Joff Wild

RPX has stated that it could enter the bidding for the Nortel patent portfolio. An attorney at the defensive patent aggregation firm, which is due to start trading its shares on NASDAQ tomorrow, is reported to have said that it has put together a consortium of companies that may get involved in an auction, scheduled to take place in New York on 20th June. So far, Google is the only confirmed bidder, though now that Nortel's administrators have been given permission to hold the sale, more are likely to emerge. There are no further details anywhere about RPX's plans as far as I can see, but if a consortium does exist it must surely have been put together separate from the firm's standard offering. According to its S1 filing of earlier this year:

Upon initial subscription, to the extent that we are contractually able, clients receive a term license for the period of their membership to, and a release from all prior damages associated with, patent assets in our portfolio. Clients also receive a limited right to purchase certain of our patent assets for defensive purposes in the event of a patent infringement suit brought against a client by a third party. In addition, clients receive term licenses to substantially all of the patent assets we acquire during the period of their membership. Our subscription agreements also include a vesting provision that converts a client’s term licenses into perpetual licenses if the company remains an RPX client after the specified vesting period and thereafter, on a rolling basis.

As far as I know, Google is a member of the RPX client pool, so would be covered by any normal purchase of the patents by the firm. If, on the other hand, RPX is acting on behalf of just one or some of its members, many of which operate in the space the Nortel portfolio occupies, then it is a different story. And RPX is able to do this. On the RPX website it states:

In cases where RPX is not pursuing an acquisition using subscription fees, our clients may still request our assistance. In these instances, RPX structures syndicated acquisitions on behalf of clients, with the same objective of efficiently sharing resources and collectively reducing litigation risk, just on a larger scale. Transactions of this complexity require the collective resources of a large client network and benefit from the substantial deal experience and market insights that RPX provides.

Being part of an RPX-managed consortium makes purchasing the Nortel patents cheaper than bidding for them alone. It means you get protection while also preventing Google from covering itself and, perhaps more importantly, offering attractive licensing deals to its Android community. All in all that could be quite an appealing proposition for Google’s competitors I would have thought – even if they are also fighting among themselves. No wonder Nortel’s US attorney says: “We're hoping for a vigorous auction.”

On another note, I wonder what kind of fees RPX would get for putting together a syndicate and then successfully bidding for a $1 billion portfolio. Even 1% of the purchase amount would be a very handy $10 million or so. Move up to 5%, let alone 10%, and it gets very interesting indeed.