Apple Could Owe Nokia as Much $1B, Report Says

Nokia's lawsuit against Apple alleging that the iPhone infringes on Nokia's patents may cost Apple in terms of public opinion as well as financially. It's also bad timing, says an analyst, coming alongside Microsoft's strong launch of Windows 7.

The lawsuit Nokia filed against Apple on Oct. 22 could cost the iPhone maker up to $1 billion, according to reporting by Reuters.
 
Nokia is alleging that the iPhone infringes on 10 patents held by Nokia that are relevant to wireless data, speech coding, security and encryption. And while approximately 40 companies pay to license Nokia's intellectual property, Apple does not.
 
Charles King, an analyst with Pund-IT, told eWEEK that the estimate The New York Times worked out seems more reasonable, in which Nokia would receive a 2 percent royalty, or approximately $12, for each iPhone Apple has sold. Based on sales of 34 million handsets, compensation could be over $400 million-and that's before any possible penalties.
 
It's not as sexy a number as $1 billion, "but it would still be a nice piece of change for Nokia," King said.
 
"According to Nokia, they've been telling Apple for months now that they owe them money for the patents they're using, and Apple has refused to pay them anything," he continued. "From Nokia's point of view, they've tried the carrot and to be nice guys, and now it's time to bring out the stick."
 
In a statement Nokia released Oct. 22, Ilkka Rahnasto, Nokia vice president of legal and intellectual property, said, "By refusing to agree to appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation."
 
Nokia additionally reported in the statement that it has spent approximately 40 billion Euro, or $60 billion, on R&D over the last two decades and has more than 10,000 patent families. King says as far as he knows, Nokia's IP is necessary for building phones, and the other phone makers consequently pay Nokia for the licensing.
 
"Cupertino seems to be the one bad apple out of the bunch," King mused.
 
How the lawsuit, and Apple's reaction, will play out likely depends on how the story is spun publicly. Will Apple be perceived as the bad guy? "Nokia's evidence that they're owed a payment seems to be very strong. The weight of this may rest with Apple having to prove ... they're not liable," King said.
 
He added that it could also prove damaging for Apple if the suit affects its stock price. "Apple's been seen to be relatively bulletproof on the iPhone, and if the case goes in Nokia's favor, this could create a sense that there's a weakness there."
 
A third factor may be Microsoft's Oct. 22 launch of Windows 7.

"With Microsoft coming out of the gate very strongly with Windows 7, the last thing Apple needs is a distraction [involving] what has proven to be their strongest product, outside of the iPod," King said.
 
That said, whatever money Nokia might get from Apple still wouldn't be enough to put the ailing phone maker back on its feet. While Nokia controls the majority of the mobile handset market, on Oct. 15 it announced fiscal third-quarter losses of approximately $838 million, amounting to a loss of 19.8 percent year over year.
 
"Any amount of money is welcome money," King said, "but they've got other fish to fry in order to be as healthy as they'd like to be."