Nokia and Apple settle patent dispute over smartphones Featured

9:26am EDT June 14, 2011

BERLIN (New York Times) -- Nokia said Tuesday it had settled a two-year-old global patent fight with Apple over smartphone technology through a licensing agreement that will commit Apple to make a one-time payment to its Finnish competitor and to pay regular royalties in the future.

The agreement settles all outstanding patent litigation between Apple, the leader in the smartphone market, and Nokia, its main rival. The companies also agreed to withdraw complaints against each other with the International Trade Commission over the use of intellectual property.

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

Nokia did not disclose the financial terms of the settlement. It did say the agreement would have a “positive financial impact” on Nokia’s revised second-quarter results.

Nokia shares rose 1.8 percent in Helsinki trading following the announcement to 4.37 euros per share. The Finnish company’s shares had plunged on May 31 after Nokia revised its second-quarter sales and profit forecasts sharply lower, and abandoned its previously announced full-year targets for 2011 amid rising competition.

Apple appeared to describe the agreement as limited in scope, and emphasized that the patent settlement did not extend to most of the unique features of the iPhone, the world's best-selling smartphone.

“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 said. “We are glad to put this behind us and get back to focusing on our respective businesses.”

The mobile phone makers had been embroiled in more than 40 patent lawsuits in Germany, England and the United States since 2009 over basic technologies relating to a handset’s user interface, power management, antenna and camera.

Florian Mueller, an intellectual property analyst in Starnberg, Germany, said the announcement was a victory for Nokia, which in the first quarter ceded its long-held lead in global cellphone revenue to Apple.

Mueller said while Apple benefited by settling its legal differences with Nokia, it was likely that the patent settlement with Apple involved “significant” payments by Apple to Nokia.

“I’m sure Nokia had to go down from its maximum demands because otherwise there wouldn’t have been a settlement,” Mueller said. “But the deal structure is very telling: a combination of a payment for past infringements as well as running royalties is a clear indication that there’s serious money in this for Nokia.”

Mueller said the agreement was the first fruit of a new Nokia strategy to more aggressively defend its patent portfolio, which includes more than 10,000 groups of handset patents called “patent families” that it developed over the last two decades. Nokia has said it invested more than €43 billion ($62 billion) to develop its patent archive.

“Having proven its ability to defeat Apple after the most bitterly contested patent dispute that this industry has seen to date is clear proof of” the effectiveness of Nokia's more aggressive strategy, Mueller said. “Other companies whom Nokia will ask to pay royalties will have to think very hard whether to pay or pick a fight.”

Mueller said Nokia may now turn its sights on Google, the maker of the Android open-source phone operating system, which is the world’s fastest growing mobile operating system. Mueller asserted that Android is technologically similar to Apple’s iPhone operating system and may invite a legal challenge from Nokia.

“Android-based devices are highly likely to infringe on largely the same Nokia patents that Apple now felt forced to pay for,” Mueller said.