Research in Motion Inc. was interested in buying Nortel Networks Corp.’s Long Term Evolution patents before Nortel filed for bankruptcy protection in January.
This was revealed Friday by Mike Lazaridis, co-chief executive officer of Waterloo, Ont.-based RIM in testimony before the House of Commons Standing Committee on Industry, Science and Technology.
“We were so close to announcing a few days after we thought we had a handshake,” he said. “We were exchanging e-mails about a press release within a matter of days.”
LM Ericsson last month agreed to buy the business unit of Nortel that manufactures products for wireless carriers using code division multiple access (CDMA) technology. Ericsson’s agreement resulted from an auction July 24, which was preceded by a “stalking horse” bid from Nokia Siemens Networks in June.
Nortel is trying to sell its business units and has been operating under bankruptcy protection since Jan. 14.
The emergency hearing Friday of the parliamentary committee was prompted by concerns from RIM officials and politicians including Liberal Leader Michael Ignatieff and Ontario Finance Minister Dwight Duncan.
After Nokia Siemens Networks presented its bid, Waterloo, Ont.-based RIM complained it was effectively shut out of the auction process, and called on the federal government to review the sale. On July 20, RIM stated in a press release “the loss of Canadian ownership of Nortel’s CDMA and Long Term Evolution businesses may significantly, adversely affect national interests, with potential national security implications ….”
But Nortel officials testified Friday the LTE patents will not be transferred to Ericsson. Instead, Ericsson would get the right to use the technology in exchange for paying Nortel licensing fees.
Lazaridis said RIM “came very close to completing” discussions to buy LTE patents before January.
“We were surprise by the bankruptcy announcement” but continued working with Nortel and “expanded the scope” of the purchase, he said.
But the stalking horse agreement resulting from Nokia Siemens’ offer only included rights to licence LTE patents, not to acquire them. This, Lazaridis said, would not have been a good deal for RIM because it wanted to acquire the LTE patents.
“When we felt we had an agreement,” he said. “That’s when we were informed (Nortel was) pursuing other agreements with other companies.”
In later testimony Friday, Ericsson officials said their license is non-exclusive.
“Nortel is free to licence them to as many other (firms) as it wants,” said Ericsson Canada lawyer Richard Corley.
Lazaridis testified that RIM was effectively locked out of the bidding process last month because in order to bid for the carrier wireless assets, it would have to sign a non-disclosure agreement, which included a stipulation that RIM not try to acquire other assets within a year.
“That made no sense” given the company was in liquidation, he said. “If you found a house that you discovered met all your needs… and you started working on a purchase sale agreement and then in the final hour you discovered the owner had given a lifetime lease to another party and given a sublet license to them for that property, then what benefit would there be for you to continue purchasing that house?”
But Ericsson officials testified their non-disclosure agreement did not include any stipulation preventing them from buying other Nortel assets within a year.
“We know it was not a condition of the bid,” Corley said. “If any party felt that there was any problem with the conditions you … can raise those concerns with the court and have the court address it.” He added some companies did persuade the court to change the bidding process.
“It’s very clear there is a protocol for doing this and it’s not through the media,” he said.
One analyst told Network World Canada he agreed.
“If they weren’t happy they should have tried to bid early, before Nokia Siemens Networks,” said Ronald Gruia, program leader for emerging telecoms at Frost & Sullivan. “If they had bid before NSN they wouldn’t have had this problem.”
Committee member Mike Lake, the Conservative Member of Parliament for Edmonton—Mill Woods—Beaumont, asked Lazaridis if RIM considered legal action against Nortel.
“We did consider it,” Lazaridis said, adding he needs to be careful in making his comments. “We haven’t finished evaluating all our options to date.”
In earlier testimony, a Nortel official said RIM could have bid had they wanted to.
“The standard (non-disclosure agreement) that we had others sign like Ericsson and Nokia Siemens Networks and MatlinPatterson … was used for RIM,” said George Riedel, chief strategy officer.
Nortel Lawyer Derrick Tay said the bidding process actually was changed due to a request from MatlinPatterson, a New York-based investment firm with about US$400 million in Nortel bonds, which offered US$725 million in July for the unit that Ericsson is buying.
“That option was always open to anyone who had trouble with the process,” Tay said.