updated 02:30 am EDT, Thu July 24, 2008
Nokia, Qualcomm settle
Hours before going to trial, both Nokia and Qualcomm have reached an all-encompassing settlement over a year-old patent feud between the two companies, which could save them hundreds of millions in legal fees and help Nokia focus its development efforts in an increasingly competitive landscape. While the details were not disclosed, the settlement includes an up-front payment by Finish handset maker Nokia and on-going royalties payable to US-based Qualcomm. In addition, Nokia has agreed to assign ownership of a number of patents to Qualcomm, including patents declared as essential to WCDMA, GSM and OFDMA.
Announced on Wednesdsay, Nokia and Qualcomm said that the new 15-year agreement covers various standards including GSM, EDGE, CDMA, WCDMA, HSDPA, OFDM, WiMax, LTE and other technologies and will result in settlement of all litigation between the companies, including the withdrawal by Nokia of its complaint to the European Commission.
"We believe that this agreement is positive for the industry, enabling the market to benefit from innovation and new technologies," said Olli-Pekka Kallasvuo, CEO of Nokia. "The positive financial impact of this agreement is within Nokia's original expectations and fully reflects our leading intellectual property and market positions."
The settlement resolves the dispute over royalty payments, which began in April 2007 when the previous licensing agreement between them expired. Nokia argued that the licensing fees were too high, given that it controlled important technology with its own patents. Following a similar ruling in US earlier this year, Qualcomm in March was dealt a blow by UK High Court that invalidated some of its accusations of patent infringement against Nokia.
"I'm very pleased that we have come to this important agreement." said Paul Jacobs, CEO of Qualcomm. "The terms of the new license agreement, including the financial and other value provided to Qualcomm, reflect our strong intellectual property position across many current and future generation technologies. This agreement paves the way for enhanced opportunities between the companies in a number of areas."
According to one analyst, the settlement could mean as much as $400 million in royalties paid to Qualcomm next year (based on a 2 percent royalty fee on the 100 million phones equipped with Qualcomm technology that Nokia is likely to sell next year). The same analyst also estimated that Qualcomm could save as much as $200 million a year in legal bills. Last week, Nokia reported $20.9 billion in sales driven by sales of 122 million phones in the quarter (an increase of about about 21 percent versus the same quarter in 2007).
Downgraded by analysts following the problematic, but largely successful iPhone 3G launch by rival Apple, Nokia raised its guidance for what it expects to earn during the summer, explaining that it's "optimistic" about the sales through the summer based on its increasing emphasis on tying devices to service
Under the terms of the new 15-year agreement, Nokia has been granted a license under all Qualcomm's patents for use in Nokia's mobile devices and Nokia Siemens Networks infrastructure equipment. Further, Nokia has agreed not to use any of its patents directly against Qualcomm, enabling Qualcomm to integrate Nokia's technology into Qualcomm's chipsets.