The Third Act in Apple vs. Nokia

The Nokia vs. Apple patent dispute entered a new stage. Nokia recently brought up a fresh patent infringement action against Apple, alleging that Apple’s new iPad product infringes five Nokia patents. At a first glance, the recent lawsuit before the U.S. District Court for the Western District of Wisconsin could be seen as nothing special. A patent holder just asserts his patents  against an alleged technology “theft”. But it looks as if there is more behind all this.

We remember the first act of the dispute in October 2009. Nokia sued Apple for infringing ten patents relating mobile communication technologies embodied in the UMTS/WCDMA (3G), GSM and WLAN standards. Subsequently, in November 2009,  Apple countersued Nokia for infringing thirteen patents. At year’s end the second act emerged by adding to the dispute an ITC (International Trade Commission) complaint, a favourite patent action by patentees, where both parties to this brawl requested an import ban: Nokia wants the ITC to ban the iPhone from being imported into the European Union by claiming another seven patents, Apple wants the ITC to ban Nokia devices form importing into the US-market. The recent lawsuit starts the third act of the ever-growing dissensions between Nokia and Apple.

The background of the conflict deserves a closer look.  Both Apple and Nokia claim a technological leadership position which both parties eager to defend.  Nokia was somewhat caught by surpirse when Apple first launched the iPhone. In a breakneck speed Apple grabbed what was for long a Nokia dominated smart phone market. Contrary to techincal reality Apple did not succeed in this marketing feat by adding really novel functionalities to mobile handsets. What Apple did was remixing functionalities, which Nokia devices already had been capable of , yes, in a way in an improved marketing and usability concept. In the meantime Nokia rested on its laurels, such as the development of a significant part of the (core) network technologies, which are – partially – embodied in the UMTS/WCDMA and GSM Standard and which made (high speed) mobile telecommunication possible at all.

The true story about the recent patent infringement lawsuits is therefore not simply technology “theft”, but the interdependency of Nokia’s and Apple’s technologies. Nokia is lacking the clean and easy – and patent protected – usability concept of Apple’s devices, which Nokia has to implement to build competitive products in future, whilst Apple must implement the UMTS/WCDMA and GSM Standards to build network compliant iPhone/iPad-devices. In such constellations, a cross-license agreement suggests itself.

We are not sure, whether Nokia or Apple have already asked for a cross-license agreement. What is sure is that they are in negotiations. According to Nokia, Apple refuses to license Nokia’s IP at reasonable terms. It is evident that the main issue in such negotiations would be the royalty question. But the issue is not only the amount of royalties. More fundamental, they have to clear, whether there are royalties at all and who has to pay them. They must balance the value of their technologies first. That’s a really difficult task. The lawsuits must be seen as a part of such a balancing process.

Nokia might be seen on a better starting position due to its standard related and essential patents.[1] The evidence of the infringement of standard essential patents is very easy. Regularly, the holder of the essential patent has only to proof that the alleged infringer builds standard compliant products. The pressure on Apple is high. On the other Hand, also Apple might be seen in a strong position with regard to Nokia. Whilst Apple has never made any promise to license its technology, Nokia has made a so-called FRAND-Licensing commitment, from which, in short, Apple could be entitled to license Nokia’s standard essential Technologies on a fair, reasonable and non-discriminatory basis. Although it is far from clear what FRAND in terms of royalties really means, Apple could get a very advantageous outcome of the whole process. Cross licensing agreements on a no cost basis are really common between the major holders of standard essential patents. Thus, Apple might get Nokia to agree to such a no-/low cost cross agreement considering its very salable usability technologies, which are obviously so much appreciated by the customers.

It remains to be seen, whether Apple and Nokia could reach an agreement within the next months. The recent escalation seems to make it more unlikely. On the other hand, it is also unlikely that Apple and Nokia would really push the things to the limit. At least, it is almost inconceivable that they would really risk a public settlement via judgments. The progress of the initiated processes will intensify the pressure to come to a mutual agreement, which is advantageous for both. That is probably why Nokia has recently escalated the dispute.

Stephan Dorn

Essential patents are standard related patents protecting technologies which essentially have to be implemented to build a standard compliant product.

All images and illustrations used in our posts are licensed and have been legally acquired through official sources such as Adobe Stock