It goes back to March 2006, when BlackBerry phone maker RIM agreed to pay a whopping $612.5 million to settle a mobile email patent infringement case with patent-holding company NTP. This comes to $6 for each BlackBerry ever sold. So-called patent trolls, those that own patents but don’t sell products or services, are a pain in the side of those that do.

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But Yahoo isn’t the only aging Web giant with a big basket of patents it thinks it can turn into money. AOL also has a portfolio of 700 to 800 “really important” patents, CEO Tim Armstrong told Wall Street this morning.

“You should assume we understand that portfolio, and assume we have a strategy on it,” he told the audience at a Barclays investor conference.

Like what? No details there. But he did draw a parallel with the Nortel patents that will sell for $4.5 billion to a coalition that inclues Apple and Microsoft — “foundational patents for the Internet” that haven’t been on the market before. They’re like “beachfront property in East Hampton,” Armstrong said. “I don’t know — I don’t go to the Hamptons.”

Armstrong said he made a point of wresting the patents from Time Warner when AOL spun off a few years ago, and that the company started taking a close look at them back in September. No mention of the proxy fight recently launched by Starboard Value, which says that AOL’s patents “could produce in excess of $1 billion of licensing income if appropriately harvested and monetized.”

Using seven passwords stolen from top Nortel executives, including the chief executive, the hackers — who appeared to be working in China — penetrated Nortel’s computers at least as far back as 2000 and over the years downloaded technical papers, research-and-development reports, business plans, employee emails and other documents, according to Brian Shields, a former 19-year Nortel veteran who led an internal investigation.

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11:39 am: A few introductory remarks, and Ina Fried welcomes Roese to the AsiaD stage.

Ina Fried: Hi again, everyone. I’m very excited that our next speaker is John Roese of Huawei. Huawei, for those of you who don’t know — I’m sure everyone in this room does — is, you know, a huge Chinese networking giant involved in all kinds of areas, from making devices, making the networks that devices run on, and has quietly, over the last many years, amassed just a huge talent pool, not just here in Asia, but also in the United States. And John Roese oversees the U.S. R&D arm, which I actually didn’t realize is composed of as many thousands of engineers as it is. John also has an interesting career as CEO of Nortel, and several other technology companies before that. So, without further ado, John Roese.

Maybe, I think, John, the most helpful thing would be to talk first a little bit just about Huawei and what are the businesses it’s in.

John Roese: Most importantly, everybody knows that Huawei is a telecom company selling things to carriers. But this year the company has gone through a complete transformation to become an ICT company, and it’s based on the premise that in the future, most problems will not be solved purely by the consumer, the carrier, or the enterprise ecosystem. You actually have to combine the technologies from them to solve problems.

And so while we had a big carrier business and continue to be currently the second-largest carrier company in the world, in terms of equipment suppliers we quietly have emerged as a consumer company with a multibillion dollar consumer company in the handset business, and now have entered the market as an enterprise player with … about $4 billion in enterprise sales, which makes us probably the second or third largest in the world.

So the company is redefining itself on a premise that the future is not about distinct silos of technology, but how you put them together in a coherent way to actually solve more complex problems in this next generation of ICT.

Ina Fried: So everything’s all related, but let’s break it into silos for a second. What are the different products you guys make? You have networking — both, I think, wired and wireless — although carriers are certainly what you’re best known for. You guys make phones and tablets which have been less in the U.S. but starting to show up first, I think, through smaller carriers and now through some of the major carriers. What other kinds of products do you make?

John Roese: To put it into context, my role in the U.S., I’m responsible for advanced technology across all of the business lines. And I kind of joke with people that, in just my organization, you can go from dealing with people developing photovoltaic technology, to cloud technology, to next-generation cellular technology, to enterprise switches and routers, to core optical networks, to handsets and tablets and smartphones. It’s really the entire spectrum, and it’s probably one of the broadest toolkits of any company in the industry, in terms of providing the communication infrastructure for — everything. It’s a strange answer, but if there’s a way to communicate, there is probably Huawei technology involved in that communication ecosystem.

Ina Fried: And let’s talk about the organization you oversee. First of all, explain to people the scale. Because I certainly didn’t have an appreciation for just how many people Huawei had in the U.S. And talk about what they’re doing.

John Roese: So, obviously, over the years Huawei has gone from out-executing a lot of people in front of us to now out-innovating and being the leader in many segments. We’re now the market share leader and the innovation leader. And as part of that, we realized we had to operate globally. We had to create a global ecosystem of innovation. The biggest change in that was this conscious decision to expand our innovation organization worldwide.

So my charter was to come in and essentially scale the North American organization from a few hundred people to well over a thousand people now, that are all chief scientists, chief technology officers. The average seniority in my organization, from an engineering perspective, is probably 25 to 30 years in the industry, these deep, deep experts that, quite frankly, have created many of the industries that we’re dealing with, in terms of technology. So that thousand-plus people that’s emerged over the last year is the tip of an arrow that, behind it, is today approaching almost 60,000 engineers around the world, many of them in India and Europe, and a huge portion of them in Shenzhen, Beijing and other provinces in China.

Ina Fried: So, 60,000 engineers — some huge percentage of the company’s overall workforce — are actually engineers.

John Roese: Absolutely. As a technical guy, and having been an executive of many companies, one of the things that attracted me to Huawei was it’s still a very technical company. Almost 50 percent of the company is R&D. There are very few companies that have this kind of emphasis on the development of technology, as opposed to other aspects of the business.

Ina Fried: And how did you build this workforce in the U.S.? You’re in many sites in the U.S. and Canada; um, from what I recall, you’ve basically cherry-picked some of the companies on the downturn and grew that way.

John Roese: I answered that question to some folks in the U.S. government; they asked the same question about how, isn’t it challenging to attract people? It was kind of an interesting conversation. I answered it, “One person at a time.” We candidly looked at where innovation was happening and tried to make sure that we had a presence close by, so we could tap into those ecosystems if you want to do advanced terminals, smartphones, tablets. A great place to do that is San Diego.

