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iPhone infringes our patents, Nokia says in lawsuit

iPhone infringes our patents, Nokia says in lawsuit

Nokia, the world’s largest cellphone maker, sued Apple yesterday, claiming the iPhone violates 10 patents for wireless transmission technologies.

The iPhone, which was introduced by Apple in 2007, uses two industry standards for wireless communications, GSM and UMTS, that Nokia developed as part of a consortium of global telecommunications companies. Nokia said it had repeatedly asked Apple to license its patents related to these standards and that Apple had refused.

“By refusing to agree appropriate terms for Nokia’s intellectual property, Apple is attempting to get a free ride on the back of Nokia’s innovation,” said Ilkka Rahnasto, vice-president for legal and intellectual property at Nokia.

Steve Dowling, an Apple spokesman, said that the company did not comment on pending litigation.

Patents disputes are standard practice in the world of electronics, especially cellphones, where the products are complex and a lot of money is at stake.

“Sometimes it can take years to figure out if a product infringes on a certain patent,” said Jerry A. Kaufman, the president of Alexander Resources, a consulting firm that specialises in telecommunications patents.

Lawsuits are a common negotiating tactic, he added.

Typically, the royalties for essential patent portfolios in cellphones make up 1 per cent to 2 per cent of the wholesale price. In some cases, the cost can be as much as 5 per cent, Kaufman said. In total, a cellphone maker might spend between 5 per cent and 15 per cent of the wholesale cost of the phones on licences for patents. (That figure understates the total cost of intellectual property because many of the chips and other components a manufacturer buys include licences for technologies they use.)

The potential return to Nokia could be enormous. The wholesale cost to wireless carriers of the iPhone is estimated to average about US$600 (RM2,100). A 2 per cent royalty would represent US$12 for each phone sold. In just the most recent quarter, Apple sold 7.4 million iPhones. It has sold more than 34 million in total.

Last week, Nokia said its share of the global smartphone market slipped to 35 per cent in the third quarter, from 41 per cent in the second, as its competitors Apple and Research In Motion, the maker of the BlackBerry, gained.

As communications equipment sales decline, manufacturers are looking to be more aggressive in making money from their patent portfolios, said Neil Mawston, an analyst at Strategy Analytics in London. “The intellectual property rights wars are ramping up in the handset industry now,” he said.

Nokia said it had invested more than 40 billion euros (RM200 billion) over the last 20 years to develop the two technologies, which it has licensed to 40 leading mobile phone makers. GSM is the most common global standard for wireless communication, and UMTS is a related standard for fast data communication.

Several other communications companies, including Sony Ericsson and Samsung, also contributed technology to the GSM standards. These firms typically license their patents to each other at no cost, said Roger Entner, a senior vice-president for telecommunications research at Nielsen.

Handset makers not part of this group typically pay royalties — but Apple has not. “Apple is a Johnny Come Lately and has not paid its dues to the club,” Entner said.

Nokia filed the suit in United States District Court in Delaware. Nokia did not specify a dollar amount it was seeking.

An analyst said Nokia’s suit was part of a trend of telecom equipment makers being more litigious. Those makers are increasingly searching for new revenue as wireless markets become saturated and sales begin to stagnate.

“Where there is a hit, there is usually a writ,” said Mawston of Strategy Analytics. — NYT

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