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Why the $4.5B Auction of Nortel's Patents Is a Big Deal

  |  September 30, 2011   |  Comments

Apple, Microsoft, and others team up to purchase 6,000 patents in a move that will affect mobile marketing's future.

Just about every serious marketer concedes that more and more marketing will play out on mobile devices in coming years. Distribution of mobile devices, how they will deliver marketing messages and what they will cost to access - for consumers and marketers alike - are fundamental questions yet to be answered. Meanwhile, battle lines are just now being drawn for defensible mobile market share among huge multinational corporations.

The battle for mobile market share was clearly evident during the auction three months ago of Canadian telecom Nortel 6,000 patents for wireless, wireless 4G, Internet, data networking, voice, and other technologies. A consortium of bidders that included Microsoft, Apple, Research in Motion, Sony, and Ericsson won out with a final bid of $4.5 billion dollars - the most ever paid in one auction for intellectual property. Notably absent from the winners' circle was Google, the auction's original straw bidder.

"That Apple, Microsoft, and other mobile technology competitors came together in this kind of unholy alliance at the eleventh hour to keep Google out is not insignificant," observed digital pioneer Jeff Einstein. "It's one thing to pursue patents as a means to protect your own intellectual property, quite another to pursue them as a means to keep them away from and pressure your biggest competitor."

In responding to the loss, Google General Counsel Kent Walker took the high road: "This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition. We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers." Of course Mr. Walker's reaction doesn't explain why Google wanted the 6,000 Nortel patents in the first place (presumably not to share them with their competitors or reduce patent litigation in an overly litigious marketplace).

Marketers and consumers alike will doubtless feel the ripple effects of the Nortel auction for years to come. Right now, however, the only thing we know for certain is that tens of billions of marketing dollars will be bet on the winners and losers in mobile technology - much of which was shaped over the years in Nortel's labs. "There is no doubt that the transaction has immense implications for our industry that are sure to ripple through the global business community," said Michael Lasinski of 284 Partners, LLC and president of the Licensing Executives Society (LES), which will devote a session to the terms and impact of the auction at its upcoming annual meeting in San Diego.

"All bets are off when this much intellectual property changes hands in one grand gesture," says Einstein. "Entire operating systems hang in the balance. Can Apple and Microsoft now suddenly compel Google to start charging partners to license Android? Are they better able now to defend their own patents? How much will all of this litigation cost and what effect will all of this have on consumers and the marketers trying to reach them?"

"More and more companies are learning the power of IP," observes Lasinski, "and are leveraging these assets to gain competitive advantage." For marketers that means choosing the right mobile platforms before we even begin to think about targeting the right audience. It's time for big marketers and advertisers to consider the real costs and implications of creating and protecting the intellectual property that informs and shapes the future of media, and what happens when so much of it suddenly shifts from one owner to another.

Learn more in my next installment about what licensing and marketers have to say about the Nortel patents. I will be interviewing executives at the annual Licensing Executive Society conference, which takes place in three weeks.

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ABOUT THE AUTHOR

Steve Eisenberg

Steve Eisenberg is principal of Media Resource Networks (MRN). MRN is a consulting firm specializing in business development and Internet strategy with expertise in online video and mobile marketing.

He also worked for seven years at the Walt Disney Co. He developed online marketing strategies for ABC Entertainment advertising clients, including General Motors, Procter & Gamble, and Barnes & Noble, resulting in increased ad revenue by $1 million. Steve also received a business citation from Michael Dell on success of a partnership between ABCNews.com, Microsoft, and Dell for producing an online promotion with Good Morning America.

 

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