Chip Lutton, Nest general counsel
Chip Lutton, Nest general counsel (Jason Doiy / The Recorder)

PALO ALTO — As Google Inc. swooped in to purchase Palo Alto’s Nest Labs for $3.2 billion in cash, the companies and investors sought advice from Orrick, Wilson Sonsini and Goodwin Procter.

Nest Labs, which produces smart thermostats and smoke detectors, was founded in 2010 by a team of Apple engineers and launched its Nest Learning Thermostat the following year. Richard Lutton Jr., Apple’s former chief patent counsel, joined Nest as general counsel in 2012.

Orrick, Herrington & Sutcliffe counseled Nest Labs in the transaction, Wilson Sonsini Goodrich & Rosati advised Google, and Goodwin Procter represented the company’s consortium of investors.

The purchase announced Monday comes as Google, which had reportedly been exploring its own line of smart home thermostats, works to extend its reach beyond Internet searches and smartphones. In addition to the products Nest has already marketed and is developing, Google will also inherit its patent portfolio, believed to number around 100.

Google had previously invested in Nest through its venture capital arm, Google Ventures, leading its Series B and C rounds of funding. The company had also received capital from such blue-chip investors as Kleiner Perkins Caufield & Byers, the lead investor, and Lightspeed Venture Partners, among others.

It’s unclear how the transaction, which marries Nest to Apple’s smartphone nemesis, will impact Nest’s ties to Apple; according to The Wall Street Journal, an Apple spokesman declined to comment on whether it would continue to sell Nest products.

Google’s leadership was more effusive. “[The Nest team is] already delivering amazing products you can buy right now—thermostats that save energy and smoke/CO alarms that can help keep your family safe,” Google CEO Larry Page said in a statement. “We are excited to bring great experiences to more homes in more countries and fulfill their dreams!”

Nest, which has about 300 employees in three countries, will continue to operate independently and report to CEO and cofounder Tony Fadell, who helped create the iPod.

The deal, which is expected to close in the next few months, could present privacy questions, such as how Nest’s current user data may be shared with Google. In a Q&A posted on the company’s blog, Nest founder and engineering VP Matt Rogers said, “Our privacy policy clearly limits the use of customer information to providing and improving Nest’s products and services. We’ve always taken privacy seriously and this will not change.”

The Orrick team advising Nest was led by firm chairman Mitch Zuklie and corporate partner Mark Seneca and included emerging companies partner Dan Yost, counsel Adam Lin, senior associate Anik Guha, and associates Andrew Erskine, Reed McBride and Owen Kirshner. They were backed up by compensation and benefits partner Nancy Chen and managing associate Michael Yang, antitrust of counsel Patricia Zeigler, tax partner Steven Malvey, and international trade and compliance partner Harry Clark.

Goodwin Procter, led by partner Larry Chu, advised the investors. The Goodwin team also included partners Jim Riley, Kelsey Lemaster and Steve Poss, and associates Jeff Cheng and Mark Schenkel.

Wilson Sonsini Goodrich & Rosati, led by partner David Segre, counseled Google. The team included corporate partner Denny Kwon and associates Derek Liu, Anson Lau, Aby Castro, Jeff Kao and Scott Blumenkranz; technology transactions partners Suzanne Bell and Michael Murphy and associate Sharon Lee; tax partner Eileen Marshall and associate Myra Sutanto Shen; employee benefits and compensation partner David Thomas and associate Brandon Gantus; employment law partner Rico Rosales and associate Rebecca Stuart; as well as corporate finance partner John Mao.

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