The Department of Justice (DOJ) recently opened a review into the sale of bankrupt Canadian telecom giant Nortel’s vast collection of patents over concerns that the winning bidder could stifle competition. Vying for ownership of over 6,000 patents covering wi-fi, social networking, and mobile technology, bidders are looking to bulk-up their commanding position in the technological arms race. Realizing the potential for abuse that might result from the sale of Nortel’s vast trove of patents, the DOJ is taking an active position in trying to balance antitrust and intellectual property law matters in an attempt to ensure that any company acquiring patents in bankruptcy proceedings do not then unfairly inhibit competition.

Google offered an initial bid of $900 million which has been approved by both the Canadian and American courts. However, under U.S. bankruptcy law, Nortel must remain open to larger bids from competing companies until June 13. Other companies expressing interest in the patents include Apple and Blackberry-maker Research in Motion. According to the Wall Street Journal, while the DOJ has not found any major concerns with Google’s offer, it is worried about any potential bid from Apple. Apple, who has earned itself a litigious reputation with regard to patent asset matters, recently sued Samsung  Electronics Co. Ltd. claiming the design of the company’s android-based smartphone too closely resembles an Apple product. By acquiring Nortel’s patents, Apple would essentially arm itself with a treasure chest of tools for future litigation allowing it to suppress its competition, especially among smaller players in the market.

It is becoming more common for companies to apply this “trolling” strategy by paying large sums to acquire the patents of bankrupt companies. By commanding a wide array of patents, a company is more likely to overwhelm any opposing party in litigation. Holding a large portfolio of patents also protects against potential lawsuits because the owner is better equipped to threaten countersuits. The Nortel auction is slated for June 20.

- Stephen Josey

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