Over the past year, Alcatel-Lucent has explored a number of options with regards to monetizing its patent portfolio. In February 2012, ALU signed a deal with RPX Corporation, whereby RPX would offer ALU’s patent portfolio to RPX’s member-clients. This fact is important as RPX did not serve a general broker which reached out to the telecom community as a whole, but only accessed its membership pool for potential licensing deals.
The venture was estimated to bring revenues of 1 billion euros in 2012. However, in September, ALU announced that it was re-evaluating its partnership with RPX after the deal had failed to deliver any significant revenues.
There is little clarity as to why the deal may have fell short of expectations. One possibility is the lack of companies willing to pay for licenses on ALU’s wireless-related patents, which make up about 25% of ALU’s total US patent portfolio.
A major incentive to acquiring wireless-related patents, given the highly litigious telecom space, is the ability to offensively enforce them against others. Under the RPX model, its members cannot enforce patents outright, but can only use licensed patents as a counterclaim against any non-members who initiate litigation.
According to a report by Tangible IP, RPX has over 100 members, a full list that they identified can be found here. Out of its members, we identified Broadcom, Cisco, Google, Intel, IBM, LG, Qualcomm, Samsung, Verizon, Microsoft, RIM, Sony, Nokia, NEC, and Ericsson as the most likely licensees of ALU’s patents.
Of these companies, Google is fresh on the heels of its 2011 acquisition of Motorola Mobility’s immense patent portfolio that contained significant wireless technologies.
Microsoft, RIM, Sony, and Ericsson were part of the Rockstar Bidco consortium which acquired Nortel’s patents, also in 2011.
Nokia and NEC are part of a 2008 patent pool with ALU that includes LTE /3G-related patents.
Thus, out of its members who we believe may have been the most likely licensees, Google, Microsoft, RIM, Sony, Ericsson, Nokia, and NEC already have shored up their wireless patent holdings, or are already part of a patent pool which may afford them similar rights as any potential ALU-RPX license deal would.
The same thinking applies to Apple and EMC, other members of the Rockstar Bidco, as well as NextWave Wireless and Siemens, members of the 2008 ALU LTE/3G patent pool.
In October, Via Licensing assembled a LTE patent pool which includes AT&T, Bosch, Clearwire, Deutsche Telecom, DirecTV, KKDI, NTT DoCoMo, Panasonic, Philips, SK Telecom, Telecom Italia, Telefonica, and ZTE. A full list of the Via Licensing patent pool members can be found here. In addition, the Via Licensing patent pool includes RPX members Hewlett-Packard, LG, Samsung, Ericsson, Nokia, NEC, Microsoft, and Sony.
The diagram below shows the relationships among major telecom players involved in wireless-specific patent pools, RPX membership, and Rockstar Bidco:
The RPX approach to patent management is certainly innovative and has its benefits. Yet the significant overlaps among patent pools which provide joint-licenses to their members, as well as membership in RPX, might limit the desire for these companies to enter into additional defensive licenses for the ALU patents.
ALU now faces increasing pressure to generate patent-based revenue. One possible avenue for ALU may be to increase its enforcement efforts, and target potential infringers as licensees, rather than blindly offer licenses through RPX. In the event that settlement/licensing deals are not struck, ALU would have to sue these potential infringers and seek damages in court.
Earlier this week, ALU announced a $2.1 billion financing package from Goldman Sachs and Credit Suisse. This financing may help ALU buy time; time that could be used to assert its patents in courts.
While litigation is an often exhaustive, expensive exercise, the very situation that RPX membership seeks to avoid, recent patent litigation awards and settlements have shown that such a route can be fairly lucrative, and a few significant litigation victories could jump-start future licensing deals for ALU.