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Nokia Claim Against iPhone Could Reach $1 Billion

HELSINKI (Reuters) – Apple faces the possibility of having to pay Nokia up to $1 billion for the technologies used in iPhones sold so far if it loses a lawsuit brought by Nokia, analysts said. The world’s top cellphone maker Nokia filed the suit in the United States on Thursday, saying Apple had infringed 10 […]

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DS

Datamation Staff

Oct 26, 2009

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HELSINKI (Reuters) – Apple faces the possibility of having to pay Nokia up to $1 billion for the technologies used in iPhones sold so far if it loses a lawsuit brought by Nokia, analysts said.

The world’s top cellphone maker Nokia filed the suit in the United States on Thursday, saying Apple had infringed 10 patents in technologies like wireless data transfer, a key factor in the success of iPhone, and accusing Apple of trying to hitch a “free ride” on Nokia’s technology investment.

Apple, a latecomer to the cellphone industry, has won 15 percent share of the smartphone market, but it has limited intellectual property assets compared with rivals, when all vendors work under cross-licensing agreements.

Neil Mawston at Strategy Analytics said Apple could have to pay Nokia anything between $200 million and $1 billion for patents used in 34 million iPhones shipped so far.

In the last quarter alone Apple sold 7.4 million iPhones for an average sales price of $566, according to Strategy Analytics.

The analysts said Nokia has a case to claim such sums as it is one of the key patent holders in mobile technologies, alongside Qualcomm and Ericsson.

“It is almost inconceivable that someone can produce a mobile phone without using Nokia patented technologies,” said Ben Wood, research director at CCS Insight.

An Ericsson spokesman said on Friday the company has a licensing deal with Apple.

Nokia said in its court filing it had made several price offers to Apple on per patent and on portfolio basis, but the U.S. firm had declined those.

15 PCT ROYALTY RATE

The analysts said top vendors who have been in the industry for a long time usually pay a few percent of their revenue as royalties, but new entrants pay around 15 percent of the sales price of 3G phones to patent holders. For older 2G technology the rate is clearly lower.

“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,” CCS Insight’s Wood said.

Nokia said all iPhones — the original GSM model, and the following 3G models — use its patented technologies.

“This issue has the hallmarks of the iPhone name and the deal Apple struck with Cisco for the use of this name. They wanted it, and needed it, in the same way they need Nokia’s technologies,” said Steven Nathasingh, managing director of research firm Vaxa Inc.

Cisco sued Apple for trademark infringement in 2007, after Apple unveiled its iPhone, a name claimed by the network equipment maker. The lawsuit was short lived, and settled within a month for an undisclosed amount and an agreement that both companies were free to use the “iPhone” trademark.

Nokia dominates the global handset market but it has lost some ground to new smartphone entrants like Apple, which entered the market with its iPhone in mid-2007.

In July-September Nokia saw its smartphone market share dropping to 35 percent from 41 percent in the previous quarter, while Apple saw its market share rising.

“The smart phone market share issue is a factor relative to the timing of this suit. This has to create concern for Nokia,” Nathasingh said.

Nokia’s previous major legal battle ended last year with a one-time payment of 1.7 billion euros ($2.55 billion) to U.S. mobile chipmaker Qualcomm as part of a 15-year patent agreement.