So we opened a big facility in San Diego. If you want to do cellular wireless — Chicago; Ottawa; Bridgewater, N.J. — great places to do that. Our biggest sites are actually in Santa Clara, where you have this — ecosystem where you can almost find any technology within about three miles of our facility. So it was a very conscious decision to say that there are clusters of intellect within the North American market, and instead of trying to assume that you can bring them to you, it was better for us to go to them and attract them into the organization.

Ina Fried: And I understand that you guys — your chief recruiter — you owe a big debt to Larry Ellison?

John Roese: Well, we actually kind of find it very useful when there’s mergers and acquisitions and consolidations. So when Sun and Oracle combined, we found a lot of people at Sun that basically wanted to rethink where they wanted to work. Sun is a fantastically innovative company, as is Oracle, but the cultures are different. So it was a great boon to us that we were able to be down the street, and be growing very rapidly, and have this idea where people could take their ideas and turn it into actual reality. By the way, we did the same thing up at Ottawa. When Nortel kind of disappeared, one of the things that happened very quickly, en masse, some of the top technical experts in Nortel just kind of walked across the street to a new facility while they opened, and joined the company.

Ina Fried: And that’s how you came to the company, right?

John Roese: Well, I was a little bit later than that. Actually, that team, most of them who worked for me came into Huawei, and then I was kind of off doing other things, and then as we decided to scale it, I guess they gave me a good reference and they say, “Well you should go attract this guy because we liked working for him, he built a good innovation culture and maybe can help you take it to the next level.”

Ina Fried: And talk about that: What was your thinking, how well did you know Huawei when they first approached you? I mean, obviously, some of your former workers were there. What were your concerns? What excited you about it?

John Roese: Well, I think most people, to quote my former neighbor up in Ottawa, the mayor of Ottawa — Larry O’Brien, at the time — he opened the R&D facility for us up there, and his comment was, “Huawei is the largest company I’ve never heard of.” And that was very common in our engagements. And for me personally, I knew about Huawei, I had competed with them, I even tested their technology to prove whether or not it worked and whether it was a real threat, and learned very quickly it was a very real threat to companies like Nortel. But for me personally, I had kind of checked out of the industry after Nortel. I said, four Fortune 500 CTO roles, it’s time to go do something else, I’ll go to that Ph.D. in cultural anthropology.

But then I started talking to Huawei. I saw some of my best and brightest people — people that were Nortel fellows — come into the company, and as I got talking to them, when I came over to SenJen, when I met with the management team, when I met with the folks that were running the company, what I realized is, this is one of those companies that actually truly values technology; understands that you have to invest heavily into it and was genuinely excited about, not what happened yesterday, but what was going to go in the future. For me, as a technologist — every technologist, any engineer — the most valuable thing you can do is take an idea and turn it into reality. It’s not about making money, it’s not about prestige, it’s about turning your ideas into reality. When I saw this engine here, and this desire to innovate into the future, it was just a complete no-brainer to join.

Ina Fried: Now, you talked about building your organization one person at a time, and part of the reason why Huawei has built its organization in the U.S. one person at a time is because the U.S. government won’t let you acquire just about anyone. You guys have tried a couple times. How challenging is that, in a technology industry that is largely built by acquisition? You came from Broadcom; they gobble up a dozen companies a year.

John Roese: No one will accuse government policy of preceding the technical ecosystems and industries. It usually is a couple generations behind. So the current status of our relationship with the U.S. government is really that we’re a bit out of sync. In most of the industries that we compete in right now, the industries have been highly globalized. If you wanted to build a wireless network today in the U.S., your choice of vendors would be, let’s see, a Swedish vendor, a Finnish vendor, a French vendor and two Chinese vendors. Those are the tier-ones. There’s no North American vendor that can build that for you. The last one was Nortel; it’s not there anymore.

So part of our challenge is educating the U.S. government, educating the politicians. And not just the U.S. — around the world — that we’re in a highly globalized environment, the innovation has shifted, the structure of the industry has shifted and there needs to be a rethinking of how public policy and governmental policy relates to understanding a technology and its application and networks.

Today we build the networks for 45 of the top 50 operators in the world. The remaining five, a chunk of them, happen to be in the U.S. And so we’re very patient. Candidly, we’re now engaging very heavily, we’re dispelling myths on a regular basis, and it does make my life a lot more difficult. In fact, some of the U.S. government people made that comment. They said, “We applaud what you’re doing because you’re hiring lots of people in the U.S.” And we’re exporting $6 billion of goods and services into our global supply chain out of the U.S., we’re a great corporate citizen. But we kind of have to get in sync between the public policy and the actual reality of the industry.

Ina Fried: And what do you think it is? Because, I mean, you mention all of your competitors are global, non-U.S. based companies, is it xenophobia, what is really fueling this fear, and are any of the concerns legitimate or are they all fear-based?

John Roese: Well, I think I would say none of the concerns are legitimate in the reality, but perception is sometimes reality in people’s minds. So the punch line is, some people still think the industry that we exist in is the Bell Labs and the Lucents of the past. So, again, we do have to educate them about this future. The second is an unknown. My comment about Larry O’Brien — I mean, the biggest company he’s never heard of. Well, if I went and polled people in Washington, every senator and congressman, and asked them, “Do you even know how to pronounce Huawei?” — the answer would be, probably not. So we have to engage.

There’s an interesting thing: It’s a $30 billion company; our definition of an emerging market is the United States. So when a U.S. company comes into China, there’s a big educational process to kind of convince people that the company is legitimate, it can provide goo technology, it can be a good partner. And so it’s really just a systematic process of getting them to understand the reality. It doesn’t hurt now that we have a highly globalized workforce, that we have a big presence in the U.S., that we’re not in front of them and dialoging and being present. But more important, the thing that will ultimately overcome this is innovation. There is — you can prevent or avoid certain companies, until the technology they develop is so far superior to what you have at your disposal currently, that it creates a competitive disadvantage. And we believe, given our investment in innovation, that we are almost at that point. In many places ,we are clearly out innovating our competitors, and it just is sound public policy to let the carrier infrastructure of the United States — or the terminal industry or the enterprise industry– use the best technology to solve the best problem, because the correlation between global development, economic advancement, user experience, is entirely tied to using the best technology.

If I told you you couldn’t use any state-of-the-art tablet because I didn’t like the country of origin, and you had to go back to using a typewriter, would you do it? Of course not. We’re not quite there yet, but I think that will occur.

