Finding a winner in the battle between Nokia, the world’s largest cellphone maker, and iPhone maker Apple could take years unless they agree on a licensing deal outside the courtroom.
Nokia dominates the global handset industry but has lost ground in the high-end of the market to new players like Apple which entered the market with its iPhone in mid-2007.
Nokia launched a new patent broadside against Apple on Tuesday, escalating a battle for control of the smartphone market that has already led to a flurry of lawsuits.
Following are the main scenarios of the legal battle starting to unfold:
CASE IN DELAWARE
Nokia filed its suit in the District Court of Delaware, United States, saying Apple had infringed 10 patents in technologies like wireless data transfer, a key factor in the success of iPhone.
The patents also cover speech coding, security and encryption, and are infringed by all iPhone models shipped since the iPhone was introduced in 2007, Nokia said.
The case is expected to last 2-3 years, and analyst estimates for compensation Nokia is seeking range from $200 million to $1 billion.
Apple is expected by analysts and lawyers to countersue, in which case the two suits could be merged.
“I would not be surprised to see a counter-claim from Apple citing patents it owns that it believes Nokia is infringing,” said Ben Wood, research director at CCS Insight. “This type of tit-for-tat approach has occurred in previous patent battles as each player tries to improve its negotiating position.”
The Delaware case could be stayed for re-examination of patents or if one of the companies takes the case to the U.S. International Trade Commission (ITC).
It is unlikely someone could make a mobile phone without using technologies Nokia has patented, but lawyers said that would not prevent Apple questioning the patents.
Nokia has successfully attacked patents of Qualcomm as part of the major global legal fight which lasted from 2005 to 2008, and also of InterDigital earlier this year.
“There are so many ways to attack a patent,” patent lawyer Alton Hornsby from law firm Merchant & Gould said.
A patent’s novelty and non-obviousness are often questioned.
Apple could ask patent office to invalidate the patents or to review them in the U.S. Patent Office, where interparty re-examination could take 6-7 years.
“It would definitely cause a ripple in the industry if Apple were to invalidate those patents. Where would it put all the other companies?” Hornsby said.
Nokia has cross-licensing deals with 40 companies, including all top cellphone makers but Apple.
OTHER VENUES — U.S. ITC, EUROPE
If the case drags on, Apple or Nokia could take it to European countries, as happened in the Nokia-Qualcomm battle.
In the United States, the ITC is an increasingly popular venue for patent lawsuits because it can bar imports of products made with infringing technology. The Delaware case could be stayed until an ITC decision.
“The chance of Nokia, or Apple, letting this issue go to the ITC is less than 50 percent,” said Steven Nathasingh, managing director of U.S. research firm Vaxa Inc.
“In cases where ownership rights are clear, a settlement is more likely since each side gives up some control to the court over the outcome and it saves time and money. Neither company can afford to be distracted right now given new entrants into the wireless handset market,” he said.
Analysts said the best solution for both companies would be settling the case with a mutually acceptable payment level.
“Nokia wants to be careful it doesn’t kill the goose with the golden egg while Apple does not want to tarnish its premium brand by being continuously sued by other companies for using their technologies without payment,” Nathasingh said.
“They both have something to gain if they can put their heads together for a win-win,” he said.
Nokia’s three major legal fights
Since Motorola Inc launched a patent attack on Nokia in 1989, the Finnish firm has built one of the mobile industry’s widest patent portfolios. Only Ericsson and Qualcomm Inc have comparable portfolios.
The following are key facts about three major legal battles in Nokia’s history:
MOTOROLA VS NOKIA
In the 1980s Nokia rose to became one of the world’s top cellphone manufacturers, surprising established players.
Industry reaction: one April morning in 1989 a large box with more than 16 kilograms of documents, charging the firm with infringing nine Motorola patents, landed in the lobby of Nokia’s Salo plant in southern Finland.
“In April 1989 Motorola declared a war on Nokia, and I had to receive the declaration,” Anne-Liisa Palmu-Joronen, a lawyer at Nokia’s phone unit at the time, wrote in her memoirs.
Motorola took Nokia to the International Trade Commission and a court in Chicago and Nokia agreed in November to pay more than $10 million to settle the case.
Palmu-Joronen says Nokia learned from the 1989 Motorola case the role of immaterial rights in the battle for market share.
“The immaterial and invisible part of the battle on the global market would in the future be a significant part of the competiveness for the company like Nokia,” she writes.
QUALCOMM VS NOKIA
In mid-2008 Nokia and Qualcomm settled a 3-year, three-continent legal battle over patent licenses and royalties for 15 years. The battle alone cost the companies tens of millions of dollars in legal fees and worried investors on both sides of the Atlantic.
In April 1992, the two firms had signed a licensing agreement, giving Nokia access to Qualcomm’s CDMA patents. Over 15 years, Nokia says it paid $1 billion for Qualcomm’s “early patents,” giving it a fully-paid, royalty-free license to those.
But when the smoke cleared, Nokia still agreed to a hefty one-time payment of 1.7 billion euros, a deal that also opened the door for Nokia to use Qualcomm chips in its phones.
NOKIA VS APPLE
A legal battle between Apple and Nokia over patent infringement is likely to last for more than a year, said Bill Merritt, the head of mobile licensing firm InterDigital.
Nokia filed a suit in the United States in October, saying Apple had infringed 10 patents in technologies including wireless data transfer, a key factor in the success of iPhone. The suit accused Apple of trying to hitch a “free ride” on Nokia’s technology investment.
Apple, which entered the industry in mid-2007, overtook Nokia last quarter as the cellphone maker generating the highest total operating profit.
Apple filed a countersuit on December 11 claiming that Nokia is infringing 13 Apple patents.
“Other companies must compete with us by inventing their own technologies, not just by stealing ours,” Bruce Sewell, Apple’s General Counsel, said in a statement.
On Tuesday, Nokia said it had filed a complaint with the U.S. International Trade Commission (ITC) alleging that Apple infringes Nokia patents in “virtually all of its mobile phones, portable music players, and computers” sold.
The inclusion of the U.S. firm’s iconic iPod and iMac products in the complaint marked an escalation from the previous patent claims.