Apple faces the possibility of having to pay the world’s top mobile phone maker Nokia up to $1 billion for the technologies used in iPhones sold so far if it loses a lawsuit brought by Nokia, analysts said.
Nokia (NYSE: NOK) filed the suit in the United States Thursday, saying Apple (NASDAQ: AAPL) had infringed 10 patents and accusing the iPhone maker of trying to hitch a “free ride” on Nokia’s technology investment.
Apple, a latecomer to the mobile phone industry, has won a considerable share of the higher end of the market, but it has limited intellectual property assets compared with rivals, when all vendors work under cross-licensing agreements.
Neil Mawston at Strategy Analytics said Apple could have to pay Nokia anything between $200 million and $1 billion for patents used in 34 million iPhones shipped so far.
The analysts said Nokia has a case to claim such sums as it is one of the key patent holders in mobile technologies, alongside Qualcomm and Ericsson.
“It is almost inconceivable that someone can produce a mobile phone without using Nokia patented technologies,” said Ben Wood, research director at CCS Insight.
An Ericsson spokesman said Friday the company has a licensing deal with Apple.
Nokia said in its court filing it had made several price offers to Apple on per patent and on portfolio basis, but the U.S. firm had declined those.
The analysts said top vendors who have been in the industry for a long time usually pay a few percent of their revenue as royalties, but new entrants could pay more than 10 percent of sales price to IPR holders.
“Intellectual property licensing costs create a significant barrier for late entrants into the mobile phone space. As a result they become net payers to the big established players such a Ericsson, Motorola, Nokia and Qualcomm,” CCS Insight’s Wood said.
Nokia dominates the global handset market but it has lost some ground to new smartphone entrants like Apple, which entered the market with its iPhone in mid-2007.
Nokia’s previous major legal battle ended last year with a one-time payment of 1.7 billion euros ($2.55 billion) to U.S. mobile chipmaker Qualcomm as part a patent agreement with Qualcomm.