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Nokia Sues Apple, Escalates Mobile-Patent Licensing Battle

Dec. 22, 2016
“This is a big deal, especially for the future of licensing revenues on standard-essential patents. Apple has regularly fought to keep royalty rates low, whereas Nokia is interested in getting as much value from its intellectual property as possible.”

Nokia Oyj has sued Apple Inc. saying that the iPhone maker infringed several mobile patents, turning simmering tension between the companies into a bitter public legal battle on multiple fronts.

The Espoo, Finland-based company said Apple agreed to license patented inventions in 2011 but has refused to extend those agreements that are now expiring. Nokia filed complaints with the German Regional Courts in Dusseldorf, Mannheim and Munich, and in federal court in Texas.

“This is a big deal, especially for the future of licensing revenues on standard-essential patents,” Bloomberg Intelligence litigation analyst Matt Larson said, referring to patents that must be used to comply with technical industry standards like Wi-Fi. “Apple has regularly fought to keep royalty rates low, whereas Nokia is interested in getting as much value from its intellectual property as possible.”

The dispute is rooted in Nokia’s demise as the world’s largest phone maker. Since selling its handset business, the company has focused on networking. It’s now tapping its patent portfolio as a source of income, rather than as a cross-licensing tool to protect its own products.

Nokia’s intellectual property business added patents through its Alcatel-Lucent acquisition, making it a more significant profit contributor. In the third quarter, Nokia’s technology unit, which licenses its patents, generated about 40% of the company’s total adjusted operating profit.

“Unfortunately, Nokia has refused to license their patents on a fair basis and is now using the tactics of a patent troll to attempt to extort money from Apple by applying a royalty rate to Apple’s own inventions they had nothing to do with,” Apple said in an e-mailed statement. “We are standing up for inventors everywhere by fighting this flagrant anticompetitive practice.”

Nokia and its Alcatel-Lucent USA unit filed two lawsuits Wednesday against Apple in federal court in Marshall, Texas, claiming patent violations related to products including the iPhone, iPad, iPod, Apple Watch, Mac computers and digital media players such as Apple TV.

In the first complaint, Nokia said Apple “steadfastly refused” to license its patents for video coding at established industry rates. Apple continues to use those inventions, which allow for higher quality transmission over cellular networks with lower bandwidth requirements, for its streaming services, according to the complaint. In that case, Nokia seeks damages for the alleged infringement of eight patents by Apple.

The second suit accuses Apple of infringing 10 patents, many of which deal with transmitting and amplifying radio signals. Apple is also accused of violating a patent for translating natural language inquiries into database queries. Apple’s Siri digital assistant also violates a patent in this area, according to the complaint. Nokia seeks damages equal to no less than reasonable royalties and a court order against Apple products found to infringe its patents.

“Through our sustained investment in research and development, Nokia has created or contributed to many of the fundamental technologies used in today’s mobile devices, including Apple products,” Ilkka Rahnasto, head of Nokia’s patent business, said in a statement. “After several years of negotiations trying to reach agreement to cover Apple’s use of these patents, we are now taking action to defend our rights.”

In 2011, Apple and Nokia settled a two-year battle over patent royalties for mobile phones. Nokia stopped making phones after that, but kept patents related to that business.

Apple sued a group of patent-holding companies Tuesday in federal court in San Jose, California, over antitrust claims. Apple alleges the companies conspired with Nokia “as part of a plan to extract and extort exorbitant revenues unfairly and anti-competitively from Apple and other innovative suppliers of cell phones, and ultimately from the consumers of those products.”

Core Wireless Licensing Sarl, one of the companies that Apple said is working with Nokia, last week won a $7.3 million jury verdict against the iPhone maker in San Jose federal court for infringing two patents. Apple has asked a judge to rule there was no infringement.

Apple said that after it entered into a cross-license agreement with Nokia in 2011, the Finnish company launched “secret plans to monetize” patents that weren’t part of the accord. Apple said Nokia has transformed itself out of desperation, based on its own “failure as a supplier of cell phones.”

“It changed from a company focused on supplying cell phones and other consumer products to a company bent on exploiting the patents that remain from its years as a successful cell phone supplier,” Apple said in the complaint.

The Texas cases are Nokia Technologies Oyj v. Apple Inc., 16-cv-01440 and 16-cv-01441, U.S. District Court, Eastern District of Texas (Marshall). The California case is Apple Inc. v. Acacia Research Corp., 16-cv-07266, U.S. District Court, Northern District of California (San Jose).

By Nate Lanxon, Ian King and Joel Rosenblatt.

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