Nokia Corp (ADR) (NOK) and Apple Inc. (AAPL) Stock Launch New Patent War

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Just as it seemed as though the smartphone patent wars had begun to settle down, they’re back in a big way. Apple Inc. (NASDAQ:AAPL) is in the thick of it — as it so often is — and this time the adversary is Nokia Corp (ADR) (NYSE:NOK). Here’s everything you need to know about the latest Apple patent lawsuit.

Apple Patent Lawsuit: Nokia Corp (ADR) (NOK) and Apple Inc. (AAPL) Stock Launch New Patent War

Source: Nokia

FRAND, AAPL and NOK

Apple and Nokia have had a long history of litigation that culminated in a 2011 agreement. Apple agreed to pay Nokia licensing fees worth hundreds of millions of dollars in exchange for its use of technology patented by NOK. As part of the agreement, AAPL has also paid NOK ongoing royalties on iPhone sales.

At the heart of their dispute — which began in 2009 — are patents which have been ruled to be covered by FRAND terms. Fair, Reasonable and Non-Discriminatory licensing terms are applied to patents that are considered to be essential to an industry. FRAND prevents key technologies like 3G radios from being controlled by a single patent holder, while ensuring that patent holder does receive fair royalty payments from all companies that use it.

Apple Patent Lawsuit: Who Fired the First Shot?

Who shot first isn’t necessarily key to the eventual outcome of a case, but it does help to understand the strategy being employed.

In this case Nokia is clearly the aggressor and it’s bringing in the big guns to help it pressure Apple. This latest battle apparently began with Nokia selling the rights to some of its patents to two firms with a reputation of being “patent trolls.” Conversant Inc (NASDAQ:CNVR) and Acacia.

These patent assertion entities (also known as PAEs) have a history of filing tech lawsuits after acquiring patents from partner companies, then splitting the proceeds with the original patent holder. Acacia alone has sued Apple over 40 times in the past.

Acacia recently won a $22.1 million verdict against Apple — for infringing on a patent acquired from Nokia — and Conversant was on the winning end of a $7.1 million judgement against Apple earlier this month. Again, patents acquired from Nokia were at the heart of this lawsuit.

In another wrinkle in this battle, just days ago, Conversant hired Apple’s former head of patent licensing as its new president and CEO.

AAPL retaliated by filing a lawsuit against Nokia, Conversant and Acacia. In it, the company accused the two PAEs of:

“Conspiring with Nokia in a scheme to diffuse and abuse [standard essential patents] and, as the PAEs and Nokia fully intended, monetize those false promises by extracting exorbitant non-FRAND royalties in way Nokia could not.”

And Then Nokia Launched Its Own Apple Patent Lawsuit

On Dec. 21, Nokia launched its own Apple patent lawsuit in German and U.S. courts. In a press release announcing the action, Nokia stated:

“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. 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.”

Nokia’s lawsuit covers 32 patents (not covered in the 2011 agreement) it says Apple is violating in many of its mobile devices, including the iPhone.

What is the Likely Outcome?

As so often seems to be the case in these patent lawsuits, the only sure winners will be the lawyers representing both sides.

Nokia appears to be pursuing the Apple patent lawsuits strategy as a revenue-generating tactic. Acacia and Conversant are obviously hoping to cash in on a series of victories.

It’s possible that Nokia and its partners may win settlements from Apple, but that outcome is far from certain. The amount of money any settlements may entail is also far from certain, but it’s unlikely to have any material impact on AAPL.

It’s possible that AAPL may ultimately seek another large-scope agreement with Nokia, similar to the 2011 agreement, in order to avoid a series of distracting lawsuits. In that case, Nokia could gain additional ongoing royalty revenues. Or, if Apple has its way with the lawsuit it filed against Nokia, Acacia and Conversant, the strategy of “Patent trolls” continually and aggressively suing over perceived patent infringements could be dealt a serious blow. If that were to happen, Nokia could be left with little but legal bills.

Since announcing it was suing Apple, Nokia stock is down nearly 5%. The cases are a long way from actually going to court, but clearly investors don’t believe the move is going to pay off for NOK.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2016/12/nokia-corp-nok-apple-inc-aapl-apple-patent-lawsuit/.

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