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The Canadian government may seek to review the $4.5 billion US auction sale of patents belonging to bankrupt Nortel Networks under a law governing foreign investment in Canada.
A consortium of technology companies including Apple, Microsoft and Research In Motion won an auction last week to buy more than 6,000 approved and pending patents from the former telecom giant.
Under the Investment Canada Act, the federal government must review any foreign investment or purchase of Canadian assets worth $312 million or more. It can reject transactions that do not provide a "net benefit" to Canada.
A statement sent to some Canadian reporters early on Wednesday said that Industry Minister Christian Paradis is asking his officials to determine whether the law applies to the Nortel assets.
Officials later declined to comment.
The government blocked Anglo-Australian miner BHP Billiton's $39 billion US takeover offer for Canada's Potash Corp. last year, just the second time a foreign takeover has been stopped since the investment review act came into effect in 1985.
But in the case of Nortel, which filed for bankruptcy protection in January 2009, the patent sale may escape scrutiny because the book value of the assets could be much less than the auction price.
"In this particular case...the book value could be more nominal than substantive," said Douglas New at law firm Faskin Martineau.
"Regardless of what someone is willing to pay for them, even if they're paying in the billions of dollars, one still has to look to see what the book value of those assets is ... and if it's under the $312 million Cdn threshold, then it's not going to be subject to review by the minister."
The government decided not to launch a review of Ericsson's $1.13 billion US purchase of Nortel's wireless assets in September 2009, saying the book value of those assets was well below the act's threshold.
BlackBerry maker RIM had opposed that deal, which gave Ericsson licenses to Nortel's wireless patents but not outright ownership.
Ericsson, along with Sony and EMC, was also part of the consortium that outbid Google and Intel for Nortel's patents last week.
The sale still needs to be approved by U.S. and Canadian courts. The deadline to object to the patent sale with the Delaware bankruptcy court overseeing Nortel's insolvency is close of business on Wednesday.