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Apple undamaged by patent deal, but is it a change of fortune at Nokia?

At no stage did any of us at Faultline ever think that Apple was going to end up getting away scot-free from the patent attack of Nokia

By PETER WHITE

Published: 16 June, 2011

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At no stage did any of us at Faultline ever think that Apple was going to end up getting away scot-free from the patent attack of Nokia. If Nokia could manage a legal stand-off with the Qualcomm legal eagles over patents, then Apple was never in the race.

So far the deal cut between the two says only that Apple will make a one-time payment to Nokia and pay ongoing royalties, but no amounts have been revealed, and guessing at 1% to 2% of total device costs for the iPhone and 3G iPads, that is perhaps a $1 billion backlog and perhaps as much as $200 million a quarter going forwards – none of which will make Apple bat an eyelid, but it will give us a target to look for when Nokia figures are revealed for the quarter.

The result is a two way patent license agreement with Apple which settles all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission.

"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."

The first tone we picked up from the blogging community is that Apple should have strung it out longer, because Nokia’s not going to be around for that long. Of course the global reach of Nokia and its strength in emerging markets means it will be cash positive throughout its difficulties and will never be forced into breaking itself up or getting out of handsets. That’s all just hot air from a US financial community which has never understood the key strengths of Nokia. Let’s just say that if it does die, it will take an awfully long time over it, so Apple had to settle.

Also from a purist point of view Apple is not an investor in R&D and Nokia is and always has been. That’s not to decry Apple – knowing what to do with technology is as important as actually inventing it, and betting the shop on your decisions is a peculiar talent of Apple under Steve Jobs. But it had to pay and if it loses $200 million a quarter, but has quarter’s like its last one, it might dent a 3% hole in its profits, but since its income tends to grow at such a fantastic rate, this could be a huge relief that Apple has not had to pay a bigger price. There are other patent disputes out there, not the least of which is one with Samsung which makes many of its components, but the one with Nokia was the most likely to cause Apple embarrassment. Others are with Motorola and HTC.

Nokia said that during the past 20 years it has invested €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.

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