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Nortel Patent Probe Picks Up
By THOMAS CATAN

WASHINGTON—The Justice Department is intensifying an investigation into whether tech giants including Apple Inc., Microsoft Corp. and Research in Motion Ltd. could use a recently acquired trove of patents to unfairly hobble competing smartphones using Google Inc.'s Android software, according to people familiar with the matter.

A consortium of six companies last month paid $4.5 billion to acquire a portfolio of 6,000 patents auctioned by the bankrupt Canadian telecom equipment maker Nortel Networks Corp., thwarting Google's interest.

The final amount, five times Google's original $900 million "stalking horse" bid, stunned observers and raised concerns about how the consortium intended to use them.

The Justice Department is interviewing consortium members on whether they have plans to file patent infringement suits against handset makers using Google's Android software, those people said. They are also talking to others that could be adversely affected.

The deal closed on Friday but Justice could still impose conditions on the parties. In April, the department forced a consortium of companies including Microsoft, Apple and Oracle Corp. to promise not to use a portfolio of patents it had acquired to unfairly hurt rivals. Microsoft was forced to give up the patents it was buying and license them instead.

On Friday, Google confirmed that it purchased a number of patents from International Business Machines Corp. related to memory and microprocessor chips, computer architecture and online search engines. A spokesman declined to comment on the price paid.

Nortel held patents touching many parts of the modern tech landscape. But it attracted particular interest from mobile telephone and computing companies because of rare patents relating to wireless technology.

For example, it included patents on the fourth-generation mobile networks now being rolled out in the U.S. and elsewhere, called Long Term Evolution, and on Wi-Fi wireless networking.

The winning consortium, which calls itself Rockstar Bidco, hasn't said what it intends to do with the patents. It is unclear whether it intends to keep the patents centrally or divide them up among its members. The Justice Department wants to know whether it intends to use them defensively to deter patent lawsuits against its members, or offensively against rivals.

But Android supporters say that the six would never have paid so much if they merely wanted the patents to protect themselves against lawsuits. Microsoft, for example, already had a license to use the patents, so it wouldn't face any law suits whoever owned them.

A key question for the Justice Department is likely "whether there's an agreement, implicit or explicit, among the members of the Rockstar consortium to collectively hinder the adoption of Android," said Thomas Ensign, an antitrust lawyer at Freshfields Bruckhaus Deringer LLP in Washington who isn't involved in the investigation.

A Justice Department spokeswoman declined to comment on the investigation, which hasn't been announced, as did spokesmen for Apple, Microsoft and Google.

Google has previously said it believes the consortium intends to use the patents to block it and others from bringing new products to market.

The bid was "a sign of companies coming together not to buy new technology, not to buy great engineers or great products, but to buy the legal right to stop other people from innovating," Google's general counsel, Kent Walker, said on Bloomberg TV this week.

Google is particularly vulnerable to patent infringement suits. Its size and wealth give it plenty to lose if anyone were to secure a court injunction against one of its key technologies. But it is only 12-years-old and has relatively few patents with which to deter suits by competitors.

The Mountain View, Calif., firm has already come under attack. Apple sued a number of handset makers using Android, including HTC Corp. and Samsung and Motorola. Apple also has been on the receiving end of such suits, recently settling a case brought by Nokia Corp.Google had hoped to bolster its armory with Nortel's patents. But, despite teaming up with chipmaker Intel Corp., the bidding quickly soared beyond its reach when Apple joined the Rockstar consortium. Other members included Sony Corp. and Telefon AB L.M. Ericsson.

The Justice Department had given all bidders in the Nortel auction preliminary antitrust clearance, partly because it didn't wish to affect the outcome of the auction, the people said. But the agency made clear to the parties that it didn't give up the right to take a fresh look if it believed the winning offer presented competitive concerns, they said.

The fact that Apple joined the Rockstar consortium and the bidding rose so high gave the agency cause to look at the issues anew, they said.

Even if Rockstar's deal is allowed by the Justice Department, some question whether it, or its principal members, would be able to bid on patent portfolios in the future without triggering an antitrust challenge.

"We're seeing a situation where big companies seem more willing to try to use, and in essence misuse, their patent portfolio in a really aggressive way to go after open-source products and weaker competitors," said Ed Black, president of the Computer & Communications Industry Association, a tech lobbying group. "That's really troubling."



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