Ina Fried: So I want to turn to one of the topics that’s near and dear to my heart — and certainly to much of the audience — which is this mobile revolution. You guys are playing in that in several areas. You’re building, as you mentioned, the gear that a lot of these networks run on. Perhaps not the ones that I get to use in the States, but a lot of the other networks that I use when I travel, as well as, increasingly, some of the devices. And one of the areas that Huawei and ZTE and a number of Asian companies are making huge influences, democratizing these smartphones. Can you talk about the world you guys see, with smartphones everywhere on the planet?

John Roese: Absolutely. We’ve been through this before. A long time ago, Huawei decided that cellular technology — mobility — should be everywhere. And at that time, most of the big players said it wasn’t cost effective to build cellular networks that could be deployed in sub-Saharan Africa or in the developing world. Huawei was one of the few companies that said, “No, no, no — we need to figure out how to do this.” The result was skipping of generations, massive penetration, and today we have a couple billion people sitting on our networks, which is a good step.

Now we’re in a different phase. The different phase is now that you have these mobile networks, there is still a bit of a have-and-have-not world, and that is the smartphone versus the feature phone. I think the day before yesterday somebody mentioned, “Would it be great if there was $100 smartphone, or something better than that”? Well, there is, we build them. In fact, in the U.S. right now, you could go purchase — there are commercials on television from some of the tier-two operators. They’re our customers that essentially are describing $29 Android smartphones, Huawei-branded, no contract, no commitment.

Ina Fried: Now, does that mean you’re building a phone that costs less than $29 to make?

John Roese: Well, the economics are slightly different and more complex, but clearly they’re in that strata of the sub-$100 smart phone. The advantage of that is, once you get rid of this concept of feature phone/smartphone, that everybody has a mobile broadband device, everybody has a media-capable device — think about the capability that can unlock. I mean, I think Vice President Gore mentioned this concept of five billion people on mobile networks, and less than one billion on smartphones. Well, as soon as everybody is on smartphones, every interesting piece of technology you saw here over the last couple of days is contingent on having an interface that can actually do media, can do data, can be fully interactive. There is a huge opportunity, and the democratization of smartphones — which is clearly our message — we are absolutely trying to make sure that wherever there is a mobile user, they are a fully featured mobile user. That has a huge, profound impact; not just on the mobile networks and the devices, but all of these very interesting, over-the-top applications, cloud services and other things that are contingent on a better terminal and a better mobile experience.

Ina Fried: That growth you mentioned is also contingent, of course, on having networks that can handle that capacity; having enough spectrum. How much time does your organization spend looking at solutions? It’s great to say, wouldn’t it be great if the whole world has smartphones. I think we’d have a problem if any country went to 100% penetration. Data networks are struggling today. How much of your time is spent looking at that issue, and what are some of the things you guys are looking at?

John Roese: A huge portion. I mean, the good news is, I did a calculation a couple of years ago to say, how well have we executed as an industry in improving the bandwidth efficiency of networks — and this was wireline networks. But over a 20-year period, we had improved the cost-per-bit ratio by 22 million to one. That’s a pretty good ratio, if you will. We are very good, as an industry, at figuring out ways to increase the available bandwidth. Now the challenge is, it gets a lot harder when you have to deal with laws of physics, when you deal with things like Shannon’s Law and channel bandwidth. And so we are spending a huge amount of time. Given the composition of my organizations and the people in the organizations I run, they’re all advanced technologists and they’re the place where we are exploring not just how to make it more spectrally efficient, but how do we architect the cellular network. Instead of having these big monster cell sites all over the place, move to heterogeneous networks that have multiple tiers and multiple devices and ways to access, different kinds of networks to interface with, spread the spectrum over multiple spectrum channels.

At the same time, we go and lobby very heavily to get the digital dividend, free up spectrum, increase spectrum. That’s a very precious commodity. But more importantly, think about ways to use that spectrum efficiently. Now, most people don’t understand that a lot of the inefficiency in the network is based on the way it’s designed, and the fact that things like the modulation rate degrades as you move away from the cell site. If you can fix that, then the efficient use of spectrum can improve dramatically. Those are the kinds of things that we keep working on.

I actually have a very high degree of confidence that, contrary to public belief, we’re going to run out of capacity on the cellular networks. I think our industry is actually quite good at figuring out ways, creative ways, of improving that cost per bit of the available spectrum or the available capacity of the network. Occasionally we hit a wall, but usually we figure out a way around it. We innovate, we come up with a new approach and we continue to provide that kind of foundational attribute, which is capacity for people to connect.

Ina Fried: I want to get to questions in just a second, so definitely be thinking of them. But since a lot of people don’t know Huawei, and don’t know what you guys do, take us through the labs. What are some of the coolest projects that you can talk about, that you guys are working on? What are the things that you could tell your cousin, and they’d be like, “Wow?”

John Roese: Yeah, absolutely. So, one of the most interesting ones that I’m really excited about is cloud. So everybody knows the term “cloud”; the problem is, it’s kind of cloudy — we don’t actually know what it really defines. But right now, there’s kind of two schools of thought about cloud. There’s this idea that cloud is just a virtualized data center, and it doesn’t really change much; it just makes things slightly more efficient. And then there’s this very disruptive model that people like Amazon and Google have been focused on, which is, let’s just rethink things like storage and compute and really change the economics so that we can kind of give storage away for free and make it up on advertising. So they had to really rethink how the world was created, in terms of some very foundational components like storage and compute.

So we have a huge amount of projects. I think today we have almost 2,500 engineers across Huawei working on cloud-based projects; which, by the way, is bigger than the total R&D staff of most of our competitors in many markets. But most importantly what we have to acknowledge is, the thing that we have to build is not just a minor iteration of the historical data center, but we have to actually take what people like Amazon and Google philosophically have created, which is a radical rethinking of storage and computing, and turn that into commercial offerings.

