By Ashby Jones
In yet another sign that the smartphone-patent wars are starting
to cool, Apple Inc. and a handful of other big technology companies
have agreed to sell the bulk of a jointly owned portfolio of
telecommunications patent assets for $900 million, less than a
quarter of the $4.5 billion they paid for the full portfolio four
years ago.
Rockstar Consortium Inc. has agreed to sell more than 4,000
patents to San Francisco-based RPX Corp., a patent clearinghouse
that helps companies protect themselves from patent lawsuits.
The deal will put an end to several high-profile lawsuits filed
by Rockstar against companies that make phones powered by the
Android operating system.
The companies that make up Rockstar--Apple, Microsoft Corp.,
BlackBerry Ltd., Ericsson Inc., and Sony Corp.--won a bidding war
with Google Inc. to purchase the full portfolio of about 6,000
patents in 2011 from the bankrupt Nortel Networks Inc. The
companies tucked 4,000 patents into Rockstar and distributed the
remaining 2,000 patents among each other.
RPX will turn around and license the patents to a separate
syndicate of about 30 other technology companies that include
Google and Cisco Systems Inc.
Funds from the syndicate made up much of the $900 million paid
for the patents.
"Peace is breaking out," said John Amster, the chief executive
of RPX. "I think people have started to realize that licensing, not
litigation, is the best way to make use of patents, and this deal
is a significant acknowledgment of that reality."
Mark Chandler, Cisco's general counsel, called the deal
"constructive for the entire industry."
Added Erich Andersen, deputy general counsel at Microsoft: "We
joined Rockstar to ensure that both Microsoft and our industry
would have broad access to the Nortel patent portfolio, and we're
pleased to have accomplished that goal through this sale."
"It's a fair price, and a very good deal for Ericsson," said
Kasim Alfalahi, the company's chief intellectual property
officer.
Spokespeople for Apple, Google, Sony and BlackBerry declined to
comment.
Rockstar was created in 2011 as a vehicle for its owners to
reach licensing deals with other players in the telecom world.
But Rockstar's efforts to license the patents didn't go as well
as initially planned. "I figured that given the price that parties
were willing to pay for these patents, talks to license them would
be much easier," Rockstar Chief Executive John Veschi told The Wall
Street Journal in a 2013 interview.
So Rockstar turned to the courtroom. Starting late last year,
Rockstar sued several companies for allegedly infringing their
patents, including Google and Cisco. Last month, Rockstar settled
its suits against Google and Cisco. Financial details weren't
disclosed, but Cisco told investors in early November that it had
recorded a pretax charge of $188 million to settle the Rockstar
litigation.
As part of the deal with RPX, Rockstar will drop the remainder
of its suits, which include claims against Samsung Electronics Co.,
LG Electronics Inc., HTC Corp. and Huawei Technologies Co.
The settlements follow others in the long-running smartphone
patent wars.
For instance, in May, Apple and Google agreed to drop all
lawsuits between the two companies, and in August, Apple and
Samsung agreed to end all litigation between the two companies
outside the U.S. Apple and Samsung are still battling in federal
court in California, where Apple has won two jury verdicts finding
that Samsung infringed its designs for the iPhone.
Whether the Rockstar companies recouped its $4.5 billion
investment is an open question. In the minds of some experts, the
$4.5 billion figure reflected the high point of a frothy market
that developed for patents in the earlier days of the smartphone
industry.
The Rockstar companies squeezed more than three years of use out
of the 4,000 patents, and will keep licenses going forward. The
2,000 patents they held back from Rockstar--and aren't part of the
sale to RPX--were among some of the most valuable in the Nortel
portfolio.
Initially, the purchase of the 6,000 Nortel patents caused
anxiety at the Justice Department. A chief concern was that Apple
and Microsoft, which took ownership of many patents related to
wireless standards, rather than leave them with Rockstar, would use
the patents to quash competition.
The Justice Department ultimately blessed the deal in 2012 after
getting concessions from the companies that they would agree to
license the patents on "fair, reasonable and nondiscriminatory"
terms.
The deal represents a significant move for RPX, which since its
founding in 2008 has offered companies a way to cut back on their
exposure to patent lawsuits, especially those bought by companies
that profit from creations they themselves had no hand in creating,
called "patent-assertion entities" or, less flatteringly,
"trolls."
RPX's nearly 200 clients pay memberships that allow them access
to any of RPX's patents to defend themselves. As a matter of
policy, RPX doesn't use its patents to bring lawsuits.
Before the Rockstar deal, the publicly traded RPX had invested
$890 million to acquire more than 4,900 patents.
Write to Ashby Jones at ashby.jones@wsj.com
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