As Nortel hurtled toward liquidation last month, its engineers and lawyers were as busy as ever in the halls of the U.S. Trademark Office, adding three new patents to a gold mine of intellectual assets. This is the prize that has sparked a feeding frenzy for Nortel's remains.
t its heart, Nortel Networks Corp. has always been a company of inventors.
It began in the 1880s as the manufacturing arm of the newly founded Bell Telephone Co. of Canada. A century later, Nortel led the way in the development of digital telephones. And even after the company was waylaid by a series of brutal self-inflicted blows – foolish tech-bubble acquisitions and an accounting scandal – its engineers continued to innovate.
The company's last big technology bet, decisively made in 2006 under new chief executive officer Mike Zafirovski, was on a wireless revolution, to build the network equipment that will soon make mobile communications faster and more reliable than anything that exists today. It wasn't enough to save Nortel from failure.
Yet even as the liquidation of the company began last month, the ideas its engineers have come up with to build this network were winning legal protection from the United States Patent and Trademark Office.
Within these patents lies the potential gold that sparked the international auction among some of the world's premier makers of communications equipment – including Waterloo, Ont.'s Research In Motion Ltd. (RIM-T82.50-0.79-0.95%) – for the failed Canadian technology icon's best assets.
What's attracting them is something called LTE, or the long-term evolution of wireless networks, which will bring the world together on a single mobile standard for the first time. Nortel, alongside Telefon AB LM Ericsson (ERIC-Q9.65-0.77-7.39%) , Nokia Siemens Networks BV, Alcatel Lucent SA and a handful of others, have raced to develop their versions of the technology and sell them to the biggest telecommunications companies as they prepare to upgrade their networks. Rogers Communications Inc. is set to be the first in Canada to sell an LTE-based service – billed as being several times faster than home Internet connections – next year.
Although the technology is in its early days, the promise of LTE is that it will allow for mobile access to Internet and video in a manner that's impossible with current networks. Picture watching a live hockey game on a laptop computer or an Apple iPhone while riding in the back of a speeding vehicle, and you have some idea of what it might bring.
Patents alone don't build a network or win multibillion-dollar contacts. But to Nortel competitors such Ericsson or Nokia, there is little downside in paying a fire-sale price to win what may turn out to the valuable intellectual property in the race to LTE – and the people who developed it.
“Having a rich patent portfolio gives one a distinct competitive advantage,” said Dave Michelson, a professor at the University of British Columbia and former AT&T wireless network engineer. “[The new patents] seem to build upon well-established work and would appear to contribute to a strategically useful patent portfolio.”