We are just about to start trialing and putting out technology to show some of these technologies. But imagine an environment where the cost of storage could be one-tenth what it is today. And you do that by delayering and stripping out a ton of technology so that it’s just very simple architecture, very well-architected and orchestrated. If you change the cost of storage fundamentally for a carrier or for a consumer, for an enterprise, what is the implication of that? Everything. You could change your business model; you can no longer worry about, you only get one gigabyte of storage for your email or don’t make those big files because I don’t have anywhere to put them or be concerned about the cost of those hard drives, or the backup is too complex. If you can get rid of all of that by just changing this fundamental component of the cost of storage, it cascades through every one of these ICT ecosystems. So we call that single cloud, it’s a piece of our overall cloud architecture; and, candidly, I think it’s going to be one of these very big disruptions in the overall industry. Beyond that, obviously we’re doing stuff in everything you could imagine, next-generation wireless. Imagine, if you’ve played with an LTE network today, it’s pretty exciting. A 30-millisecond round-trip time, a 20-30 megabit per second of realistic bandwidth; the theoreticals are much higher. The stuff we’re working on pushed the envelope up to hundreds of megabits or gigabits per second over the wireless environment.

Now, it’s hard to say what you do with that. But I have no doubt that creative people will find a very interesting thing to do with gigabit wireless.

Ina Fried: Really fast dropped calls.

John Roese: Well, it’s funny, I was just at MIT last week, and they were showing me holographic video. I asked them a simple question: How much bandwidth does this take? And they said, “Well, basically it’s the equivalent of a whole bunch of high-definition channels combined to create this three-dimensional, high-definition visualization.” So they were talking hundreds of megs or gigabits of capacity to do holographic video. We think holographs are kind of neat, and they’re interesting. I’ve heard it come up a couple times in the last couple of days. But to move that over a network, we’re going to have to rethink and redesign the networks, which might be one of those first applications, but even if that isn’t the one, I have no doubt people will figure out what to do with it.

Ina Fried: Even making Netflix cost-effective. I mean, their pure data shows that right now we’re not in that place where it’s really you can get Netflix for $7.99 a month, but the cost of delivering a movie is approaching that same rate.

Moving on now to the Q&A with the audience …

Q: On this topic of spectrum and bandwidth, we actually had Mr. Gore here mention that one of the main challenges that the networks are facing is video delivery, broadband delivery; this is definitely one of the drivers. And if that’s an issue not only over typical wired networks, it is only more an issue if every single one of us started to want to stream video or these other high-bandwidth applications over the networks. It’s a significant challenge, which as I understand it, faces two very serious walls, which you’ve alluded to. One is the physics itself. And the second is a political wall. As an example, in Europe, one of the issues is you have a lot of small countries and space; they have to divide the spectrum in ways that are actually very, very inefficient and leave very little spectrum for a given country. So my question is, is this actually really a technical problem, or is it more of a political problem that needs to be solved, that will allow us to get that kind of bandwidth necessary?

John Roese: Yeah, well it’s a great question. I mean, the bottom line is, yes, there’s clearly a political piece to the equation. If you carve up spectrum in funny ways, or you decide that it can only be used in certain ways — like frequency division duplexing versus time division duplexing — these create an unnatural burden. Spectrum is a spectrum; it’s just a segment of the airwaves. We’d like to see a little more rational spectrum policy. Clearly it’s improving, and people I think, now — definitely the FCC, and around the world — are really thinking about how to free up spectrum. But it just takes quite a long time to actually accomplish that. But don’t underestimate the technical problem. There is clearly a technical problem that needs to be solved. You cannot take a network that was historically designed to move very low-bit-rate voice calls, GSM and SMS, and suddenly assume it can be an ultrabroadband wireless delivery vehicle for high-definition video, without really rethinking not just how you do things like modulation on the cellular side, but also how you design the network. And so, that heterogenous networking model, which I think is where most of the action is going to be for the next several years, starts to say, well maybe we should redesign the way the network works. Instead of having one tier, let’s have two tiers, let’s have small cells, let’s spectrum up in the 5- and 6GHz range in coordination with 700 megahertz spectrum.

Imagine a device, five years from now, that’s always connected over a 700MHz channel. So it’s got long range, great building penetration, it’s kind of the control channel — that’s where the important stuff flows. But it’s seamlessly able to invoke additional radios when it’s nearby a small cell, that gives it 100MHz wide channel, 4×4 MIMO, so it has a gigabit of capacity potentially to consume video. So those are all theoretically possible. There are technologies that can be built that way, but the design of the network is very different. It means that now you have to start putting those small cells somewhere; you have to decide that it’s okay to put them on light poles or on building walls, and if we have to have a permitting process that says it takes six months and $10,000 per site to get the permit to hang something on a light pole that just is a small cell in the second tier, that’s just not going to work. So you’re absolutely right, both are important pieces of the equation, both are resolvable, but if you just solve one without the other, it probably isn’t going to get us there.

Q: I have a question about Huawei and potential market share and mindshare in the U.S. One thing that I found really disrupting recently was, Google has shifted Chromebooks with an allocation of Verizon data for free each month. And I think that model is — it’s an incredible model, and I think if you were to put it on lower in phones, you could get people to dig in to this data so that they would see the value of it and want to purchase it, but it’s hardly anywhere. I’m just wondering if you have tried this in any markets around the world, and if you think that this might be something that would be disruptive enough to get traction in America? Because there’s no one offering that.

Ina Fried: So the drug-dealer model — the first hit is free. [laughter]

John Roese: Yeah, we’d rather not use that analogy, but generally it’s not us that are going to create that model, in the sense that it’s the carrier that ultimately has to decide what makes economic sense. Now, the good news is that carriers are now more and more engaged with us saying — they used to think of Hauwei as kind of a supplier of technology that kind of kept the other suppliers honest. That’s when we were in the fast-follower mode. Now that we’re the innovator, the dialogue we’re having with customers is fascinating. So I think you’re on to something, and I think that there are markets where the carriers are looking for ways to increase the penetration rate. And I think now Huawei has an opportunity to actually describe new business models, and the carriers are much more willing to listen to us, because they view us more as an innovator. So I haven’t had that discussion especially, but I’m pretty much, on a weekly basis, sitting down with either CEOs or CTOs or the operators.So maybe the next one, I’ll bounce it off of them and see what they say. I think it’s a great idea, and there’s many other examples in the enterprise world where we’ve done that as an industry and it has worked really well. Get people excited.

