well as commercial competitors; their concerted control
over the entire Nortel portfolio would seem to create a much-enhanced collective ability and
incentive to act in that manner, with a decisively exclusionary impact on open-source competition in
particular. Why, in this light, should ANY horizontal collaboration among them (joined by three
others with strong portfolios of their own as well) be allowed with regard to the Nortel portfolio,
particularly in the absence of any transparent safeguards against anticompetitive effects from it?
Three close competitors’ shared control over 6,000 patents surely at a minimum creates significant
risk of spillover collusion, tacit or otherwise.
These concerns are exacerbated by our understanding that a significant number of the patents within
the Nortel portfolio cover technologies that are either already incorporated into industry standards
or prime candidates to become incorporated into next-generation industry standards.5 Many if not
all of the patents covering technologies within existing standards may be subject to largely undefined
and thus largely meaningless Nortel "RAND" license commitments that the Rockstar members may
or may not honor in the future in some "reasonable" manner. One can only speculate about
Rockstar members' royalty demands with regard to technologies destined to become essential to
comply with future standards. In short, the transfer of ownership over the whole Nortel portfolio to
the Rockstar group, unaccompanied by meaningful commitments to reasonable license terms
availability, creates substantial risk of exclusionary patent holdup conduct that can subvert open
standards initiatives and thereby suppress competition and innovation opportunities throughout the
mobile devices space.
_____________________
2Wall Street Journal, July 2, 2011, at B3.
3New York Times, July 2, 2011, at B3
4 Id.
5 See “Objections of the Institute of Electrical and Electronics Engineers, Inc. to Sale Free and Clear of Debtors’ SSO
Commitments,” In re Nortel Networks Inc., Case No. 09-10138 (D. Del. June 27, 2011).
2
For all of these reasons, AAI believes it would be a grave mistake for the Department to permit the
bankruptcy court proceeding to approve the Rockstar-Nortel transaction next Monday without
appreciation of the serious potential for anticompetitive effects and consequent need for an in depth
investigation. The investigation should ascertain whether (a) the Rockstar parties can demonstrate
any necessity for their horizontal collaboration to achieve a cognizable efficiency or other legitimate
objective and, if they can meet that burden, (b) there are adequate safeguards in place to eliminate or
mitigate anticompetitive risks. Most immediately, the Department should enter the proceeding
before next Monday with a request that the court defer a decision on the transaction until such time
as the Department can report on the results of its investigation.
Sincerely,
/s/Albert Foer
Albert Foer
cc: Katherine Forrest, Esq.
James J. Tierney, Esq.
3
***************
UPDATE
The Canadian government has determined that it will not pursue an investigation of the Nortel patent sale by the U.S. bankruptcy court. The determination was based on the application of Canada's Investment Canada Act which requires the assets in question to have a value "to the country" in excess of CA$312 million. Despite the fact that the Nortel portfolio was sold for an amount in excess of $4 billion, the law only requires the government to look at the value of the portfolio as stated by the investor, Nortel. Nortel was carrying its patent portfolio on its books for less than the CA$312 million threshold amount. It remains to be seen whether the U.S. government is pursuing an investigation.
