Google initially thought of purchasing the patent portfolio of the bankrupt Nortel Networks by bidding for $900 million but Nortel decided to hold an auction for the patents in the view of minting money in subsequent biddings. Nortel along with its financial advisor contacted almost 98 parties who are likely to be interested and able to acquire the residual IP. Five interested parties executed supplemental confidentiality agreements due diligence on the residual IP but finally four parties expressed their interest in participating in the auction. The four parties finalized as Qualified Bidders were Apple Inc. (“Apple”), Rockstar Bidco, LP (“Rockstar”), Intel Corporation (“Intel”) and Norpax LLC (“Norpax”).
The court approved the bidding procedures and stated that Rockstar is a single purpose entity formed by a consortium of technology companies for participating in the sale process of the residual IP from Nortel. The entities participated in Rockstar were Apple, Research in Motion Limited (“RIM”), EMC Corporation (“EMC”), Telefonaktiebolaget LM Ericsson (“Ericsson”), Sony Corporation (“Sony”), and Microsoft Corporation (“Microsoft”). As per the auction rules Rockstar did not bid in the fifth round hence the number of qualified bidders entitled to participate independently in the auction were reduced to three.
After the fifth round, Apple with the consent of the Nortel had discussions with Rockstar regarding potential partnership opportunities. Apple expressed his wish to partner with Rockstar and also adopt Rockstar’s transaction structure which includes using Rockstar as the purchaser. After the sixth round of bidding, Intel withdrew from further independent bids thus leaving Ranger and Apple to be the two qualified bidders. The Nortel gave their consent to the final two bidders to discuss possible partnering opportunities with those bidders who were no longer able to participate independently in the auction by providing prior written notice.
After eighth round of bidding, Ranger entered into partnership with Intel as per Auction rules and with the consent of the Nortel. In ninth round Ranger and Apple (Rockstar) continuously exchanged counter-bids in increments of $100 million dollars. Finally in the nineteenth round, Apple in partnership with Rockstar presented a bid of $4.5 billion. At the beginning of the twentieth round, Ranger requested and was granted an adjournment by the Nortel after which Ranger indicated that it would not make further bid. Thus based on the definitive documentation analysis the $4.5 billion bid submitted by Apple in partnership with Rockstar was declared as the successful bid.
Even though press report focusses on the Rockstar group’s win after the auction, the court documents vividly declares that it was actually Apple the only group that had not dropped out in the entire bid won in partnership with Rockstar. Thus Apple led the High-Stakes patent poker win against Google.
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