Cloud storage is a great example. Give them the first 20 Gb, and see what happens. If they like it, they’ll buy more.That’s what Picasa does, that’s what many of these systems do. You’re absolutely right, it needs to be applied to other markets.

Q: I have a question about your intellectual property strategy. Traditionally, IP is still a little bit of a stigma over here, especially in China. But Huawei has a very impressive IP strategy, so I want to know how it is received internationally, and how it compares to when you were at other international companies.

John Roese: I think you’re absolutely right. The perception is that intellectual property isn’t important. Some companies historically — Huawei, seven or eight years ago — said, no, this is really important. And in the last couple of years we’ve been in the top five intellectual property producers in the world, in all industries — a couple of the years we were, I think, number two. Today we have about 50,000 patents PCTs and patent applications globally. So, my — to answer your question very briefly, compared to Western companies I’ve been CTO of, in fact the patent portfolio is larger and the discipline and desire to create it and the willingness to invest in it is absolutely higher in Huawei. They get it, they understand it and I think realize that intellectual property is a critical part of actually being able to compete in the global marketplace.

Q: It seems like on the one hand you have Moore’s law, giving us faster and faster devices capable of consuming bandwidth, and new business models springing up to accelerate that consumption. On the other hand, you have networks struggling to provide enough spectra. I’d like the answer of, well, technology is going to find a way, but do you think that a period of just real latency is almost inevitable at this point, and if not, do you see solutions coming from outside the network world, like smart flash to do caching, to smooth peak times?

John Roese: Absolutely. The solution to these problems will not be just more bandwidth in the network. That’s a great vehicle. I joke that I’ve been in this industry long enough that we go — we oscillate as an industry between finding really long-term solutions to problems by looking at the end-end ecosystem technically, to moments of time where suddenly the network provides more bandwidth, and we think that you can solve every problem by just throwing bandwidth at it. We’re right now approaching a point in wireless where we can’t just throw bandwidth at it. LT is going to give us a bit of a bump, but it’s a bit more time before we get to LT advanced, and in between there, we will have to get very creative on content management, caching, dynamic transcoding, the intelligence of the endpoint, multi-tiered topologies — those are not cellular problems. And so, you’re absolutely correct, which is great for Huawei, because we actually touch all of those, as opposed to only having one tool to solve the problem.

Q: And do you think that’s going to result in an inevitable period where there’s just going to be a lot of latency?

John Roese: I think it’s going to slow things down in certain markets and certain business models, where the assumption of unlimited bandwidth in all environments is true. But you look over the last 20 years, and it has always gone through those cycles. I’m an optimist, I’ve seen us work through them before. The technical work to solve it when you’re in those “periods of latency” is much more complex. And then eventually we have a breakthrough on bandwidth capacity and everybody kind of breathes a sigh of relief and rapid innovation occurs. And then we do it to ourselves again. It’s inevitable.

John Roese Session Photos

When Hewlett-Packard coughed up $1.2 billion for Palm last spring, the acquisition was widely viewed as a quick way for the company to capture a slice of the increasingly important mobile device market.

And while the launch of the Veer and the TouchPad proved that to be true, there was another reason as well: Palm’s intellectual property.

As former HP CEO Mark Hurd explained a few months after the acquisition: “We didn’t buy Palm to be in the smartphone business … we bought it for the IP.”

So, now that HP is getting out of the smartphone business and trying to figure out just what to do with the mobile OS it was once so excited about, what’s going to happen to that IP that Hurd was so hot on?

That’s unclear. Current HP CEO Léo Apotheker said Thursday that the company is considering all its strategic options. But, given the current environment, selling off the Palm patent portfolio is surely at the top of the list.

Consider: Nortel’s portfolio of more than 6,000 wireless patents recently sold for $4.5 billion, and earlier this week Google ponied up $12.5 billion for Motorola Mobility, citing the company’s patent portfolio as a key reason for the acquisition.

With that kind of money being thrown around for wireless IP, a Palm patent sale could be an easy way for HP to “extract value from webOS,” as Apotheker said.

As a mobile computing pioneer, Palm brought a strong patent portfolio to HP (among them one that seems to describe the smartphone itself: “Integrated Handheld Computing and Telephony System and Services”).

Anthony Mazzarella, CEO of PatentVest, once said the value of Palm’s IP was “along the same order of magnitude as Apple’s.”

Indeed, when Palm and Apple were first rubbing shoulders in the smartphone space, Palm was quick to rebut Apple’s smack talking by brandishing its IP. “Palm has a long history of innovation that is reflected in our products and robust patent portfolio and we have long been recognized for our fundamental patents in the mobile space,” the company said at the time. “If faced with legal action, we are confident that we have the tools necessary to defend ourselves.”

Notably, Apple never sued Palm, despite a long-running call-and-response spat over the Pre’s iTunes syncing feature. And the company’s hesitation to take its smaller rival to court could be viewed as an acknowledgement of the potency of Palm’s patents.

That said, if Palm’s IP is truly valuable, why didn’t the company use it to squeeze licensing fees out of others when it desperately needed the money? The high costs of litigation, perhaps?

In any event, it’s certainly possible that HP could turn a profit on Palm yet, via its patents. Although it’s difficult to gauge the value of the company’s IP, it is clear that mobile patents are worth a great deal these days.

Stanford Law School Fellow Stuart Soffer estimates that the patents sold in the Nortel auction and Google’s acquisition of Motorola Mobility are worth between $736,000 and $750,000 apiece.

If Palm’s patents are as fundamental to the mobile space as the company once claimed, HP could fetch a good price from the companies slugging it out in the smartphone space right now.

What a sad fate for Palm, though — a little like gutting a broken-down historic house to salvage the pricey copper pipes.

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As Google CEO Larry Page wrote in a blog post announcing the deal:

“Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”

Motorola, after all, holds what is said to be one of the strongest patent portfolios in the wireless industry with some 17,000 patents granted and another 7,500 pending across a wide range of technologies–2G, 3G, 4G LTE, and video compression and decompression. This would be one of the biggest patent purchases ever and provide Google with quite an arsenal, one that it may be able to use to indemnify its Android licensees outright. Certainly that’s the impression one gets from reading the canned quotes Google’s assembled from its Android partners (or wrote for them …).

