Apple agrees to pay settlement and royalties to Nokia, all litigation dropped

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Nokia has announced that it has signed a patent license agreement with Apple, ending all patent litigation between the companies. The financial structure of the agreement consists of a one-time payment payable by Apple to Nokia and ongoing regular royalties to be paid by Apple to Nokia. The exact amounts involved are confidential, but the "agreement is expected to have a positive financial impact on Nokia's recently revised outlook for the second quarter 2011", so the sums must be very substantial.

From the press release:

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

During the last two decades, Nokia has invested approximately EUR 43 billion in research and development and built one of the wireless industry's strongest and broadest IPR portfolios, with over 10,000 patent families.  Nokia is a world leader in the development of handheld device and mobile communications technologies, which is also demonstrated by Nokia's strong patent position.

Rafe comments (from the Disqus thread below):

The terms are confidential, so any guess as to the amount changing hands is speculation. However, Nokia is saying it will have a positive impact on Q2 finances. That would indicate it is a significant amount and is likely in reference to the one off payment. 

Such disputes are complex, legally and from a business strategy point of view. The Nokia - Apple dispute is particularly complex, spanning multiple area and geographies. Some analysts have pointed out that both companies may have decided to settle because they prefer to keep strong patent positions with other companies rather than see a patent thrown out in court (because, if that happened, other companies would not feel obliged to continue paying licesnsing fees for the patents in question). This is why the agreement will likely be seen as positive for both companies.

Reuters has a report saying: 

"Analysts said Nokia could be estimated to get between 1 and 2 percent of iPhone revenues, which are seen at around $43 billion this year according to a Reuters poll.".

That's a guess, but it seems fairly reasonable to me (note I'm not a patent expert), given other known licensing agreements.

A widely reported rumour is that Apple is paying Nokia around €8 ($11) per iPhone, but there seems to be no definitive source for this. Florian Mueller (FOSSpatentsnotes that this amount would be plausible and is consistent with Apple's deal with Qualcomm (5.5%) (see also this blog post).

The on-going fees clearly indicate that Nokia have the more valuable patent portfolio. Typically, patents are cross-licensed between companies and a payment goes one way or the other, depending on who has the more valuable collection. Given Apple's previous stance on such matters, I think this is significant. In that sense, Nokia choice's to take legal action has clearly been justified (the terms are a tacit admission that Apple was infringing and should have been paying royalties) and Apple's action was clearly aimed at minimising any such payments (one assumes they are paying less than Nokia originally wanted). Nonetheless this outcome should be seen as a victory for Nokia and is a strong demonstration of the strength of their patent position.

This is welcome news on all fronts for Nokia - the settlement wasn't unexpected, in view of Nokia's history and patent reach.

[On a purely personal and anecdotal note, some of my own archive Psion documentation (and a device) from the 1990s were borrowed to be used as part of the evidence for Nokia and Symbian's prior art and mobile computing precedents - glad they proved useful, guys?]

Steve Litchfield, AAS, 14 Jun 2011