American Antitrust Institute Warns of Anticompetitive Effects From Wireless Technology Consortium’s $4.5 Billion Purchase of Nortel’s Entire Patent Portfolio

In a letter today to Assistant Attorney General for Antitrust Christine Varney, the American Antitrust Institute (AAI) urged the Department of Justice (a) to commence an in-depth investigation of the proposed purchase of Nortel’s portfolio of more than 6,000 patents and patent applications, many of which may be vital to the future of mobile communications and computing devices, by Rockstar Bidco LP, a consortium consisting of Apple, Microsoft, Research in Motion, EMC, Sony and Ericsson; and (b) to advise the U.S. and Canadian bankruptcy courts presiding over the Nortel estate of the Department’s commencement of that investigation prior to their joint hearing on the Rockstar-Nortel transaction next Monday.

Rockstar’s $4.5 billion purchase price is five times the amount of a previous offer from Google at the outset of the auction. The AAI believes that this in itself “raises questions about the concerted intentions and objectives of the six consortium members that could not be achieved through independent bidding and eventual individual ownership or licensing of some or all parts of the patent portfolio at stake.”

The consortium membership includes three leading mobile device operating system competitors, and they are the three main commercial rivals to Android, Google’s open-source mobile operating system. Each of them already possesses a large portfolio of wireless technology patents and the capability of bidding on its own for a significant portion of the Nortel portfolio. The AAI warns that their collective control over the massive Nortel portfolio could enable and incent them to enforce the patents to suppress mobile device competition generally and open source competition in that field in particular. In these circumstances, the AAI questions why any horizontal collaboration among them with regard to the Nortel portfolio should be allowed.

AAI President Bert Foer said, “It would be a grave mistake for the Department to permit the bankruptcy court proceeding to approve the Rockstar-Nortel transaction next Monday without appreciation of the serious potential for anticompetitive effects and consequent need for an in-depth investigation.”