Nokia vs Apple Overview
Our guest contributor, Oscar Nobi, gives an overview of Nokia’s lawsuit against Apple.
Nokia’s lawsuit against Apple, announced last week, could cost the
Nevertheless, the impact of the lawsuit is not insignificant. According to Nokia, the patents, which cover wireless data, speech coding, security and encryption, are infringed by all Apple iPhone models shipped since the iPhone was introduced in June 2007.
Nokia, the world’s largest mobile manufacturer, has been a veritable stalwart in the mobile communications industry since the late 20th century. In its statement, Nokia said that it had spent €40 billion (£36.2 billion) in research and development, creating technologies which have been licensed to approximately 40 companies, but that Apple was not one of them.
“The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards, create intellectual property, which others then need to compensate for,” said Ilkka Rahnasto, Vice President, Legal & Intellectual Property at Nokia. “Apple is also expected to follow this principle. By refusing to agree appropriate terms for Nokia’s intellectual property, Apple is attempting to get a free ride on the back of Nokia’s innovation.”
A spokesperson for Apple told the BBC that the company would not comment on pending litigation.
Apple is a relative newcomer to the mobile industry but has managed to win a 15 percent share of the smartphone market on the back of the success of the iPhone which was named Invention of the Year by Time magazine in 2007. 34 million units have been sold worldwide to date. According to Reuters, citing Strategy Analytics of London, Apple sold 7.4 million iPhones in the last quarter alone for an average sales price of $566 (£346).
However, the
“It is almost inconceivable that someone can produce a mobile phone without using Nokia patented technologies,” Ben Wood, research director at CCS Insight told Reuters. “Intellectual property licensing costs create a significant barrier for late entrants into the mobile phone space. As a result they become net payers to the big established players such as Ericsson, Motorola, Nokia and Qualcomm.”
According to its complaint, filed at the federal court in
The suit goes on to ask that the court award Nokia appropriate compensation and damages for past and future use of its patents, and subsequently enjoin Apple from infringing its patents until it has paid Nokia.
Nokia’s lawsuit had not specified a dollar amount as part of its claim but the potential return for Nokia could be colossal. Analysts at Strategy Analytics told Reuters that, whereas top vendors who had been in the industry for a long time usually paid around 2 percent of the sales price of their phones to patent holders, new entrants like Apple would pay around 15 percent of their revenue as royalties. Based on 34 million iPhones sold, Neil Mawston of Strategy Analytics went on to say that Apple could have to pay Nokia up to $1 billion for the patents used in their iPhones.
Even if a 2 percent royalty were applied, the New York Times reports that this would work out at approximately $12 (£7.30) for each iPhone sold, coming to a total of around $400 million (£244 million). Charles King, an analyst with Pund-IT, told eWEEK that this would, “still be a nice piece of change for Nokia.” He added that, “according to Nokia, they’ve been telling Apple for months now that they owe them money for the patents they’re using, and Apple has refused to pay them anything. From Nokia’s point of view, they’ve tried the carrot and to be nice guys, and now it’s time to bring out the stick.”
Considering the sums involved, is it telling that the suit comes after Nokia saw its global smartphone market share drop between July and September 2009 from 41 percent to 35 percent? Particularly as Apple saw its market share rise over the same period? Steven Nathasingh, managing director of research firm Vax told Reuters that Nokia could very well be litigating as a means of acquiring new revenue. “The smart phone market share issue is a factor relative to the timing of this suit. This has to create concern for Nokia.”
Mawston told Reuters that manufacturers would become more aggressive in generating revenue from their intellectual property portfolios in the light of declining sales. “The intellectual property rights wars are ramping up in the handset industry now,” he said.
Neither party are noviciates when it comes to litigation. In 2007 Cisco sued Apple for infringement of the “iPhone” trademark which led to a settlement for an undisclosed amount and an agreement that both companies were free to use the trademark. Meanwhile, Nokia and Qualcomm agreed to a 15″‘year settlement in July 2008 which ended a bitter three”‘year legal dispute and saw Nokia make a one”‘time payment to the
However, Nicholas Fox, patent attorney at Ipulse told Mobile Europe that the case was “almost certain to end up settling well before it goes to court.” He added that the lawsuit was a sign that Nokia had become frustrated with the progress of their negotiations with Apple.
Nevertheless, Mawston told Reuters that Nokia’s suit was an example of mobile equipment makers becoming more litigious in an effort to seek out additional streams of revenue. As he put it: “Where there is a hit, there is usually a writ.”
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