Justice Department approves Apple's purchases of Nortel, Novell patents
The federal agency issued a statement on Monday announcing that it was closing its investigations of the Nortel deal and Apple's acquisition of the Novell patents. It also revealed that it was giving Google the go-ahead for its $12.5 billion acquisition of Motorola Mobility.
Google and Apple squared off last year in a bidding war over a trove of more than 6,000 patents from bankrupt Canadian telecommunications equipment maker Nortel. The patents had attracted an unusual level of interest because they were believed to be essential to the 4G Long-Term Evolution wireless standard.
After the dust settled, Apple and a consortium of companies including Ericsson, Research in Motion, Microsoft, Sony and EMC emerged the winners with Google and Intel on the losing side. The winning bid was $4.5 billion, more than three times the price that some analysts had expected, with Apple's share of the purchase coming to a hefty $2.6 billion.
The Department of Justice subsequently conducted a "thorough review" of the transaction because it contained standard essential patents (SEPs) that the agency feared could be wielded by the purchasing companies against their competitors. The investigation ultimately came to the conclusion that the transition was not "likely to significantly change existing market dynamics."
Microsoft and Apple aided their own cause by publicly expressing their commitment to uphold Fair, Reasonable and Non-Discriminatory (FRAND) patent commitments. The DoJ specifically cited a November letter from Apple to the European Telecommunications Standards Institute that recently came to light.
âA party who made a FRAND commitment to license its cellular standards essential patents or otherwise acquired assets/rights from a party who made the FRAND commitment must not seek injunctive relief on such patents. Seeking an injunction would be a violation of the partyâs commitment to FRAND licensing,â Apple wrote.
The agency noted Microsoft's support for Apple's proposals for standards essential patents. The Redmond, Wash., company went on record last week with a commitment to "always adhere to the promises it has made" to licenses its SEPs on FRAND terms.
Also taken into consideration was the fact that Research in Motion and Microsoft have been dwarfed by Apple and Google in terms of market share in the wireless industry. "Their low market shares in mobile platforms would likely make a strategy to harm rivals either through injunctions or supracompetitive royalties based on the acquired Nortel SEPs unprofitable," the agency said in its statement.
Microsoft's existing cross-license agreements with more than half of the Android market were also cited as a reason that the Nortel deal wouldn't adversely affect competition. With licensing agreements from Samsung and HTC, the Windows Phone maker is said to make more money off the Android platform than its own mobile OS.
The DoJ did note that Apple was in a position to benefit from "[excluding] Android-based phones from the market or [raising] the costs of such phones through IP-licenses or patent litigation," but it was content with the company's commitment not to seek injunctions on FRAND-committed patents.
Shortly after the Nortel auction closed, Google, which had expressed an early interest in the patents, called the auction's results "disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition." However, the Justice Department has worked to ensure that the search giant will, at the least, have an opportunity to license any of Nortel's patents that were committed to standard-setting organizations.
The agency also announced on Monday that it had completed its investigation of Apple's proposal to acquire patents originally owned by Novell. In 2010, Apple, Microsoft, Oracle and EMC banded together to purchase 882 patents from Novell by creating a consortium under the name CPTN Holdings. The plan faced some opposition over concerns that the patent acquisition would affect open source initiatives.
According to the DoJ statement, the division concluded that Apple's acquisition of the patents was "unlikely to harm competition." The agency's investigation determined that Apple would be unable to get out of Novell's original commitments to the Open Invention Network" or seek royalties from Linux users. Apple's expressed commitment to honor Novell's OIN licensing agreements served to reassure the DoJ.
For its part, Google cited the Novell patent purchase last year in accusations that Apple and Microsoft were waging an "organized campaign" against its Android operating system. However, Microsoft quickly fired back by noting that Google had turned down an invitation to jointly bid on the Novell patents.
The members of the CPTN consortium have claimed that they purchased the Novell patents to keep them out of the hands of patent trolls.