Last year, Google was drooling over the auctioning of bankrupt Nortel's treasure trove of 6,000 patents and made the opening offer for $900 million. That started a bidding war that ended up with the search giant clutching at air while a consortium made up of Apple
Rockstar Bidco was what the consortium was called at that time, and it transferred ownership of one-third of those patents to the group's member companies. The other 4,000 patents became the property of what is now known as Rockstar Consortium, an entity still funded by most of its founding members.
Why didn't Apple et al. keep the whole enchilada of patents for themselves? "[P]lausible deniability," attorney Thomas Ewing told Wired's Robert McMillan. The Rockstar members can sue other companies through Rockstar for patent infringements but cannot be countersued because, says Ewing, "They can say with a straight face: 'They're [Rockstar Consortium] an independent company. We don't control them.'" And because of its independent nature, Rockstar can even threaten customers of its member companies!
Patent infringements everywhere
Rockstar's only purpose in life is to find infringements of the patents it owns and then to seek licensing fees for the use of that technology. The company does employ an engineering staff -- along with its team of lawyers -- but the engineers' job is not to actually produce something tangible. It is to dig deeply into the innards of smartphones, tablets, and other high-tech devices, searching for anything that may indicate some patent trespassing.
Those engineers don't have to look to far. "Pretty much anybody out there is infringing," Rockstar CEO John Veschi told Wired. "It would be hard to envision that there are high-tech companies out there that don't use some of the patents in our portfolio."
As for Google, that Nortel loss may have been the motivation for its $12.5 billion bid for Motorola Mobility last August. With rumors swirling then that Microsoft was in the hunt, too, Google wasn't going to take any chances with Motorola's cache of patents.
A patent to print money
If you think patent fees are just small potatoes, think again. Qualcomm
One of the reasons Nortel disappeared into the Canadian wilderness, says Veschi, a former Nortel employee, is that it didn't take advantage of the licensing opportunities it had with its huge portfolio of high quality patents.
Size 15s
Even though it has yet to actually sue for patent infringement, there are probably a number of companies waiting for Rockstar's other big shoe to drop. That shoe may be LTE, or Long Term Evolution, that much-bandied-about buzzword used in almost every mobile carrier's advertising. It's the technology that comes closest to the 4G mobile communications standard for high-speed mobile technology, and Nortel held patents -- now held by Rockstar -- that are needed to make LTE work.
With its large portfolio of quality patents and its powerful pedigree of patron companies like Apple, Rockstar is not your garden-variety patent bottom feeder (a.k.a patent troll). Also unusual for a company whose main concern is to profit only from patents is the makeup of its staff. Out of 32 employees, 25 are former Nortel workers. So it is highly likely that the payoff from Nortel's patents may also include a bit of payback.
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