Nortel Networks entered into a “stalking horse” agreement with Google, covering the sale of Nortel’s remaining patents and patent applications, for a cash purchase price of US$900 million. The move is said to follow a “confidential, multi-round bidding process involving several interested companies and consortia from around the world.” While Google is currently the first in line for the assets, an auction will be held (expected in June 2011) which will provide a chance for “qualified bidders to submit higher or otherwise better offers.” The transaction will also be subject to regulatory approvals. The intellectual property under the hammer includes “approximately 6,000 patents and patent applications spanning wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios.”

Google has been clear what its motivation for bidding for the intellectual property is: in a blog post, Kent Walker, its general counsel, noted that “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.” This puts it in a weaker position when it comes to defending patent actions, because “one of a company’s best defences against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services.” The company also said it hopes bolstering its patent holding will “not only create a disincentive for others to sue Google, but also help us, our partners and the open source community – which is integrally involved in projects like Android and Chrome – continue to innovate.” The ability to benefit from Nortel’s heritage in the telecoms industry is also believed to be appealing to Apple, which has previously been suggested as a possible bidder for the patents. Other companies reportedly in the frame include Nokia, RIM and ZTE.