Nortel Networks was once North America's largest communications equipment provider, with $30 billion in annual revenues at its peak. Following cash woes and a heavy debt burden, it succumbed to bankruptcy in Europe, Canada and the United States in January 2009. Hoping to exit bankruptcy with sound financial footing, Nortel, which had assets valued at $11 billion at the time of the filing, instead ended up selling most of its businesses.

Among the assets of Nortel remaining are its patents and patent applications. Search giant Google Inc. has inked a deal to lead an auction for the patents with its $900 million offer to buy the patents. The Google-led auction supervised by a bankruptcy court in the United States will be held on June 20 at the offices of law firm Cleary Gottlieb Steen & Hamilton LLP in New York. The bankruptcy court will evaluate the auction results at the end of the month.

The assets to be auctioned off comprise 6,000 patents and patent applications spanning 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, Canada-based Nortel said.

It is not Google who is only interested in the patents. According to reports, tech firms, like Research in Motion, maker of the Blackberry smartphones; Microsoft Corp., developer of the world's most popular operating system for computers; and Apple Inc., maker of the iPad and the iPhone, have set their eyes on the patents.RPX Corp., a patent-service company, is said to have put together a consortium of possible bidders, to bid for the assets.

Aside from counter-offers, the proposed sale have received objections from industry giants like Hewlett-Packard, the world's largest manufacturer of personal computers; and Nokia, the market leader in smartphones.

The proposed sale has sent ripples in the technology sector, as the arsenal of patents can be used to defend against intellectual property lawsuits, ward off competitors and have headway in for future generations of smartphones and other devices.
Microsoft, Nokia, and communications firm AT&T Inc. have said in court filings that that free-and-clear patent sale would hurt the whole industry. The software giant said that Google or the winning bidder cannot be allowed to hold the patents without being bound by licensing deals Nortel made with industry standards settings organizations (SSOs) and other parties.

According to Nokia, SSO participants make a commitment to license any patents that are essential to a standard on reasonable and nondiscrminatory terms. ("F/RAND"). It said that a "patent hold-up" might occur if the purchaser of the patents and later argued that because it purchased the patents free and clear of Nortel's SSO commitments, it is entitled to higher than F/RAND compensation or an injunction against parties who refuse to pay beyon F/RAND compenstation.

Google, developer of the Android operating system, which is used in over 35% of smartphones, has admitted it needs the patent portfolio to defend itself from lawsuits. Several mobile companies have sued Android partners for patent infringement, and Google has been sued by Oracle Corp. over Java. "One of a company's best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services," Google's general counsel, Kent Walker, wrote on the company blog in April.

Google or the winning bidder can use the patent to protect itself from patent litigation, which is usually aimed against big technology companies. Last week, the U.S. Supreme Court, by unanimous decision, upheld a $290 million jury verdict against Microsoft for infringing a patent of a small Canadian firm. The high court denied a plea by Microsoft that a lower standard of "preponderance of evidence" -- instead of the standard "clear and convincing evidence" -- be used to invalidate patents. Microsoft pleaded, to no avail, that using a lower standard of proof would make some "bad" patents easier to invalidate while promoting innovation and competition.

Buying the patents could help phone manufacturers avoid expensive royalty payments to third parties. This week, Apple Inc. said it agreed to provide one-time payment and royalties to Nokia to settle a two-year old lawsuit that Apple's iPhones infringed on the Finnish handset maker's patents. Apple did not disclose the settlement amount but the initial payment is estimated to cost Apple hundreds of millions.

The Wall Street Journal, citing unnamed sources, said the U.S. Justice Department conducted an antitrust review of the sale deal and has granted Google Inc. the go-ahead to pursue its opening bid for the patents. The sources told the Journal that the Justice Department concluded that Google's potential ownership of the patents wouldn't raise any major competitive concerns.

It appears that no matter the outcome, Google won't be going home empty handed. For the setting the floor price for the bidding,Google will receive at least $25 million if it is outbid at the auction.

Nortel's assets have been valuable to players in the technology industry. Nortel has already raised $3.2 billion by selling its operations during the past two and a half years. Nortel sold its Layer 4-7 assets to Radware Ltd., its CDMA and LTE-related assets to Telefonaktiebolaget LM Ericsson (Publ), its enterprise solutions business to Avaya Inc., its next generation packet core network components business to Hitachi, Ltd., its GSM/GSM-R business to Ericsson, its metro ethernet networks business to Ciena Corporation, its carrier voice over IP and application solutions business to GENBAND Inc, its multi-service switch business to Ericsson.