“We welcome today’s news, which demonstrates Google’s deep commitment to defending Android, its partners, and the ecosystem.”
– J.K. Shin, President, Samsung, Mobile Communications Division

“I welcome Google’s commitment to defending Android and its partners.”
– Bert Nordberg, President & CEO, Sony Ericsson

“We welcome the news of today’s acquisition, which demonstrates that Google is deeply committed to defending Android, its partners, and the entire ecosystem.”
– Peter Chou, CEO, HTC Corp.

“We welcome Google‘s commitment to defending Android and its partners.”
– Jong-Seok Park, Ph.D, President & CEO, LG Electronics Mobile Communications Company

Notice a common theme here? It’s the phrase “commitment to defending Android and its partners” (during a call with Google execs this morning, it was the word “protect”). Which speaks to what this acquisition is really about: gaining a strong IP position in wireless from which to protect and defend the Android ecosystem against mounting legal challenges from a cabal of rivals Google claims is conspiring to hamstring the OS’s growth by buying up some of the mobile industry’s most valuable IP.

In July, Google lost a bidding war to buy up some 6000 patents from Nortel through which it hoped to achieve something similar. With this deal to acquire Motorola Mobility it’s managed something it believes is even better. The company’s patent portfolio is about 4 times larger than Nortel’s and it will be Google’s alone, not shared among members of a 6-company consortium.

In Google’s hands, Motorola Mobility’s patent portfolio could become a club with which to beat that cabal down and a deterrent to anyone else considering taking Google or one of its Android licensees to the mat. Recall that in October of 2010, Motorola sued Apple, claiming infringement of 18 patents related to wireless communication technologies, antenna design, and software application management, among other things.

As Motorola Mobility chairman and CEO Sanjay Jha said just last week, “We have a very large IP portfolio, and I think in the long term, as things settle down, you will see a meaningful difference in positions of many different Android players–both, in terms of avoidance of royalties, as well as collecting them. And that will make a big difference to people who have very strong IP positions.”

People like Google and its 39-plus Android OEMs.

“I think that we’ve seen some very aggressive licensing demands in the Android ecosystem,” Google Chief Legal counsel Dave Drummond said during a call today to discuss the Motorola deal. “And we think that having the patent portfolio will make sure that Android is open and vibrant, and the kind of platform that lots of companies can remain on.”

[Image credit: Patent chart courtesy Trip Chowdhry, Global Equities Research]

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After our grand tour of Asia last week — with stops in Korea and Japan — it seems like a perfect time to update the speaker list for our upcoming AsiaD conference in Hong Kong in October.

As Walt Mossberg and I said, we are trying to mix both U.S.-based speakers with a pan-Asian selection of speakers from across the region, and the new additions are just that.

For the international confab — this one will be held Oct. 19-21 — we’ve already announced a great lineup, including Alibaba’s Jack Ma; Google Android head Andy Rubin; Twitter inventor and product guru, as well as Square co-founder and CEO, Jack Dorsey; Nvidia founder and CEO Jen-Hsun Huang; and Asus Chairman Jonny Shih.

Now, to add to that terrific lineup:

Kazuo “Kaz” Hirai is widely considered the second in command at the consumer electronics giant Sony, in charge of its key computer entertainment division, as well as now serving as executive deputy president of the whole company. In that role, the dynamic exec is at the nexus of the Japanese company’s efforts around tablets, smartphones, gaming and more. As Sony struggles to reassert its dominance over the arena, Hirai will be a key player in that effort.

Bradley Horowitz — as head of product management for Google+, the search giant’s aggressive effort to break Facebook’s hammerlock on social networking — has a perfect perspective to talk about the fast-growing area and where it is going globally. With locally-based social companies springing up all over Asia, can Google establish one the whole world will use? It’s an important question and Horowitz’s job No. 1.

At Microsoft, Andy Lees is leading one of the software giant’s most important initiatives, as president of its Windows Phone division. His come-from-behind job includes mobile software and hardware, as well as its key partnership with Nokia. With Apple’s iPhone and Google’s Android far in the lead, Lees will need to win in markets globally, especially in Asia.

Peter Chernin is one of Hollywood’s top players and execs. The former top News Corp. exec is now a movie producer — his first effort, “Rise of the Planet of the Apes,” is a big hit. But he’s also been increasingly active in media investing in Asia of late, and has a lot to say about the global nature of entertainment in the digital age.

John Roese heads the North American R&D team for Huawei, the Chinese telecom giant making everything from heavy-duty gear for networks to mobile phones and tablets. The former CTO of Nortel, he’s heading up global development of Huawei’s cloud services for both businesses and consumers. Roese will also talk about the phenomenon of a Chinese-owned company emerging on the world technology stage.

Even in the midst of an economic downturn, there is no denying that it has been a golden time for Silicon Valley start-ups, which have enjoyed unprecedented growth and funding in the Web 2.0 era. But as they seek to expand beyond the U.S., a critical move for them all, we’ve assembled a panel of entrepreneurs to discuss it, including:

Brian Chesky is the CEO and co-founder of Airbnb, the popular online vacation rental site that recently got a huge dose of funding and an equally large amount of controversy. How Airbnb can take the company to the next level, including across the world, while dealing with the kinds of challenges the small management team has to face, will be an interesting topic for discussion.

After stints as president of Asia Pacific and Latin America operations at Google and co-founder of the online personal finance company Yodlee, Sukhinder Singh Cassidy is trying her hand at a small start-up again. She’ll talk about how the recently funded Joyus, a new premium video commerce site trying to pioneer a new way to shop online, plans to expand globally.

Finally, longtime tech exec David Goldberg is now running one of tech’s most successful start-ups at SurveyMonkey, the dominant online survey company. With stints as founder of music site Launch Media, which was bought by Yahoo, and as an Entrepreneur in Residence with Benchmark Capital, he is the perfect person to explain what it’s like being an entrepreneur today in Silicon Valley.

We have even more speakers for AsiaD we’ll be announcing in the coming weeks, so get ready for what’s next.

