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June 24, 2011 2:21 PM

With Cleary Presiding, Nortel Patent Auction Could Be Biggest Ever

Posted by Julie Triedman

Two and a half years after Nortel Networks Corporation filed for bankruptcy protection, the estate of the insolvent Canadian telecom is scheduled on Monday to sell off its last valuable asset: a portfolio of nearly 6,000 patents that could be key to the future of mobile computing. 

The patent trove--which covers technologies used in smartphones and tablet computers, as well as in  cellular infrastructure, online search, and even social networking--is expected to bring in more than any of Nortel's previous asset sales and could set a record for the most money ever raised in a single public sale of intellectual property assets, lawyers familiar with the auction process say. 

In addition to Google, whose so-called stalking horse offer of $900 million represents the minimum bid, other high-tech companies expected to vie for the Nortel patents include Apple and Intel. All three companies have received approval from federal antitrust regulators to participate in the bidding, as has Rockstar Bidco LP, according to Bloomberg.

Other potential suitors include Ericsson and defensive patent aggregator RPX. As of Friday, it was unclear whether another reported bidder, BlackBerry maker Research in Motion, will ultimately enter the fray.

Interest in the portfolio, which Nortel says includes about 3,650 U.S. patents and 1,650 patents in other countries, has been so intense that the auction--originally scheduled for June 20--was pushed back a week.

Those eyeing the Nortel patents have different reasons for doing so. In announcing its bid in April, for example, Google noted on a company blog that its interest is twofold. Winning the portfolio, the company said, "will not only create a disincentive for others to sue Google, but also help us...continue to innovate." Intel, meanwhile, views the patents as a potential "gold mine" for its own push into the wireless market, according to Reuters.

Previous Nortel asset sales have yielded a combined total of some $3 billion for the bankrupt company's estate, Nortel lawyers say. The two largest auctions both grossed double the minimum bids, and Reuters reports that some observers believe the final price for the patents going on the block Monday could reach $1.5 billion. 

Prior to seeking bankruptcy protection, Mississauga, Ontario-based Nortel had more than 140 affiliates operating in more than 150 countries--making its dismantling one of the largest coordinated multi-jurisdictional insolvency proceedings ever.

Managing the auction for the Nortel estate is Cleary Gottlieb Steen & Hamilton bankruptcy partner Lisa Schweitzer, Nortel's lead U.S. restructuring counsel. Partners Paul Shim and Paul Marquardt are providing corporate advice and counsel Daniel Ilan is helping on IP matters. (All are in New York except Marquardt, who is in Washington, D.C.) Schweitzer had teamed up with colleague James Bromley on previous Nortel auctions. (We have reported on previous Nortel auctions here, here, and here; a Bloomberg story describes a fourth here.)

As of April 30, Cleary had billed $128 million in fees for its work on the Nortel matter, with a bankruptcy court filing showing some 300 lawyers from the firm racking up hours on the effort. Scores of additional lawyers at firms in Canada and the United Kingdom, where related bankruptcy proceedings are playing out, have also logged time on the case. (For more on the complex lawyering involved in the case, read this 2010 account from sibling publication Corporate Counsel.)

Advising Google on the bidding process is Wachtell, Lipton, Rosen & Katz. Counsel Philip Mindlin is leading the firm's team on the matter, with help from corporate partners Adam Emmerich and Benjamin Roth, antitrust partner Ilene Gotts, and restructuring and finance partner Gregory Pessin. Mindlin has in the past represented key parties in distressed asset transactions involving such companies as Refco Group and Aleris International.

No information on which firms are providing counsel for the other potential bidders was available as of Friday. Ericsson won a previous auction in July 2009 for Nortel's wireless assets. The company was represented at the time by partners Marilyn Sobel and Jeffrey Marell at Paul, Weiss, Rifkind, Wharton & Garrison. Neither responded to an e-mail request for comment on the current auction.

As with the previous sales, this one requires the approval of the U.S. and Canadian judges supervising the proceedings, as well as the U.K. administrator overseeing the bankruptcy in that country. Previous auctions with multiple bidders have taken as long as three days. The auction will be held in Cleary's Manhattan offices. A winner will be announced shortly after the close of bidding, with an approval hearing schedued for July 11.

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