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Authored by: Anonymous on Tuesday, July 19 2011 @ 10:37 AM EDT |
Thank God someone with a loud voice was paying
attention. The three losers in market share work
together just long enough to stab the winner in the
back. Lovely.... if you ever needed more reason to
distrust apple and Microsoft, you have it. Rims reason
is just desperation.. but apple and Microsoft are just
evil in outlook. [ Reply to This | # ]
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Authored by: designerfx on Tuesday, July 19 2011 @ 11:00 AM EDT |
correktions go here [ Reply to This | # ]
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Authored by: designerfx on Tuesday, July 19 2011 @ 11:02 AM EDT |
newspicks discussion here, please include link in first post [ Reply to This | # ]
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- What are the security services for? - Authored by: Anonymous on Tuesday, July 19 2011 @ 11:33 AM EDT
- what sort of mindset does it take .... - Authored by: nsomos on Tuesday, July 19 2011 @ 02:19 PM EDT
- Greed - Authored by: Anonymous on Tuesday, July 19 2011 @ 04:14 PM EDT
- Google's Schmidt vows to defend HTC - Authored by: Anonymous on Tuesday, July 19 2011 @ 04:01 PM EDT
- Apple Patents Portrait-Landscape Flipping: - Authored by: Anonymous on Tuesday, July 19 2011 @ 04:42 PM EDT
- Scribd provides news reading experience for iPhone - Authored by: Anonymous on Tuesday, July 19 2011 @ 07:20 PM EDT
- FLOSS: Accept no substitutes - Authored by: Anonymous on Tuesday, July 19 2011 @ 07:31 PM EDT
- "Stealing is stealing..." - Authored by: Anonymous on Tuesday, July 19 2011 @ 10:49 PM EDT
- Google's Schmidt vows to defend HTC - Authored by: Anonymous on Tuesday, July 19 2011 @ 11:41 PM EDT
- Myhrvold on patents - Authored by: tqft on Wednesday, July 20 2011 @ 07:21 AM EDT
- News Corp. Under Fire Finds Defense in Wall Street Journal’s Opinion Pages - Authored by: Anonymous on Wednesday, July 20 2011 @ 08:47 AM EDT
- News Corp. Under Fire Finds Defense in Wall Street Journal’s Opinion Pages - Authored by: soronlin on Wednesday, July 20 2011 @ 05:57 PM EDT
- newspicks here - Authored by: charlie Turner on Wednesday, July 20 2011 @ 06:25 PM EDT
- T-Mobile responds to Sen. Kohl's letter: "We are disappointed" - Authored by: Anonymous on Wednesday, July 20 2011 @ 08:47 PM EDT
- And Unsurprisingly enough ... - Authored by: Anonymous on Wednesday, July 20 2011 @ 08:50 PM EDT
- New Math [PJ] - Authored by: Anonymous on Wednesday, July 20 2011 @ 09:22 PM EDT
- Linus on Google+. Will Linux users follow? - Authored by: complex_number on Thursday, July 21 2011 @ 01:14 AM EDT
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Authored by: designerfx on Tuesday, July 19 2011 @ 11:04 AM EDT |
off topic comments here, again link in post if it's related to
an article[ Reply to This | # ]
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- "The Ether" and patent protection - Authored by: Anonymous on Tuesday, July 19 2011 @ 01:50 PM EDT
- Windows trial licence - Authored by: Anonymous on Tuesday, July 19 2011 @ 04:20 PM EDT
- Great diagram will make getting the message out much easier - Firefox Rapid Release - Authored by: SilverWave on Tuesday, July 19 2011 @ 06:12 PM EDT
- blame canada - Authored by: Anonymous on Tuesday, July 19 2011 @ 07:37 PM EDT
- For what? - Authored by: Anonymous on Wednesday, July 20 2011 @ 05:39 PM EDT
- For what? - Authored by: Anonymous on Thursday, July 21 2011 @ 12:58 PM EDT
- Suppressed Report Found Busted Pirate Site Users Were Good Consumers - Authored by: Anonymous on Tuesday, July 19 2011 @ 08:20 PM EDT
- Monkey See, Monkey Do - Part Deux - Authored by: Anonymous on Tuesday, July 19 2011 @ 09:30 PM EDT
- https - Authored by: Anonymous on Wednesday, July 20 2011 @ 03:02 AM EDT
- Just this once I have to agree with Botty, but...... - Authored by: tiger99 on Wednesday, July 20 2011 @ 12:46 PM EDT
- Scam - Authored by: Anonymous on Thursday, July 21 2011 @ 01:10 AM EDT
- Pirate chasing firm moves abroad - Authored by: tiger99 on Thursday, July 21 2011 @ 07:58 AM EDT
- Family rescues grateful humpback whale - Authored by: JamesK on Thursday, July 21 2011 @ 11:14 AM EDT
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- Peter Adekeye Freed: Judge admonishes Cisco - Authored by: Anonymous on Thursday, July 21 2011 @ 01:26 PM EDT
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- Introducing BrowserID – easier and safer authentication on the web - Authored by: SilverWave on Thursday, July 21 2011 @ 02:42 PM EDT
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Authored by: Anonymous on Tuesday, July 19 2011 @ 11:50 AM EDT |
I have never heard of the AAI. As a regular supporter of the EFF I will be
donating to AAI as soon as I figure out how to do it. We need to participate
in these organizations as they are the only ones that are looking out for our
interest. Thanks for this info. [ Reply to This | # ]
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Authored by: Anonymous on Tuesday, July 19 2011 @ 01:05 PM EDT |
At the time, Google's billion times some physical constant was either
cute, or more likely, they've reviewed Nortel's patents and decided they
could invalidate them.
