Apple, Microsoft, and a handful of other tech companies are now free to license $4.5 billion in patents they bought at auction last year from bankrupt Nortel, which could open up a can of worms for companies using technology covered by the patents.
Working together as Rockstar Consortium, the companies have waited out the U.S. Department of Justice review period on the purchase and plan to pursue licensing agreements with companies it thinks are using what is now their intellectual property.
“The entire industry has benefitted from Nortel’s groundbreaking innovations, and we are eager to work with them to establish licenses enabling the continued use of this technology,” says John Veschi, CEO of Rockstar. He used to be the chief intellectual property officer for Nortel.
Rockstar is made up of Microsoft, Apple, EMC, Research In Motion, Ericsson and Sony and bought about 4,000 patents that cover technologies including wireless, GT LTE, data networking, voice, optical networking and others.
The consortium not only has the option to license the patented technology – and to sue if they can’t settle – it may also have the option to renegotiate existing licenses, says Florian Mueller, an intellectual property analyst and author of the Foss Patents blog. “[A] patent portfolio like this is, oddly, more valuable to certain buyers if they get to buy the assets out of a bankruptcy estate, enabling them to dispute that they have to honor past license agreements,” he said in an email interview.
So even companies that now pay license fees for the intellectual property could face renegotiating the agreements if Rockstar chooses to go that route.
The vast trove of patents may contain what is called standard-essential patents – patents that are needed in order to implement industry standards for particular technologies. Holders of those patents must agree to license them for fair and reasonable fees, which can be lucrative.
In addition to being a revenue stream, it can be a way to cut the expenses a patent holder has to pay to obtain standard-essential patents that it doesn’t own outright. If the company that owns such a patent needs a different patent held by the consortium, it could barter for its use, Mueller says.
In particular, Apple could benefit. It is embroiled in patent suits with Samsung and Motorola over some of their patents. With the Rockstar deal, Apple now has a share of patents Samsung and Motorola might need.
“Apple now brings plenty of wireless-essential patents to the negotiating table. Apple would presumably like to resolve licensing issues relating to standard-essential patents separately from those involving other patents such as Apple’s multi-touch inventions,” Mueller says.
He believes the companies might fall into cross-licensing agreements relating to standards-essential patents. “Without this bargaining chip, Apple would either have to pay higher royalties to other strategic owners of standard-essential wireless patents or would have to consider licensing out some of the patents it would rather keep for its own exclusive use,” he says.
Last month both Apple and Microsoft said they won’t seek injunctions based on standard-essential patents. “We won’t see products being banned over Nortel’s wireless-essential patents,” Mueller says. “The DoJ welcomed Apple’s and Microsoft’s commitments to a constructive and reasonable use of those patents.”