RealTime IT News

Apple to Nokia: We're Ready to Rumble

Nokia and Apple lawsuit
Apple isn't backing down from Nokia's charge that it infringed on 10 patents covering technology used in the iPhone.

And the Finnish mobile giant isn't retreating, either, from its charges that the Cupertino, Calif.-based iPhone maker failed to license key wireless technology in the popular smartphone -- and that it's "attempting to get a free ride" from Nokia's research on GSM, 3G and Wi-Fi.

In response to last week's lawsuit, Apple (NASDAQ: AAPL) said in its latest 10-K filing with the Securities and Exchange Commission that it would "vigorously" defend itself against the charges.

For both companies, the stakes appear high: Some legal analysts estimate that damages from the suit could be worth $1 billion.

Nokia (NYSE: NOK) maintains that Apple refuses to play fair following a breakdown in negotiations over a wireless technology licensing agreement.

"We have filed this lawsuit as a last resort -- we are not a litigious company by nature -- following Apple's refusal to agree to appropriate terms for their use of Nokia's intellectual property," Laurie Armstrong, director of communications for Nokia's North America division, told InternetNews.com.

So far, Apple has said little in response to the lawsuit, with its 10-K offering its first public comments on the matter.

"The complaint alleges that these patents are essential to one or more of the GSM, UMTS and 802.11 wireless communication standards, and that [Apple] has the right to license these patents from plaintiff on fair, reasonable, and non-discriminatory ("FRAND") terms and conditions," Apple said in the filing. Nokia "seeks unspecified FRAND compensation and other relief."

Apple did not responded to queries for further comment by press time.

Nokia, meanwhile, said it just wants fair compensation for its technology.

"This action is not about stopping or interrupting Apple's commercial mobile phone business; it is about appropriate compensation for the use of our IP, ensuring Apple is competing with others in the industry on a level playing field," Nokia's Armstrong said.

"Nokia has already successfully entered into license agreements (including these patents) with approximately 40 companies including virtually all the leading mobile device vendors," she added. "Apple has been infringing on these patents since the introduction of the iPhone in 2007 but has so far declined to agree to appropriate terms to license these. This is the next logical step."

But even under the worst-case outcome of the suit, Apple -- fresh off its most profitable quarterly results to date -- would still most likely be on solid footing, according to PiperJaffray analyst Gene Munster.

"Nokia is likely looking to obtain a patent royalty of 1 percent to 2 percent ($6 to $12) on every iPhone sold in compensation for its IP concerning GSM, 3G, and Wi-Fi technologies on mobile devices," Munster said in a research note.

"Even the most extreme scenario ($12/unit royalty), which we believe is unlikely, would not change our thesis on the iPhone and its positive impact on shares of AAPL."

News of Nokia's lawsuit comes as the company, the world's largest mobile phone maker, has seen its dominance in the smartphone sector start to slip with grim sales numbers. Meanwhile, Apple and other rivals continue to gain market share.

Nokia is also seeking to undergo a transformation from handset maker to a provider of mobile applications and services through its Ovi brand, as well as a manufacturer of non-phone wireless computing devices.

Under the new strategy, Nokia plans to begin selling a netbook, the Nokia Booklet 3G. The company also has a wireless tablet on tap, the N900, and recently updated its SDK for mobile developers of its Symbian OS.