Nokia Wins Big in Smartphone Patent Dispute with Apple

Apple settled a wide-reaching patent-infringement lawsuit with Nokia and will pay the latter company an undisclosed sum upfront as well as ongoing, per-unit royalties so that it can continue using Nokia-patented technologies in the iPhone and other related products.

But opinions vary about which company comes out stronger on the other end of the deal. Nokia did get a nice stock bump from the announcement, but Apple claims that the deal is somewhat limited in that it doesn't relate to the iPhone's best features.

According to a Nokia release, the agreement settles all patent litigation between the two companies—like many competitors in the smartphone business, Apple and Nokia had previously cross-sued each other for various alleged patent infringements—and both are withdrawing any patent claims against the other. But the flow of money is decidedly one-way: Apple will pay an undisclosed sum to Nokia upfront and then will continue paying Nokia ongoing licensing fees for the use of its patented technologies. Basically, each time Apple sells an iPhone, Nokia gets paid.

Although the payment amounts are unknown, industry analysts speculate that Apple will issue a "significant" payment of at least several hundred million dollars to Nokia, and Nokia did state that this upfront payment would have "a positive financial impact" on its financial outlook for the current quarter. Some say Nokia will receive over $10 per iPhone sold on an ongoing basis.

Wall Street reacted positively to the news, driving shares in beleaguered Nokia up more than 3 percent Tuesday to $6.31.

Not everyone has such a rosy opinion of the deal. The Motley Fool financial website claimed that Nokia's victory over Apple was "hollow" and that Apple might ultimately benefit from the deal because its heady iPhone sales volume will make the payments relatively immaterial for the company. And Apple of course claims that the settlement is limited.

"Apple and Nokia have agreed to drop all of our current lawsuits and enter into a license covering some of each other's patents, but not the majority of the innovation that makes the iPhone unique," Apple claims in a public statement. "We are glad to put this behind us and get back to focusing on our respective businesses."

That's cute, but the 46 Nokia patents in question actually cover a wide range of features that people often associate with the iPhone, including using a built-in App Store and the methods by which touch screens respond to swiping gestures. Granted, in the years since the original iPhone release, these capabilities are pretty common across the smartphone market.

Which raises an interesting point. Now that Nokia has prevailed against Apple, shouldn't it go after other competitors, including Android, currently the number-one player in the market, and Research in Motion (RIM), which makes the BlackBerry line of corporate smartphones? I say yes, and I'm guessing that Nokia's new BFF, Microsoft, is suggesting exactly the same thing.

In negotiating for licensing terms with other smartphone vendors, including Google (which is responsible for far more units sold each year than Apple), Nokia's victory over Apple suddenly becomes more absolute. This is a strategy worth pursuing.

TAGS: Windows 8
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