Apple/Nokia: Nokia’s innovative past has hitched a ride on Apple’s future. The iPhone maker will pay an undisclosed — though substantial-sounding — sum to Nokia for rights to its technology. But settling the two-year dispute won't reverse the Finnish company's waning fortunes. It's the latest example of how patent portfolios can prolong the lives of tired tech firms.
While Apple has a big collection of patents for computing and personal digital devices, it's a relative newcomer to cell phones. The first iPhone only arrived in 2007. Nokia has been producing mobile phones for decades, stretching back to the clunky carphones of the 1970s. As the biggest firm, with an R&D budget to match, it is in a position to fight for fees related to many 4G phone technologies. Neither company is saying what the terms of the settlement are. But Nokia announced the payments would be large enough to improve its second-quarter bottom line. Similar agreements suggest a 1 per cent or so royalty on sales of iPads and iPhones. Based on sales forecasts, that would add to more than $500 million this year.
That’s good news for Nokia, which warned about its revenue and earnings last month. Its shares bounced 4 per cent on the news. It also provides momentum in negotiations with producers of devices using Android software. But it won’t solve the company’s huge market-share losses, particularly in smartphones, where most of the industry’s profits are now concentrated. Nokia’s net income already had been expected to fall 70 per cent this year to ¤680 million. A settlement slows, but won’t stop, that fall. More broadly, Nokia’s deal with Apple highlights the winds at the back of intellectual property holders. TiVo's market value shot up following a recent court decision over its television recording technology. An auction of Nortel's patent portfolio is heating up as Google, Microsoft, Hewlett-Packard — and even Nokia — weigh in. The ranks of so-called patent trolls — aggressive and opportunistic patent enforcers — are swelling. The revenue of one such firm, Acacia Research, has nearly tripled in two years.
But retiring to a life of patent hoarding has its limitations. Such litigation won’t bring Nortel back from bankruptcy or make Nokia’s phones must-have devices.
