Google To Buy 6,000 Nortel Patents For $900M

Google has bid some $900M cash for approximately 6,000 patents owned by Nortel Networks (www.nortel.com/ ). The company had filed for bankruptcy protection in January 2009.

Kent Walker, Senior Vice President & General Counsel with Google explained in an official blog post the search-giant's motive behind such an acquisition – " to have a formidable patent portfolio", as this "helps maintain your freedom to develop new products and services." "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," Walker adds.

Nortel has selected Google's bid as the "stalking-horse bid," which is the starting point against which others will bid prior to the auction. If the transaction takes place, Walker hopes Nortel's portfolio will not only create a disincentive for others to sue Google, but also help the company, its partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate.

Google's agreement with Nortel includes the planned sale of approximately 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications, and additional markets as well, including Internet search and social networking. The agreement follows a confidential, multi-round bidding process involving several interested companies and consortia from around the world.

According to a Bloomberg report IBM, the world's biggest computer-services provider, was issued 5,896 U.S. patents in 2010, followed by 4,551 for Samsung Electronics Co. and 3,094 for Microsoft Corp., according to available data from. Google was issued 276 patents last year, the report says.

Details of the sale

Nortel will file the stalking horse asset sale agreement with the United States Bankruptcy Court for the District of Delaware along with a motion seeking the establishment of bidding procedures for an auction that allows other qualified bidders to submit higher or otherwise better offers, as required under Section 363 of the U.S. Bankruptcy Code. A similar motion for the approval of the bidding procedures will be filed with the Ontario Superior Court of Justice. Following completion of the bidding process, final approval of the U.S. and Canadian courts will be required. Additionally, regulatory and other customary conditions will have to be met.

Incidentally, Nortel does not expect that the Company's common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings. The company expects that the proceedings will result in the cancellation of these equity interests, Nortel said in a statement.

Google has been shifting its strategy towards wireless and desktop operating systems, broadening its scope beyond the Search market, and this is the latest in the company's pursuit of market leadership and hopefully continued shareholder happiness.