WILMINGTON — Nortel’s warring creditors will not be the only ones focused on a trial to divide the more than $7bn remaining after the Canadian telecom giant was liquidated.
Microsoft’s lawyers will be trying to guard secrets surrounding more than 6,000 patents it teamed up with Apple and Sony to buy for $4.5bn.
In the trial, set to start on Tuesday, US, Canadian and UK creditors will fight about how to divide cash raised through auctions after the 2009 bankruptcy of what was once North America’s largest telephone-equipment maker.
Nortel put its units under the jurisdiction of US, European and Canadian courts.
Creditors have been unable to resolve their differences after more than a year of talks and litigation, with the $4.5bn raised in the patent sale a sticking point.
"The US-Canada fight on the patents will be the main part of the trial," said Kevin Starke, a senior analyst with CRT Capital Group.
Canadian creditors, who include Nortel’s pension system, argued that because the company was based in Ontario and owned the patents, it deserves the cash paid for them by the technology company group, according to Mr Starke. However, US creditors, including bondholders seeking full interest payments, submitted that US businesses deserve the money because they hold the patent’s licenses. Judges in Wilmington, Delaware, and Toronto will preside over the video-linked proceedings. The tech companies said they fear secrets may leak during the trial and want the court to shield information about, among other things, licence agreements and potential litigation targets.
About 1,000 of the documents which may be used may contain confidential information and could become part of the public record when they are presented to witnesses. The patent holders also want to review other documents, which may be safe to publicly disclose, before they are introduced. The creditors have said that without clear rules, the trial could be disrupted by the need to keep so many documents secret.
US bankruptcy Judge Kevin Gross has agreed to allow the blacking out of sensitive material, but with so many documents involved, decisions on what to keep secret may have to be made while court is in session.
Lawyers for Rockstar Consortium, the joint venture Microsoft, Apple and Sony formed to buy the patents in 2011, will follow the trial with Ericsson, which bought Nortel’s wireless unit for $1bn.
Mr Gross said he would defer to Microsoft and the other companies on the secrecy of certain documents. Anyone challenging the need for secrecy would have to show why a document should be made public.
"We not only bought those patents and those assets, we also bought a lot of other information that is valuable in the marketplace," Stephen J Shimshak, an attorney for Ericsson, said at a pretrial hearing last week.
Nortel filed for bankruptcy after losing almost $7bn since 2005. At its height in 2000, it reported $30bn in annual revenue, had a market capitalisation of $250bn and employed almost 93,000 people, the company said in court papers.