Apple, Microsoft Group Sells Smartphone Patents for $900 Million

The Rockstar Consortium, backed by Apple, Microsoft, BlackBerry, Sony, and Ericsson, has just sold the smartphone patents it was holding for $900 million. RPX Clearinghouse, a subsidiary of RPX Corp., acquired the assets and will license them, in some instances, to competitors of these companies.

Formed in 2011, the Rockstar Consortium holds about 6,000 patent assets from the Nortel bankruptcy estate. About 2,000 of those patents were distributed to Rockstar members before the sale to RPX, which provides patent risk solutions, offering defensive buying, acquisition syndication, patent intelligence , insurance services and advisory services.

"This is the largest syndicate of its kind, and it proves once again that our clearinghouse approach can transform the patent licensing process from one dominated by prolonged litigation to one that is transparent, scalable, and provides a rational outcome for licensors and licensees alike," said John Amster, CEO and co-founder of RPX. A Win-Win-Win

RPX is licensing the patents to a syndicate of more than 30 companies, including Google and Cisco, on a non-exclusive basis. The company has vowed to make the patents available for license to any company that is interested under fair, reasonable, and non-discriminatory terms.

"With RPX acting as a clearinghouse and deal manager, a global consortium of unprecedented scale came together willingly and reached a fair value for licensing patent rights in a negotiated business transaction instead of a courtroom,” said Mark Chandler, General Counsel of Cisco. “This is an approach and transaction that is constructive for the entire industry.”

Beyond Google and Cisco, a broad range of software and media providers, semi-conductor manufacturers, wireless carriers and wireline network operators, multiple system operators and original equipment manufacturers are part of the RPX Clearinghouse syndicate.

"Today's announcement is good news for our industry as it demonstrates our patent system working to promote innovation," said Erich Andersen, vice president and deputy general counsel of Microsoft. "We joined Rockstar to ensure that both Microsoft and our industry would have broad access to the Nortel patent portfolio, and we're pleased to have accomplished that goal through this sale and our valuable license to the patents being sold."

Google Was Outbid in 2011

We caught up with Greg Sterling, vice president of Strategy and Insights at the Local Search Association, to get his thoughts on the buy. “All the protracted patent litigation was incredibility wasteful and distracting for the smartphone industry,” he told us. “This represents the likely end of this unfortunate chapter.”

Google bid $900 million on Nortel Networks patents to build up the firm's mutual-destruction defense strategy in an increasingly litigious technology world back in 2011. Despite the fact that Nortel selected Google's offer as a 'stalking-horse bid,' Google wasn't the winner of the coveted patent portfolio. Instead, a group of rivals won the pot, and that, some thought, could put Google projects like Android and Chrome at risk of legal attack .

At the end of a multi-day auction, Nortel handed over all its remaining patents and patent applications to the consortium bidder for a cash purchase price of $4.5 billion. The portfolio touches nearly every aspect of telecommunications and other markets as well, including Internet search and social networking.

Rob Enderle, principal analyst at the Enderle Group, told us the industry seems to have recurring memory loss. He said it goes through a cycle that begins with one or more vendors aggressively litigating around patents and then deciding all of the testimony and discovery is a "royal pain in the butt" and shifting to cross licensing and more cooperation.

"This would indicate we have shifted, again, to the second part of that cycle and the core vendors have moved to a more cooperative model," Enderle said. "The time and aggravation of litigation between large companies can take all of the fun out of a job unless litigation is your business. The tech firms tend to forget this regularly."