That’s the gist of a blustery and bitter blog post on the mobile IP wars penned by Google’s chief legal officer, Dave Drummond, who claims that a cabal of Google rivals is conspiring to hamstring Android’s growth by buying up some of the mobile industry’s most valuable IP. From the post:

They’re doing this by banding together to acquire Novell’s old patents (the “CPTN” group including Microsoft and Apple) and Nortel’s old patents (the “Rockstar” group including Microsoft and Apple), to make sure Google didn’t get them; seeking $15 licensing fees for every Android device; attempting to make it more expensive for phone manufacturers to license Android (which we provide free of charge) than Windows Mobile; and even suing Barnes & Noble, HTC, Motorola, and Samsung. Patents were meant to encourage innovation, but lately they are being used as a weapon to stop it.

A brazen takedown, particularly for Google, which to date has been reticent to call its rivals out in this way. Clearly, the company is taking a new tack here, framing the issue in its own way and, presumably, putting whatever lobbying and legal muscle it has into throwing out roadblocks. To wit, these few lines, also taken from Drummond’s post:

We’re encouraged that the Department of Justice forced the group I mentioned earlier to license the former Novell patents on fair terms, and that it’s looking into whether Microsoft and Apple acquired the Nortel patents for anti-competitive means.

I bet you are. Particularly since you’re facing antitrust inquiries into your own core businesses. And in the end, that may be another purpose of this post: To show regulators that Google isn’t always the unstoppable juggernaut it is portrayed to be. Sometimes it’s the victim, or it would like to be viewed that way, especially by the FTC and the tough-talking judge presiding over its patent infringement showdown with Oracle.

One last point: If the patents to which Google refers are “bogus,” why bother decrying them at all? Or, for that matter, bidding $Pi billion dollars for them in the first place?

A consortium of six companies last month paid $4.5 billion to acquire a portfolio of 6,000 patents auctioned by the bankrupt Canadian telecom equipment maker Nortel Networks, thwarting Google’s interest. The final amount, five times Google’s original $900 million “stalking horse” bid, stunned observers and raised concerns about how the consortium intended to use them.

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The patents could aid HTC, which is in the middle of a legal battle with Apple. It’s the latest in a string of moves in the mobile industry as key players look to bolster their intellectual property position in what has become a very litigious market.

The biggest prize in recent memory — the patent holdings of bankrupt Nortel Networks — was sold last week to a consortium of companies including Apple, Microsoft, Research In Motion and others. Their $4.5 billion winning bid kept the collection of 6,000 patents out of the hands of Google.

The S3 deal is expected to close before the end of the year, Via said.

“The transaction would allow Via to monetize a portion of its rich IP portfolio, yet retain its graphics capabilities to support the development and sale of its processors and chipsets,” Senior VP Tzu-Mu Lin said in a statement.

Meanwhile, elsewhere in the patent litigation world, Microsoft continues to convince some of the folks selling Android devices to pay for a license to Microsoft’s mobile patents. In the past week, Redmond has separately announced four deals with smaller Android product makers. A pact with Wistron was announced on Tuesday, while last week the company announced agreements with Onkyo, Velocity Micro and General Dynamics Itronix.

HTC, which makes both Android and Windows Phone-based devices, was the first big name company to announce an Android-related licensing deal with Microsoft, in a pact announced last year.

So how is the company feeling after losing the auction to a consortium including several rivals that have Android in their legal crosshairs?

Well, not too good, thanks for asking.

“This outcome is disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition,” Google Senior VP and General Counsel Kent Walker said in a statement provided to AllThingsD. “We will keep working to reduce the current flood of patent litigation that hurts both innovators and consumers.”

The patents sold for $4.5 billion to a group made up of Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony. The collection of more than 6,000 patents covers a range of technologies, including lots in wireless and networking and some related to 4G wireless technology.

Google and its Android partners are, of course, finding themselves entwined in a host of legal battles. Apple is suing Taiwanese phone maker HTC, while Oracle is suing Google directly.

Microsoft has sued Motorola and Barnes & Noble over their use of the open source operating system, while seeking Android royalties from any company that will pay. HTC has already agreed to a deal with Microsoft, as have three smaller players, in moves announced this week.

Given all that, open source patent watcher Florian Mueller said he was surprised Google didn’t cough up whatever was necessary to get its hands on Nortel’s patents.

“No major industry player is as needy in terms of patents as Google,” Mueller said, noting that there are some 45 patent infringement lawsuits already surrounding Android. Still, he noted, “By purchasing Nortel’s portfolio, Google couldn’t have solved all of Android’s patent issues in one fell swoop.”

Mueller said the patents wouldn’t have helped much against Oracle, for example. “But Google lost an unprecedented opportunity to acquire a major bargaining chip that would strengthen it at the mobile industry’s intellectual property negotiating table.”

“Following a very robust auction, we are pleased at the outcome of the auction of this extensive patent portfolio,” Nortel Chief Strategy Officer George Riedel said in a statement. “The size and dollar value for this transaction is unprecedented, as was the significant interest in the portfolio among major companies around the world.”

The winning bid requires approval of both U.S. and Canadian courts, which the company will seek at a joint hearing expected to take place on July 11. Nortel said it will work with the winning bidders in an effort to close the sale in the third quarter.

The consortium won the bidding, but a number of other players had publicly expressed interest or were believed to be interested in the patents, including one of the eventual winners — Ericsson — and Google, which had placed the initial $900 million bid to begin the auction process. Google had justified its initial bid by saying that patents are necessary given the increasingly litigious environment these days.

Google, as well as its hardware partners, face a number of lawsuits related to Android. Apple, for example, has sued HTC, while Oracle has sued Google directly and Microsoft also has claimed Android hardware infringes on its patents, suing both Motorola and Barnes and Noble.

The patents covered a broad range of areas, Nortel said, including all manner of telecommunications and networking technologies — wireless and 4G wireless, among others — as well as additional areas such as Internet search and social networking.

Even with the cash haul, Nortel said it still doesn’t expect to have any remaining value for common shareholders once it completes its bankruptcy protection hearings.

Also qualified as a bidder: Apple, which, as AllThingsD reported back in December, has been sniffing around Nortel’s IP for months now.

With these four participating in the auction for Nortel’s portfolio, it seems almost certain Google will have to raise its $900 million “stalking-horse bid” if it hopes to prevail. Already some private equity investors are saying the final price on the patents may reach $1.5 billion if a real bidding war erupts over them.

