Buried in the Nokia results statement is a fairly damning conclusion about Apple’s attitude to patents – it has failed to renew the Nokia patent agreement which it signed in 2011, which needed to go to court at that time. This was first announced mid-December last year.
Apple has now either sued or withheld payments from every major cellular patent holder in Samsung, Nokia, Qualcomm and Ericsson – always arguing the terms should be FRAND – fair, reasonable and non-discriminatory – which it views as paying next to nothing despite the $Billions it cost these companies to invent these technologies. These four companies hold some 55% of all LTE patents. Is this good business? Brinkmanship? Or a belief that if you are not as US company you have no rights to patents? Or does Apple fundamentally not agree with IPR?
In a quarter where Apple has sold more phones than anyone else on the planet, not contributing a single technical component to any standard in cellular, doesn’t it seem hypocritical for so much litigation, especially as most of these companies are net payers to Apple for its “obvious” UI and touch patents, many of which are questionable.
Apple is currently in dispute over Qualcomm patent licenses, which it accused of double dipping – taking a charge for each chip from the manufacturers of those chips, and then charging Apple for the right to use the chips as well. This has been the Qualcomm policy on patents since time immemorial and past disputes have led to precedents – notably one with Ericsson, in 1999, which related to CDMA, a technology entirely invented by Qualcomm, in which Ericsson agreed to let Qualcomm into the club for cellular royalties by co-developing a converged standard for 3G. It was in this trial that the practice of double dipping was established in US courts as legal, if not acceptable and there were event hints of triple dipping, where the operator too paid license fees. The recent Federal Trade Commission 0complaint is likely to founder on those precedents.
It also took all of 2015 for Apple to renew a royalty deal with Ericsson after two prior years of Apple sticking its head in the sand and ignoring all approaches from Ericsson.
Nokia said of the suit it filed in December with Apple that as of today, in actions across 11 countries in Asia, Europe and the US, there are now more than 50 Nokia patents in suit, covering technologies such as display, user interface, software, antenna, chipsets, video coding, as well as 3G & 4G cellular standards. Apple has filed counter suits.
The difference this time around is that the flimsy Apple UI and software patents are older and less secure under US law (after the Supreme Court changed the definition for software patents), and Nokia brings to market all the Nokia Siemens Networks patents as well as the Alcatel-Lucent patents.
While Qualcomm has a certain amount of trepidation that it may upset a large customer, Nokia has no such fear, and as it re-enters the handset market would like nothing more than to stop Apple shipments stone dead. It may well take a year to settle this dispute as the Ericsson one took, but don’t be surprised if Nokia gets heavy handed with Apple, by applying to block sales in a number of major countries, as Apple pioneered against Samsung.
Nokia reported its Networks business revenue fell 14% but still has margins of 40% and its Technologies revenue fell 24% and lost half its profits, but it attributed much of this to the absence of the Samsung arbitration award, which happened in the earlier year. And Nokia said it experienced a 34% sales increase in “other” revenues due to strong growth in Alcatel Submarine Networks.