Last week's faceoff between Google chief legal officer David Drummond and two Microsoft execs was quite a spectacle. Google emerged from its cone of silence to accuse Apple and Microsoft of teaming up to destroy Android by leading an alliance that last month ponied up $4.5 billion for Nortel's intellectual property. Microsoft responded with a revelation that seemed to undermine Google's argument. The blog posts and tweets richoceted around the Internet like misfired bullets. Yet Google raised a real issue that was left in the shadows by the fireworks: How can the Justice Department bless the Nortel sale when it previously objected to Microsoft and Apple's purchase of a much smaller patent portfolio?
First, though, the fireworks. Drummond lit the fuse last Wednesday with a blog post complaining about Apple and Microsoft teaming up to buy the Nortel patents. "Microsoft and Apple have always been at each other's throats, so when they get into bed together you have to start wondering what's going on," Drummond wrote. His interpretation: Microsoft and Apple are trying to kill Android. "Instead of competing by building new features or devices, they are fighting through [patent] litigation," Drummond blogged.
To bolster his point, Drummond pointed back to December 2010, when Microsoft and Apple (along with Oracle and EMC) formed a shell company called CPTN Holdings to buy 882 patents from Novell for $442 million. Drummond said the Novell deal, along with the Nortel acquisition, was part of "a hostile, organized campaign against Android by Microsoft, Oracle, Apple and other companies, waged through bogus patents."
Oh yeah? said Microsoft GC Brad Smith, via his Twitter account. Then why did Microsoft and Apple invite Google to join the group that bought the Novell patents? "Google says we bought Novell patents to keep them from Google," the Smith tweet said. "Really? We asked them to bid jointly with us. They said no." Microsoft chief communications officer Frank Shaw elaborated on Smith's tweet through his Twitter account. Shaw linked to Google GC Kent Walker's letter declining to team up with Microsoft for the Novell IP, then added commentary: "Why? BECAUSE they wanted to buy something that they could use to assert against someone else. SO partnering with others & reducing patent liability across industry is not something they wanted to help do."
Drummond, meanwhile, added on to his original blog post. Microsoft's invitation to join the Novell consortium, he said, was a ploy to head off any attempt by Google to acquire and assert the Novell patents. "Making sure that we would be unable to assert these patents to defend Android - and having us pay for the privilege - must have seemed like an ingenious strategy to them. We didn't fall for it."
Drummond also repeated a point from his first post: The Justice Department forced the Microsoft-led consortium to modify the Novell patent deal, and is reportedly giving similar scrutiny to the Nortel sale. The Google lawyer's implication: Microsoft, Apple, and their Nortel partners aren't going to get away with this deal.
So is he right? It's extremely likely that the DOJ's antitrust division is, in fact, looking at the Nortel sale, though a Justice Department spokesperson declined my request for comment. The Hart-Scott-Rodino Act requires buyers and sellers in almost every deal valued at more than $66 million to get clearance from the antitrust division. The Nortel patent consortium agreed to put up $4.5 billion for Nortel's intellectual property. That and the size of the participants in the consortium pretty much guarantees Hart-Scott-Rodino review. And the newly-appointed acting head of the division, Sharis Pozen, led the Novell investigation last winter, so she quite clearly takes patent matters seriously.
DOJ and German regulators forced some pretty big changes to the Novell patent acquisition. After a three-month investigation, a deal announced in April specified that Microsoft was not permitted to purchase any patents outright, but could license all of the Novell patents; EMC had to forego the purchase of 33 patents; all CPTN consortium members could acquire the patents subject to an open-source license and did not have the right to limit which patents would be available under that license. Open source software proponents cheered the DOJ's intervention. (Groklaw crowed, "Mighty Microsoft has struck out," and Linux Insider quoted a patent lawyer who called the DOJ changes "a true milestone.")
The Nortel patents obviously aren't the same as the Novell open-source IP, so we shouldn't assume DOJ will be as activist this time around. I called three of the lawyers who negotiated the Novell deal with the antitrust division to get some insight on the Nortel case. Cliff Aronson of Skadden, Arps, Slate, Meagher & Flom, who represented Novell, said he couldn't comment because he's involved in the Nortel matter. Daniel Wall of Latham & Watkins represented Oracle in the Novell negotiations; he declined comment. Steven Holley of Sullivan & Cromwell, Microsoft's counsel in Novell, didn't respond to my e-mail and phone messages.
(Reporting by Alison Frankel)