Cross-posted by at On the Docket

We have devoted a lot of digital ink here at The Legal Pulse to the parasitic activities of so-called “patent trolls” – entities which use their patents as litigation swords rather than empowerment devices for innovation (see, e.g., here and here). With federal patent reform finally a real possibility, trolls’ abusive practices have attracted the attention of policymakers as well as leading civil justice reform advocates. We hope they will also be cognizant of today’s auction of over 6,000 patents owned by bankrupt telecom equipment company Nortel. The triumphant bidder will control a formidable patent portfolio which could fuel billions of dollars worth of offensive patent lawsuits or offer solid defenses against future patent litigation. See this post for a great FAQ on the auction.

Google’s April “stalking horse” bid of $900 million garnered a great deal of attention, but that bid doesn’t mean Google has a leg up on the competition or will ultimately prevail. Google, along with Apple and Intel, has received U.S. Department of Justice Antitrust Division “pre-clearance” to participate. Other reported bidders include patent holding company RPX, Research in Motion, and Ericsson. The patents, according to a court filing, cover

wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.

Considering the litigious nature of the mobile-phone world, it’s no surprise that the aforementioned companies would want to buy the portfolio. No doubt the bidding will reach well beyond $1 billion, and there is no guarantee that all the patents will be sold to one bidder. That could lead to some fascinating behind-the-scenes alliances and other maneuvering. One additional factor to watch: by virtue of a 2006 licensing deal with Nortel, Microsoft has stated that it has, and will continue to have after the auction, “a world-wide, perpetual, royalty-free license to all of Nortel’s patents that covers all Microsoft products and services.” Whatever happens at today’s auction, a bankruptcy court in Delaware and a superior court in Nortel’s home province of Ontario will hold hearings on July 11 to review and possibly approve the sale.

Google’s participation is most interesting for a number of reasons, most prominently because it lacks what the other bidders already possess: a strong patent portfolio. Google’s general counsel wrote in April that defense against would-be patent litigators and assistance for its “open source community” partners motivated its interest. Also, now that Google is antitrust regulators’ reigning flavor of the month, and especially with an expensive, possibly protracted fight against the U.S. government looming, the company may want to use the patents to move more into the mobile tech space, or sit on the patents and pursue licenses through threats of litigation.

The latter approach would certainly belie Google’s stated reasons for seeking Nortel’s patents. Any eventual auction winner could follow such a patent troll path, but the possibility of the world’s dominant online search and advertising company joining the ranks of NTP (the patent holding company which extracted $612 million from RIM) may launch the Nortel auction bid towards the stratosphere.  No matter what happens, as the above-referenced FAQ noted, “it’s a turning point in the development of the modern mobile computing industry.”