After an antitrust review, the Justice Department concluded that Google’s potential ownership of the patents wouldn’t raise any major competitive concerns, these people said. The clearance could give Google’s bid a leg-up against rivals, part of its effort to acquire an arsenal of patents that could help it ward off lawsuits by rivals.

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On Monday, Nortel announced that Google had bid $900 million to acquire the bankrupt company’s patent collection.

In a blog post, Google said the current litigious environment justifies the pricey bid.

“The tech world has recently seen an explosion in patent litigation, often involving low-quality software patents, which threatens to stifle innovation,” said Google general counsel Kent Walker. “Some of these lawsuits have been filed by people or companies that have never actually created anything; others are motivated by a desire to block competing products or profit from the success of a rival’s new technology.”

Google has been on the receiving end of a number of patent lawsuits, both directly and indirectly. Oracle, with its Sun acquisition, has sued Google over Android, while Microsoft has sued and threatened to sue Android handset makers, saying that the mobile operating system infringes on Microsoft’s intellectual property. Microsoft has already sued Motorola and Barnes & Noble and reached a licensing deal with Taiwan’s HTC.

Microsoft is looking to make the case that Google’s Android isn’t really free to handset makers and has been arguing both privately and through its legal actions that it believes it deserves royalties for any use of Android.

And it is not just Microsoft seeking to use patents as part of its smartphone battle. Apple has also sued HTC, while Nokia has also been active on the patent assertion front.

Walker argues that what is really needed is significant patent reform but–given the current situation–the company is best off trying to assemble a patent army of its own.

“Google is a relatively young company, and although we have a growing number of patents, many of our competitors have larger portfolios given their longer histories,” Walker said. “So after a lot of thought, we’ve decided to bid for Nortel’s patent portfolio in the company’s bankruptcy auction. Today, Nortel selected our bid as the ‘stalking-horse bid,’ which is the starting point against which others will bid prior to the auction. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community–which is integrally involved in projects like Android and Chrome–continue to innovate.”

The fact that they’re now rare makes them valuable. In fact, Microsoft has just paid $7.5 million to buy some 666,000 addresses from the assets of the bankrupt Canadian networking company Nortel.

You may remember that the world ran out of these addresses last month when the Internet Assigned Numbers Authority handed out the last batch of the 4.5 billion or so addresses under its control. Who knew the Internet would ever need so many?

A new numbering system called IP version 6 or IPv6 is coming soon with lots more room for addresses. The theoretical number of addresses that should be available is 340 undecillion. (Yes that’s a real number, a 340 followed by 36 zeros.) That ought to be plenty of space. The problem is that it’s taking forever to get it up and running.

But in the meantime, the world is still relying upon the old-school IPv4 addresses and they’re scarce, hence valuable. Microsoft paid $11.25 each for these addresses, and it stands to reason that there are scores of companies and entities out there with blocks of addresses that are in various states of disuse. Something tells me this isn’t the last deal of this kind.

Nortel filed for bankruptcy in 2009, and has been shedding its assets in bankruptcy court, including the portfolio of 4,000 patents. This portfolio contains a set of patents related to the emerging technology used in long-term evolution, or LTE, wireless phone networks. Wireless carriers, network-equipment firms and handset vendors are interested in the Nortel patents because they could be a critical defense against lawsuits in the competitive, and increasingly litigious, wireless industry.

The deal, expected at around $1 billion, would be a preliminary “stalking horse” bid filed with the Delaware bankruptcy court, these people said. Stalking-horse bids are initial offers for an asset that help set a floor price for a broader auction.

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Last year, Nortel sold its optical networking and carrier ethernet business to Ciena for $769 million and its wireless business to Ericsson for $1.3 billion. Soon it will sell off its patents as well, among them some thought to be essential 4G wireless technologies like Long Term Evolution (LTE) and Service Architecture Evolution (SAE).

And that IP is drawing a lot of interest from the likes of Research in Motion, Nokia, Google and Apple, none of which want to see it in the hands of a rival, particularly as 4G’s commercial availability broadens. Sources tell me all four companies are participating in the auction, and Reuters reports that final bids are due in a matter of weeks. Said one source, “Whoever buys these patents is buying a hell of an advantage.”

Reached for comment, Apple and RIM declined. Google and Nokia did not respond.

Under the terms of the deal, Motorola (MOT) will retain its wireless patent portfolio and iDEN assets, while Nokia Siemens acquires all that remains: the company’s GSM (Global System for Mobile Communications), CDMA (Code-Division Multiple Access), WCDMA (Wideband Code-Division Multiple Access), WiMax and LTE (Long-Term Evolution) operations, along with contracts to supply some 50 wireless carriers and cable companies, among them top wireless carriers like Verizon (VZ), Sprint Nextel (S) and KDDI in Japan.

Not a bad deal for Nokia Siemens, which had been struggling to bolster its presence in North America. The company last year bid in two auctions for Nortel Networks’ assets and lost both times, first to Ericsson and then to Ciena.

For Motorola, which has been looking to unload its network infrastructure business for quite some time now, the deal is an important step in its plan to spin off its mobile and cable set-top box divisions into a separate company early next year.

But the acquisition is not without risks. It poses a massive integration challenge for Ciena (CIEN), the likes of which the company has never dealt with before. As Jefferies & Co. analysts wrote in a research note this morning, “We can’t think of anyone in Ciena’s management team that has ever been involved in–much less integrated–an M&A deal like this.”

He is president and chief executive of Blade Network Technologies, a closely held Silicon Valley maker of networking gear that was formed from assets spun out of Nortel (NT) Networks in 2006. Though many companies have been holding up spending on such technology–witness the 18 percent revenue decline at archrival Cisco Systems (CSCO) in the quarter ended in July, for example–Blade’s revenues grew 30 percent from the year-earlier period, Mehta says.

On Wednesday, Blade is announcing a new funding round of about $10 million that puts a valuation of $230 million on the company–up about five-fold from the last infusion in 2006, Mehta says–and includes contributions from new investors NEC Corp. and Juniper Networks (JNPR), as well as some more money from Garnett & Helfrich Capital, Blade’s original funder.

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