Joff Wild

Reports that the French government is considering whether to take a stake in Alcatel-Lucent have re-emerged. According to Bloomberg, unnamed sources “with knowledge of the deliberations” have indicated that one of the motivations for doing so would be “to protect the unprofitable network equipment maker’s patents”.

Back in December, this blog looked at rumours that authorities in France were considering the establishment of some kind of “patent consortium” as an alternative to the struggling company taking a loan from Goldman Sachs and Credit Suisse secured against its IP. While the latest news does not shed any further light on that, it does seem clear that who owns the patents is a concern to the French government. It would be interesting to know why.

It is possible, I suppose, that the French are concerned that should the patents end up in the hands of a non-French company, the revenues they generate – and which they could generate in the future – will be managed from outside France, so depriving the state of income. Alternatively, ownership could be regarded as a matter of prestige in the sense that the fact that Alcatel-Lucent owns thousands of patents – most of which will not be valid in France, of course – is somehow a reflection of la gloire Française. Then again, it may be that the government believes that it should have a say in how to maximise the revenues and the value that the patents can create. However, none of these would be sensible justifications for an intervention; they would significantly reduce the Alcatel Lucent board’s freedom of action and would probably have a negative impact not only on the company’s overall value, but also on the value of the patents themselves.

Instead, the only conceivable reason I could see for the French state to get involved with the management and ownership of the portfolio is because it is worried that if it did come to a divestment for whatever reason, the organisation which took control of the patents may not have France’s national interest at the forefront of its mind. For example, it could be a company operated from a country which is hostile to France; or, more likely, a company whose standing would be considerably enhanced at the expense of French interests should the patents come into its possession.

If you think about it for a moment, it is a surprise that patents have not emerged as more of an issue of national security. It seems to me that there is the potential, at least, for valuable patents to fall into hands of entities that, for want of a better word, wish to use them malevolently. And by that I do not mean NPEs seeking to generate licensing revenues, but organisations whose aim is to use their rights to prevent access to technologies and/or to control who gets into a market and under what circumstances.

As readers of this blog know, ownership of a high quality patent portfolio reading on key technologies is a very powerful weapon – especially so in countries where the rule of law is sacrosanct and transparency of patent ownership is not guaranteed. In such countries, using patents as weapons of trade war would be hard to stop – unless, that is, you had some level of control over patent-related transactions. Perhaps, this is what the French are thinking about: maybe they want to make sure that should it come to a sale of Alcatel-Lucent patents they are in on the details as early as possible about who might be bidding so that, if necessary, they can block certain parties from taking part unless very tightly defined guarantees are provided. They may be better placed to do that as a powerful shareholder in Alcatel-Lucent than as a regulator acting after the fact.