OTTAWA -- The bankruptcy of a Canadian telecommunications icon, and the scramble over what to do with its assets, has reopened the rift between the federal Conservative and Ontario Liberal governments.

Late yesterday a joint bankruptcy hearing in both Ontario and the U.S. state of Delaware approved the sale of Nortel's patents and technology to Ericsson, a Swedish wireless and cell phone giant.

Ericsson won a three-way bid to buy Nortel's assets last week by agreeing to spend $1.13 billion US for the failed Canadian company's technology.

Since winning the bid, Ontario Finance Minister Dwight Duncan has been demanding the federal government step in to prevent the sale. Duncan says it would cripple Canada's competitive advantage in the telecommunications business to lose Nortel's assets to a foreign company.

Yesterday federal Industry Minister Tony Clement fired back.

"I find it very curious, actually, Dwight Duncan's intervention on this," said Clement. "It could have something to do with the fact that (Ontario is) on the hook for the pension issue and they are trying to offload the pension issue to us."

But Duncan says Nortel has not made any request to Ontario's Pension Benefits Guarantee Fund for assistance and the issue of pensions for former Nortel employees is "completely unrelated" to what will happen to the patents and wireless technology up for sale in the bankruptcy auction.

"It's just a cheap shot," said Duncan. "I suspect (Clement) is just lashing out because he has nothing else to do to explain the fact that their government has failed to protect the Canadian interest here."

Duncan says the federal and Ontario governments have given generous and substantial tax credits to Nortel to help it develop its technology, which is key to the next generation of mobile phones.

He wants the federal government to stop "sleeping at the switch" and consider working out some kind of deal with Research In Motion, the Canadian company that makes the Blackberry, so the technology could stay in Canada.

RIM was not one of the three companies that bid on Nortel's assets. It was shut out of the auction when it objected to Nortel's bidding process, although it has pledged to fight on for the chance to buy Nortel's assets.

PETER.ZIMONJIC@SUNMEDIA.CA