I think they snookered 'Rockstar' into
buying a
pig in the
poke.
[ Reply to This | # ]
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Authored by: DannyB on Tuesday, July 19 2011 @ 01:19 PM EDT |
Google: Partner with everyone, sue no one.
Apple: Partner with no one, sue everyone.
Microsoft: Stab your partners in the back, sue everyone else.
---
The price of freedom is eternal litigation.[ Reply to This | # ]
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- Don't forget - Authored by: Anonymous on Tuesday, July 19 2011 @ 04:50 PM EDT
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Authored by: Anonymous on Tuesday, July 19 2011 @ 01:22 PM EDT |
n/t [ Reply to This | # ]
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Authored by: Anonymous on Tuesday, July 19 2011 @ 05:38 PM EDT |
From the AAI letter: How could shared ownership of the Nortel
portfolio be worth so much more to the Rockstar group than sole ownership of it
would be worth to Google? This in itself raises questions about the concerted
intentions and objectives of the six consortium members that could not be
achieved through independent bidding and eventual individual ownership or
licensing of some or all parts of the patent portfolio at
stake.
The "all or nothing" sale is at the bottom of this. Would
the Investment Canada
Act require an inquiry even if the estate was parcelled
into lots of like
technologies, or divided into lots of mixed technology sorted
by date? Such a
division of the estate would of course require more
administration time and
effort. Would it have provided more chance for each
snout at the trough to get a
fair share? Has anybody here at GL seen a complete
list of the 6000 patents?
We might assume that Google has little
experience or desire for the licensing of major
patent portfolios; yet Google
has great expertise in the actuarial analysis useful
in this field; and at the
same time Google has an unenviable record of releasing
brilliant new technology
and watching it ignored by the mass market. I don't
think it's yet time to stop
wondering. This puzzle will linger.[ Reply to This | # ]
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Authored by: Anonymous on Tuesday, July 19 2011 @ 06:09 PM EDT |
I keep hearing that a number of the Nortel patents are related to
smartphones,
but the exact percentage has varied in news sources from 'some'
to 'a
majority'. It makes me think these articles are just making up the
percentages
or parroting what they read elsewhere. Anyone know for sure how
many of
these patents really are smartphone related? Because I doubt it's a
significant
amount, and here's why:
Nortel mostly made products on the
carrier / backhaul side of the networks.
Most of the related patents would not
be directly relevant to smartphones. I
mean, look at this:
http://en.wikipedia.org
/wik
i/Nortel#Products
Some articles mentioned that some patents concern
wireless
demodulation at receivers, specifically for LTE, and that
there are a
few odd ones related to social networking etc. Still, to me, it seems
that the
bulk of the patents is not too relevant to Android.
On the other hand,
Apple, RIM etc. actually design and make their smartphone
hardware, so I see
the value of the wireless receiver patents to them. EMC and
Ericsson would be
interested in the backhaul and network management-
related patents. I can't
imagine what Microsoft found interesting there,
especially since they already
had licenses to those patents (probably through
cross-licensing). I suspect
they are relevant to some future plans. Same for
Sony. But I can't see how
Nortel's R&D would be relevant to Android and
Google.
This may
explain why most of the others dropped out of the bidding until
Apple asked
them if they wanted to join in: the whole portfolio was way too
expensive for
any one party, but some subsets were valuable to individual
members. Hence each
member probably ponied up to pay for the portion of
patents most valuable to
them. This may explain Google's almost flippant
bids; there simply weren't
enough relevant patents to really interest them, so
they just made bids to
increase the cost to their competitors. For this same
reason, I doubt there'll
be much for an antitrust investigation to work with.
