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Google to Get $25 Million Breakup Fee If Rival Wins Nortel Bid

Google Inc. will be paid a $25 million breakup fee if another bidder wins a proposed auction for bankrupt Nortel Networks Corp.’s patent portfolio, according to court papers.

Google agreed to be the initial bidder with a cash offer of $900 million at the proposed auction, which Toronto-based Nortel will seek to hold June 20 at the New York office of its bankruptcy law firm, Cleary Gottlieb Steen & Hamilton.

The proposed breakup fee and other concessions were necessary for Google “to continue to participate in the auction process,” Nortel said in court papers filed yesterday in U.S. Bankruptcy Court in Wilmington, Delaware. Google is also guaranteed repayment of as much as $4 million in expenses.

Google, owner of the world’s most popular search engine, is moving into areas such as mobile and desktop operating systems to broaden sales, a strategy that has spurred patent lawsuits from companies including Oracle Corp.

The planned sale, which includes about 6,000 patents and patent applications, must be approved by the judges overseeing Nortel’s bankruptcy cases in the U.S. and Canada.

The patent portfolio is the last significant asset the company has to sell. Since filing bankruptcy in the U.S., Canada and the U.K., Nortel has sold almost all of its businesses, raising about $3 billion to distribute to creditors. Creditors of the company’s main U.S. unit, Nortel Networks, claimed they were owed $16.3 billion, according to bankruptcy court documents.

To beat Mountain View, California-based Google, any competitor must offer at least $29 million more than the company’s initial offer. Thereafter each bid must be at least $5 million more than the last offer, according to the proposed bidding rules.

The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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