Rockstar sale of patents latest sign of cooling in smartphone litigation

Rockstar Consortium, the Apple-backed company that bid successfully for the patents of bankrupt Nortel Networks, has agreed to sell more than 4,000 of these patents to RPX, a company in San Francisco that helps reduce the risk of patent litigation for its clients.

RPX Clearinghouse, a RPX subsidiary, expects to recover most of its investment from simultaneously licensing the portfolio to more than 30 technology companies, including Cisco Systems and Google, thus holding out the possibility that a number of patent infringement lawsuits by Rockstar can come to an end.

Cisco, one of the companies involved in a lawsuit over the Nortel patents, described the deal as a "victory for common sense."

"This step should also send a strong message to companies who toy with the idea of 'monetizing' their patent portfolios through transactions with private equity and non-practicing-entities, or by shaking down other industry participants: They will find themselves isolated," wrote Cisco's General Counsel Mark Chandler in a blog post on Tuesday.

Backed by Microsoft, Apple, BlackBerry, Ericsson and Sony, Rockstar acquired Nortel's patents for US$4.5 billion after outbidding Google in 2011.

Rockstar's owners divided 2,000 patents among themselves, and under the deal announced Tuesday, RPX is acquiring the balance patents, which it will pay for largely from license payments for the patents by the syndicate of over 30 companies. RPX is paying about $900 million for the patents, according to reports.

Upon closing of the deal, the companies will receive non-exclusive licenses to the Rockstar patents, and RPX will also make the patents available for license to all other interested companies under fair, reasonable, and non-discriminatory (FRAND) terms.

In October last year, Rockstar sued Google and some of its Android partners including Samsung Electronics for alleged infringement of its patents.

Last month, Rockstar said in a filing in the U.S. District Court for the Eastern District of Texas, Marshall division that a binding term sheet had been executed that "settles, in principle, all matters in controversy between the parties" in the patent infringement dispute between it and Google. The terms of the settlement were not disclosed. A term sheet is an outline of an agreement that could later become a detailed legal document.

The settlement between Google and Rockstar suggests a general winding down of patent disputes, particularly in the smartphone business. In May, Apple and Google agreed to drop all current patent infringement disputes between the two companies, while Cisco had recently indicated that a settlement with Rockstar was imminent.

On Tuesday, Cisco said it had already taken a financial charge in its first quarter of fiscal year 2015 based on the expected resolution of the Rockstar-associated litigation, so there was no financial impact to the company as a result of the new deal.

Samsung and Apple, however, continue to butt heads in patent disputes in a district court in California, though the companies have agreed to end litigation for patent infringement outside the U.S.

"We joined Rockstar to ensure that both Microsoft and our industry would have broad access to the Nortel patent portfolio, and we're pleased to have accomplished that goal through this sale and our valuable license to the patents being sold," said Erich Andersen, vice president and deputy general counsel of Microsoft, in a statement.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com