The largest handset maker in the world is suing the maker of one of the most popular, the iPhone, because, according to a statement released by Nokia on Thursday, Apple has refused to license any of the patents in question.
All iPhone models dating back to the original introduced in 2007 are infringing, according to Nokia. Nokia is asking the U.S. District Court in Delaware for an injunction on sales of iPhones and for unspecified damages.
"The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards create intellectual property, which others then need to compensate for," said Ilkka Rahnasto, vice president, legal and intellectual property at Nokia. "Apple is also expected to follow this principle. By refusing to agree to appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation."
Nokia has already reached licensing agreement on the patents in question with 40 other companies, including "most of the major device makers", according to Nokia spokesman Mark Durrant. Apple has thus far refused to cooperate, and filing the lawsuit was a "last resort". The two companies have been in negotiations for "some time," he added.
Nokia says it has spent more than US$60 billion on R&D related to wireless technology. The 10 patents it accuses Apple of violating are related to making phones able to run on GSM, 3G, and Wi-Fi networks. They include patents on wireless data, speech coding, security, and encryption, according to Nokia.
Apple did not respond immediately to a request for comment.
For every kind of technology you can think of (USB, wall plugs, video game controllers) there's an agreed upon standard. It's arrived at by companies making products that use the technology in question in the context of a standards-setting organization. They'll gather, debate over whose patented technology is best, and also agree in advance that every other company in the standard group will be able to license their patent at a reasonable rate.
Apple is one of a few companies--Nokia wouldn't expand on who the others might be--that is not licensing Nokia's 10 patents. Nokia says that for any phone to run on a GSM, 3G, or Wi-Fi network, it would have to license one of its patents.
Though it is asking the court to halt sales of the iPhone, the general consensus by legal observers and those who follow Nokia, is that it's not actually trying to pull the iPhone off the market permanently--injunctions are always used as leverage in these cases--but rather that it wants Apple to pay its fair share.
"There are companies that are patent trolls, that don't participate in the creation of technology, or they secretly acquire them. Nokia's not one of these companies. They're pretty up front about the patents they own," noted Jason Schultz, director of the Samuelson Law, Technology & Public Policy Clinic at the UC Berkeley School of Law. "They're probably not trying to put Apple out of business...but force Apple to play the same game that every other phone company has to play."
Apple analyst Gene Munster thinks Nokia is looking to extract a royalty payment of 1 percent to 2 percent of every iPhone sold from Apple, which would be about US$6 to US$12 per phone. With 34 million iPhones sold to date, that would be US$204 million to US$408 million in back payments Apple would have to pay if Nokia were successful in court. There's also the added risk of something called "willful infringement." Basically, if Apple were to be found in violation it'd have to pay three times the amount of whatever the judgment won by Nokia.
Apple could settle out of court, or it could try to show that Nokia either doesn't own the patents or that they're not valid in this case, both of which would be difficult, said Schultz.
"Invalidating 10 patents is a lot, that's like running the Boston Marathon. It's really hard to do. You might get one, two or even five," he said. "But 10 is a lot."
If it does go to court, strap in for a long ride. This kind of case could take up to two or three years of litigation.