[ Reply to This | # ]
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Authored by: Anonymous on Tuesday, July 19 2011 @ 06:32 PM EDT |
Could a DoJ probe reflect badly on the Judge? [ Reply to This | # ]
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Authored by: Anonymous on Wednesday, July 20 2011 @ 12:59 AM EDT |
Here's something related to prior art that I don't recall being mentioned on
Groklaw before. One source of prior art that the USPTO and patent offices around
the world are very likely to consult are available databases of prior art
publications that were deliberately submitted for defensive purposes by various
corporations and individuals.
One such source is the IBM Technical
Disclosure Bulletin. The following article provides some explanation of the IBM
TDB and the role such databases of publications can play in a defensive
publication strategy.
IBM Technical Disclosures Prior Art
Database
A search of the US Patent database from 1996 to
2001 reveals almost 10,000 patents that cite the IBM Technical Disclosure
Bulletin as prior art. The Bulletin is a mechanism for defensive publishing.
Citation of a publication, such as the Bulletin, in a patent application
indicates that the publication contributes to the state of the art against which
the application is judged. IBM uses the Bulletin to advance the state of the
art, thereby raising the bar for its competitors' patent applications. In other
words, Bulletin publications force IBM's competitors to narrow their patent
claims, helping IBM to reduce the possibility that its competitors' patent
claims will encompass IBM inventions.
The purpose of
a defensive publication is to destroy the balance of the deal by disclosing an
invention to the public. If the defensive publication predates the filing of the
inventor's patent application, the patent deal for that application is out of
balance: the patent applicant has nothing new to disclose to the public, because
the invention has already been disclosed and is thus already possessed by the
public. Technically speaking, the successful defensive publication renders the
competitor's invention obvious or lacking in novelty.
Since
1998, rather than publishing their own Technical Disclosure Bulletin, IBM has
instead joined with other organizations in contributing defensive publications
to Research Disclosure, a
service that describes itself like so:
Research Disclosure
establishes an invention as prior art preventing others from patenting the
idea
- Patent examiners are required to search Research Disclosure by PCT
statute
- Research Disclosures are abstracted into major databases including
DWPI
- Research Disclosure is frequently cited in patent
applications
Defensive publication can be a
cost-effective way for organizations to reveal technology and potentially keep
it out of the domain of patentable material that could be used by competitors.
There are services out there such as Research Disclosure that offer defensive
publication services that make publication relatively easy (even anonymous),
well documented, and accessible to patent examination bodies around the
world.
Research Disclosure and the original IBM Technical Disclosure
Bulletin are resources that the USPTO actively uses to search for non-patent
prior art during the patent examination process. For example, an examination of
the file wrapper for the Apple patent on heuristics for rotating displays
between portrait and landscape views showed that the patent examiner explicitly
searched for non-patent prior art using those
resources.
--bystander1313 [ Reply to This | # ]
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Authored by: Anonymous on Thursday, July 21 2011 @ 10:53 AM EDT |
Two new numbers have come out from Nokia and Apple financial reports:
Nokia
received about $600 million from Apple in license fees for 110 million
iPhone sales, and Apple paid $2600 million for its share of the Nortel
patents. At that rate, Apple is going to save an awful lot of money in license
fees over the next ten or twenty years. [ Reply to This | # ]
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Authored by: Anonymous on Thursday, July 21 2011 @ 11:36 AM EDT |
My company often ships merchandise internationally and when filling out customs
forms, it is made very clear that I must accurately portray the value of the
item being sold. I've apparently been quite naive in assuming that this value
was de facto the amount tendered for the merchandise.[ Reply to This | # ]
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Authored by: jsusanka on Friday, July 22 2011 @ 11:29 AM EDT |
what is funny is those are the same company that are part of
the holding company that chewed up Novell.
seems like there an effort out there for companies to get
patents that hate open source.[ Reply to This | # ]
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