Jennifer O’Dell is a JD candidate at Osgoode Hall and Denise Brunsdon is a social media writer and researcher.
For anyone with family members at Apple, Research in Motion, Microsoft, Ericsson, Sony and EMC, don’t forget to put “A Nortel patent” on your wish list this Christmas. There’s at least 6, 000 to go around.
As was outlined in this pre-sale IPilogue blog post, the big tech consortium with all these players successfully outbid Google in the biggest patent auction in world history, and for a far greater price tag than many expected – $4.5 billion to be exact.
The sale made headlines both because of US anti-trust concerns as well as Canadian worries about the loss of such a large amount of domestically-developed intellectual property.
On issues of domestic economic asset management, the Government has the ability to review and block asset sales under the Investment Canada Act but it ambiguously claimed that the threshold values required for review were not met.
Just as the US monopoly concerns turned out to be invalid, so were the economic sovereignty ones, to a degree. Through natural market mechanisms and relationships, Canada’s top blue-chip computing manufacturer Research In Motion (RIM) joined the consortium and won a fraction of the patents. Although the patents are unlikely to be distributed numerically in a ratio to match the relative pots put forward by each company, it is safe to say that their value will distributed according to buy-in, which means that RIM will receive 17 percent of the patent package value. Thus, slightly under 1/5 of the original patents will remain in Canadian hands.
A cynic might say that these patents won’t necessarily remain in Canadian hands for long if RIM fortunes continue to decline as was recently indicated by its recent announcement of 2,000 job cuts, but an optimist will likely argue that these patents could be just what RIM needs to reinvigorate its market offering.
Time will answer many of the detail questions around the eventual winners and losers of this deal from a strict technology perspective. But the lingering question that remains unanswered is whether or not the Government has a cohesive policy or long-term strategy around domestic economic protections and whether or not the refusal to review the Nortel sale is an anomaly or an example. Nortel is the first in a line of similar foreign investment or purchase issues, including spectrum, nuclear and potash.
The government blocked the Potash Corp bid by BHP Billiton in late 2010. Worth over $40 billion, Tony Clement, then Industry Minister, declared the takeover bid to “not be of net benefit to Canada or Canadians.”
In the Nortel instance, however, Industry Minister Christian Paradis seemed hardly certain that the Investment Canada Act even applied.
It may be that these two cases are too dissimilar to draw any conclusions: Nortel was bankrupt, Potash Corp was not; Nortel’s bid involved somewhat intangible patents, Potash involved a physical company and Canadian jobs.
Given its previous record with Potash, Ottawa remained mostly ambivalent throughout the auction process, with Paradis only asking his department to review the auction in early July of this year. RIM’s CEO, Jim Balsillie, had been requesting the Government’s intervention as early as 2009.
Consulting and risk management firm Deloitte estimated earlier this year that “roughly two-thirds of Internet use will be via smartphones or other mobile devices by 2014.” If this is true, the 80 percent of the patent package that went to foreign companies will undoubtedly contribute to their profit growth and general market competitiveness. Whether or not these profit advantages should have been reserved for Canadian companies in this particularly case is a national debate that was missed because of weak legislation and a passive approach by the Government.
This 2-year long saga should serve to highlight some of the uncertainties still present in Canadian rules, regulations and acts vis-à-vis intellectual property. The Canada Investment Act needs to be revamped to reflect the growing importance of IP or certainly the method for measuring whether or not the asset value meets the threshold for review. Legislation needs to reflect that intellectual property is just as – if not more – valuable in today’s interconnected market place.