Nokia iPhone Patent Infringement Lawsuit 2 Years Late

Nokia's lawsuit against Apple, filed this week in federal court in Wilmington, Del., alleges that the iPhone violates 10 patents owned by Nokia. Nokia is claiming that the technologies, such as security, speech coding, encryption, and wireless data connection and transmission, apply to all iPhones since the first generation, inclusive, was introduced, in mid-2007. That amounts to about 34 million units.

Although no dollar amounts are specified in the suit, typical royalties for the industry for essential technologies run 1-2 percent of the wholesale price. Wholesale cost of the iPhone to carriers has been estimated at $600, which means Nokia would be due from $6-12 each, or roughly 2 to 4 Billion dollars, and that doesn't include future sales. Apple has declined comment.

So why did it take Nokia more than 2 years to start the lawsuit? There are number of possible reasons. Perhaps the recently increasing global sales of the iPhone are putting heat on Nokias profits. Perhaps it took them that long to go through the thousands of patents they hold to put together an airtight case. Perhaps the two companies have been in royalty negotiations all along and talks broke down. The point is there are many potential business, legal and technical reasons behind the timing and it is too early yet to know.

Nokia is no stranger to Intellectual Property litigation, having battled with other industry players, for example Qualcomm, in recent years.

"The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards create intellectual property, which others then need to compensate for," according to a statement from Ilkka Rahnasto, Nokia's Vice President of legal and intellectual property. "Apple is also expected to follow this principle. By refusing to agree [upon] appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation."

But when it was being sued by Qualcomm over similar patents, such patent litigation was severely criticized by Nokia. Qualcomm filed 11 patent infringement lawsuits against Nokia between 2005 and 2007 relating to technology for accessing 3G wireless networks. Holders of a patent can take several different approaches to patent licensing. They may license it to component makers, in this case chipmakers, while waiving the licensing for downstream users of the technology, for example Apple or HTC.

Alternately, patent holders may decide to license just for end products, collecting fees from manufacturers when it is sold wholesale. Large end users like Apple also have options when they go to purchase chips. You can elect to source components with patent indemnity and then try to negotiate a favorable royalty to keep down costs, for example. Details of this kind may never emerge in court, but you can be sure the case will be watched closely in the tech press.