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Where most of Nortel's $4.5B patent collection ended up

It's been nearly a year since telecomm giant Nortel sold off its patent portfolio, and its buyers have been quick to turn it into a business.

When Apple, Microsoft and four other technology companies spent $4.5 billion on the patent collection of bankrupt telecommunications giant Nortel nearly a year ago, the big question was where all that intellectual property would end up.

Wired's Robert McMillan today clears that up in a feature about Rockstar Bidco, the consortium comprising Apple, EMC, Ericsson, Microsoft, Research In Motion, and Sony, which successfully beat out a team consisting of Google and Intel for the collection last June.

The company, which now goes simply by the name of Rockstar, has control of 4,000 of the 6,000 patents and patent applications originally purchased as part of the Nortel sale. And according to McMillan, its new role is to continuously investigate whether anyone's infringing on the technology:

Called the Rockstar Consortium, the 32-person outfit has a single-minded mission: It examines successful products, like routers and smartphones, and it tries to find proof that these products infringe on a portfolio of over 4,000 technology patents once owned by one of the world's largest telecommunications companies.

When an infringing element is found, Rockstar then seeks out a licensing deal with the device-maker's company. And that's kept the company busy, McMillan says, leading to such requests with "as many as 100 potential licensees" during the past two months.

Part of that is due to the depth of Nortel's catalog, which included patents and patent applications for wireless, wireless 4G, data networking, optical, voice, Internet, and semiconductor technologies. Those patents go far beyond the technologies the company was using in its products, which is no mistake Nortel's former technical manager Gillian McColgan told Wired.

"A large focus of our patenting efforts had been around in the pre-bankruptcy era, had been trying to identify what our competitors might do, and laying down inventions in those spaces to protect ourselves," McColgan -- who now works for Rockstar -- told Wired. "We ended up with a large portfolio of patents that are directed toward products and areas of technology that our competitors were working in, where we didn't necessarily have products ourselves."

The need for companies to have a so-called "war chest" of patents has become an increasingly important part of doing business. Mobile devices in particular have become the latest target of patent litigation, due to their combination of features that may have previously been available only in standalone electronics.

Yet as McMillan notes, the patents that Rockstar manages are not owned by any one of the companies that bought it. Instead it's an operation that is one step removed, that can act without its owners names attached.

Toronto-based Nortel filed for Chapter 11 bankruptcy protection in June 2009. At its peak in the 1990s, the telecommunications company was worth $250 billion, and had more than 90,000 employees. The company was hit hard by the credit crunch, and struggled to get back in form after the economic downturn in 2001 and 2002.

After deciding to sell off its business, Nortel's collection of intellectual property became a highly sought-after catch for companies in need of bolstering their own portfolios. Last April, Google pledged $900 million in cash to buy the IP portfolio, effectively kicking off an arms war for other companies to go higher, which it did. The closing price of $4.5 billion was later discovered to be led by Apple, which staked $2.6 billion in the sale.

Rockstar joins the likes of Intellectual Ventures, a Washington-based company started in 2000 by former Microsoft CTO Nathan Myhrvold that's made a business out of patents. Last week the company announced that with Nvidia, it had purchased some 500 patents covering LTE, 3G, and 4G technologies from a company called IPWireless.