Patently Insane

$4.5 Billion Purchase of Nortel Patents is a Potent Reminder How Broken the System has Become

patent troll $4.5 Billion Purchase of Nortel Patents is a Potent Reminder How Broken the System has Become

Image via Bob MacNeil

A heated bidding war taking place at the World Trade Center has finally wrapped up. At stake was the largest collection of technology patents ever assembled into a single sale portfolio, the treasure trove of the now bankrupt Nortel.

Google emerged as the early front runner with a $900 million bid and was expected to compete with Apple over a price that could reach as high as $1.5 billion. In the end a coalition of Microsoft, Apple, RIM, and Sony beat out Google with a massive $4.5 billion bid.

The sad reality of the situation is that the massive interest in the patents is not about innovation. When Google filed its stalking horse bid back in April, Google’s general counsel, Kent Walker, said the search giants interest was primarily defensive, “to create a disincentive for others to sue Google. The tech world has recently seen an explosion in patent litigation, often involving low quality software patents.” 

The Nortel portfolio is also full of hardware patents, but software was Google’s focus. Walker wrote that Google hoped it would, “Help us, our partners and the open source community—which is integrally involved in projects like Android and Chrome—continue to innovate. In the absence of meaningful reform, we believe it’s the best long-term solution for Google, our users and our partners.”

The enormous price paid for this portfolio echoes the sentiment that has been percolating in NYC’s tech community of late. Fred Wilson wrote an impassioned blog post, Enough is Enough, in response to the Lodsys case.

I believe that software patents should not exist. They are a tax on innovation. And software is closer to media than it is to hardware. Patenting software is like patenting music….The whole thing is nuts. I can’t understand why our goverment allows this shit to go on. It’s wrong and its bad for society to have this cancer growing inside our economy…We need to eliminate software patents. This ridiculous Lodsys situation is the perfect example of why. We need to say “enough is enough.”

Betabeat was chatting recently with Brad Burnham, Wilson’s co-founder at Union Square Ventures, about this issue. “The patent lawyers are an entrenched interest and they have an incredible amount of money and influence in the political sphere.” Curious to see how bad things were among their own investments, Burnham emailed the USV portfolio. “Almost half the companies had received had been hit with some kind of software patent litigation. And all the ones that had, were those who had achieved some scale. The ones that had not, are just not big enough, not visible enough to be targets.”

The hard line from folks like Chris Dixon, who believes software patents should be abolished, is probably not the best way to make progress with the folks in D.C.. But a rising chorus of voices from well established and well connected VCs is probably the best bet for catalyzing change. That, or patent trolls like Lodsys, who anger big dogs like Apple by mucking around in their developer ecosystem.

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