Bloomberg News

Nokia Wins Apple Patent-License Deal Cash, Settles Lawsuits

June 14, 2011

(Updates with Apple comment in sixth, seventh paragraphs.)

June 14 (Bloomberg) -- Nokia Oyj won an almost two-year patent dispute with Apple Inc., in a settlement that awards a one-time payment and royalties to the Finnish handset maker.

Nokia rose as much as 4.1 percent in Helsinki trading. The agreement will bolster the Devices & Services unit’s second- quarter profitability, Espoo, Finland-based Nokia said in a statement today. The details of the contract, under which Apple will pay an undisclosed sum and royalties for the term of the agreement, are confidential, Nokia said.

The two mobile-phone makers have been in litigation since October 2009, when Nokia filed a lawsuit accusing Cupertino, California-based Apple of infringing patents. Nokia also demanded royalties on the millions of Apple iPhones sold since the device’s introduction in 2007. Nokia said in March it has 46 patents asserted against Apple in civil lawsuits and complaints lodged with the U.S. International Trade Commission.

“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.

Nokia climbed as much as 17.6 cents to 4.47 euros and traded 2.1 percent higher at 4.39 euros as of 1:14 p.m. in Helsinki. The stock has lost more than three quarters of its value since Apple introduced the iPhone in June 2007.

Cross License

The agreement doesn’t 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 said in a statement today that Nokia will have a license to some technology, “but not the majority of the innovations that make the iPhone unique.” Apple gets a license to some of Nokia’s 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.

Freed Resources

“This frees up resources for both Apple and Nokia,” said Florian Mueller, a Munich-based consultant and intellectual property activist. “Other companies whom Nokia will ask to pay royalties will have to think very hard whether to pay or pick a fight.”

Nokia Chief Executive Officer Stephen Elop 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.

“We’re glad to put this behind us and get back to focusing on our respective businesses,” said Steve Dowling, an Apple spokesman.

Nokia wouldn’t disclose the amount of the payments. Royalty agreements are generally secret, said Martin Nilsson, a Stockholm-based analyst with Handelsbanken.

Smartphone Growth

“Everybody pays license fees, that’s how this industry has worked for 25 years, and now the setup with Apple isn’t any different to what they have with the others,” Nilsson said. “It’s in line with expectations that they resolved it and that Nokia became a net recipient.”

Nokia’s first claims covered technology for wireless data, speech coding, security and encryption. Subsequent claims asserted rights to wiping gestures on a touchscreen and on- device application stores, both of which Nokia said it filed to patent more than 10 years before the iPhone launch.

The global market for smartphones is expected to grow 50 percent to $138 billion this year, Stuart Jeffrey and other Nomura analysts said in a report yesterday.

Mobile-phone makers generally cross-license patent portfolios with extra payments covering the differences in value. Apple countersued and both companies pursued parallel claims with the ITC.

“We’ve 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.

Nokia Licensees

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

“Our understanding is that the dispute was never really about Nokia’s essential patents,” such as those relating to GSM and 3G wireless technologies, Sarkamies said. “Rather they were used to arm-wrestle a solution on non-essential patents such as touchscreen user interface innovations.”

Apple has patent fights with smartphone companies, primarily handset makers that make phones running Google’s Android system, including Samsung Electronics Co., Motorola Mobility Holdings Inc. and HTC Corp.

--With assistance from Adam Satariano in San Francisco, Stephanie Bodoni in Luxembourg and Susan Decker in Washington. Editors: Romaine Bostick, John Lear

To contact the reporter responsible for this story: Diana ben-Aaron in Helsinki at dbenaaron1@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong in Berlin at kwong11@bloomberg.net.


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