Nortel Networks Ltd. executives being grilled by a Canadian parliamentary committee say that the company could sell off its Long Term Evolution (LTE) patents at a later date, amongst other options for the wireless intellectual property rights (IPR).
The $1.13 billion package that Ericsson AB (Nasdaq: ERIC) won at auction includes LTE research-and-development staff and a license to use the pre-4G IPR. But the Ericsson deal doesn't include the patents themselves. Under questioning, Nortel executives said that they are looking at a range of options for the patents and a future sale could be one of the them.
Nortel holds LTE-related patents dating back to 1998 and still retains a "small" R&D staff for the technology, based in Dallas. "They could be part of a subsequent transaction," says Richard Lowe, Nortel's president of carrier networks.
George Riedel, chief strategy officer at Nortel, said Nortel is working with the courts on a "fact-based approach" on what to do with the patents. "Do we keep some or do we sell them all... I don't know the answer yet," he told the committee. [Ed. note: Should it make us suspicious when they announce that NOW they're using facts?]
Nortel has spent around $350 million on developing LTE technology, Lowe told the committee. [Ed. note: Another fact? Hmmm...] The bulk of that spending happened in 2008 and 2009, Lowe said.
Riedel also said that there was a "simple rationale" in not including the patents in the sale of Nortel's wireless assets: The initial bidder for the assets, Nokia Siemens Networks , was happy with its own LTE IPR portfolio.
"The original buyer did not value the assets," Riedel explained.
I'd like to give two comments to help in understanding the Nortel's LTE patent portfolio.
1. Licensing market: Most of Nortel's patents for OFDM/MIMO technologies are for the downlink (base station to mobile handset), which means the licensing market will be mostly the base station equipments.
2. Essentiality for standards: Not all Nortel's LTE patents will be essential for the 3GPP's LTE standard specifications, which means the royalty will depend on the total share of Nortel's LTE essential patents among LTE patent licensing contenders:
Nortel's IPR licensing candidate analysis for LTE baseband products (OFDM/MIMO Modem and Channel Coder) in the lists of patents declared essential to LTE appear at the ETSI IPR Online by TechIPm, LLC shows that there are 24 issued patents, 13 published patent applications, and 2 patent applications in pending in the United States as of July 31, 2009. Among 14 LTE IPR licensing contenders for the US LTE baseband product market, Nortel is ranked 4th in IPR shares (10 %).
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