Nokia gets a bite of Apple

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In a dramatic move, Apple Inc. yesterday, agreed to license wireless phone patents owned by Nokia and ended a long-running legal dispute between the two companies.

We are very pleased to have Apple join the growing number of Nokia licensees, Stephen Elop, president and chief executive officer of Nokia, said in a statement. This settlement demonstrates Nokias industry leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market.

The deal will settle all patent litigation between Nokia and Apple, and the two will withdraw their respective complaints filed earlier with the U.S. International Trade Commission. The details of the contract, under which Apple will pay an undisclosed sum and royalties for the term were not disclosed.

Nokia rose as much as 4.1 percent in Helsinki trading. The stock has lost more than three quarters of its value since Apple introduced the iPhone in June 2007.

Nokia emerges as a clear winner from the fight, Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki, said in a note to clients today. The initial payment will likely be in the range of hundreds of millions of euros related to about 200 million Apple devices delivered to date, Sarkamies said.

Suing and Counter-suing

The whole episode started in October 2009 when Nokia filed a lawsuit accusing Apple of infringing patents. Nokia also demanded royalties on the millions of Apple iPhones sold since the devices introduction in 2007.

Apple filed a countersuit in December 2009, charging Nokia with infringing 13 Apple patents related to the iPhone. In its suit, Apple denied Nokias claims of copyright violations and said that the licenses for which Nokia was seeking payment from Apple were unfair, unreasonable, and discriminatory and non-essential to the iPhone.

The dispute escalated later that month when Nokia lodged a complaint with the U.S. International Trade Commission, accusing Apple of infringing seven Nokia patents in virtually all of its mobile phones, portable music players, and computers.

A Delaware court put the lawsuits on hold in March 2010, pending the trade commissions decisions on the matter. Apple then took its fight to the U.K. in September 2010, accusing Nokia of infringing on 9 patents it owned.

No Cross-licensing

The agreement doesnt provide Nokia with a full agreement to cross-license patents with Apple. In court filings, Apple had claimed that Nokia filed the suits to strong-arm it into granting Nokia access to patented technology for features that differentiate the iPhone from other smartphones.

Apple will still maintiain the important elements of the iPhone as a secret. In a statement yesterday Apple said that Nokia will have a license to some technology, but not the majority of the innovations that make the iPhone unique.

Apple on the other hand gets a license to some of Nokias patents, including ones that were deemed essential to industry standards on mobile phones.

The settlement ends litigation that was pending before the ITC, which has the power to block imports of products that infringe U.S. patents, and in federal courts in Delaware and Wisconsin. It also resolves suits in Germany, the U.K. and the Netherlands. This makes the path for both companies hurdle free.

Nokia has about 40 Licensees for the standard-essential patent portfolio, including Apple, Durrant said. All actions between the two companies including Apples suits against Nokia and conflicts at the ITC have been dropped, he said.

Nokia-Microsoft alliance

Nokia is readying a line of phones based on Microsoft Corp.s Windows Phone 7 operating system to replace the Symbian line, which is losing market share to the iPhone and handsets based on Google Inc.s Android system.

Mobile-phone makers generally cross-license patent portfolios with extra payments covering the differences in value.

Smartphone Growth

The next big thing would be Smartphones. Experts say that the Smartphone may even surpass laptops by 2015. Though this may seem likely, this reminds us the mockery that was made of PC as compare to the Mainframe in the 1980s.

As per Stuart Jeffrey and other Nomura analysts, the global market for smartphones is expected to grow 50 percent to $138 billion this year.

Weve been talking to them since 2007, discussions have continued throughout the litigation and our goal has always been to stop Apple using our patents without paying for them, Nokia spokesman Mark Durrant said by phone.

Mobile Patent Behemoth

Nokia has become one of the biggest innovators in the in its industry. It has invested approximately EUR 43 billion in its R & D (Research and Development) Department.
Nokia is a world leader in the development of handheld device and mobile communications technologies, which is also demonstrated by Nokias strong patent position.

It has built one of the wireless industrys strongest and broadest IPR portfolios, with over 10,000 patent families.

Who won?

It might seem that the green light might have come a little bit late for Nokia.

The thing was that Apple was never against paying for the license. It wanted to pay the fair price other companies paid. Nokia on the other hand was more interested in the Apple Technology than numbers, which of course Apple refused.

Nokia is planning to switch platforms from Symbian to Windows 7, thereby it would not be need the Apple technology anymore.

Also, ITC recently ruled that Apple did not infringe on five patents owned by Nokia. Therefore, it would have probably been a good strategy for Nokia to settle the dispute and its most likely that Nokia agreed to license to Apple at the same price they license to other companies.

It is also in Apples favour to settle the dispute and for a fair price, which has always been the bone of contention, and so when they got a deal they readily agreed to a settlement which is probably cheaper then they would have gotten with a jury.

It is interesting to recall that in July 2008, Nokia had to give a huge payout to Qualcomm for using Qualcomm patents. Under the agreement, Nokia was granted a licence under all Qualcomms patents for its mobile phones and network equipment.

Seems like Nokia did the exact same thing Apple did. And like Apple they were sued and settled by making a payment to, and then licensing patents from Qualcomm.

Sources: ft.com, bloomberg.com,cnet.com

 

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