Nokia Is Ready To Flex Patent Muscles During Tough Transition

After Apple (NASDAQ:AAPL) and Samsung, it is Nokia’s (NYSE:NOK) turn to engage in the patent wars. Two months ago, the Finnish handset maker sued rivals HTC and Research in Motion (NASDAQ:RIMM) on multiple counts of patent infringement at several courts in the U.S. and Germany. And now it is mulling over dragging Google (NASDAQ:GOOG) /Asus to court over their Nexus 7 tablet which Nokia claims is infringing on some of its Wi-Fi patents. ^[1]

With its mobile phone sales flagging as Apple and Samsung run away with the smartphone market, Nokia is relying on its patents to draw in some licensing revenues and mitigate the impact of what is likely to be a long and painful Windows Phone transition process.

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Nokia has patent muscle

Nokia has a very strong patent portfolio, comprising of over 30,000 patents and around 10,000 patented innovations. It already earns a steady royalty income from its patents, which it has licensed to multiple mobile handset makers around the world. The company reported in its Q1 earnings that it stands to earn $500 million from its intellectual property related license deals every year at the current run rate.

Last year, the company filed a lawsuit against iPhone manufacturer Apple for some of its patents which were settled after the latter agreed to pay a one-time payment and recurring royalty fees.

However, Nokia has not been a major litigator in the past unlike Apple, Samsung and Motorola that have been suing each other for quite some time now. Nokia, on the other hand, has maintained a pretty low profile in such matters, focusing instead on developing and marketing its Lumia smartphones.

Patent licensing could cushion short-term losses

But with the Lumia sales slow to gain strength and Nokia’s Symbian sales dropping fast, the company is looking for alternate ways to boost revenues while still staying the course for the planned transition. Nokia’s recently announced Q1 results showed that the Lumia is being received well by both the carriers and consumers alike, with sales doubling over the previous quarter. However, that was not enough to cover the losses the company sustained on the Symbian front. (see Nokia’s Earnings Show Pricing Pressures And Slow Windows Phone Transition) The company saw overall mobile phones sales drop 24% over Q1 2011, as Samsung raced ahead to become the largest handset maker in the world breaking Nokia’s 14-year-old reign at the top.

With net losses in the first quarter and a bleak outlook for the next few quarters, Nokia needs all the financial support it can get. This is why it will be much more willing to just get Google to pay up the licensing fees instead of trying to get its tablets banned, unlike Apple. Filing for an injunction to ban Google’s tablets would serve little purpose since neither does Nokia compete in the tablet space nor does it want to fight a protracted court battle, incur high litigation costs and distract itself. Google may, however, not be as willing to fork up the license fees easily now that it has Motorola’s patents and may cross sue. Although any financial settlement from such a lawsuit filed could be, at best, months away, Nokia is willing to take any victory that falls its way in this uphill battle that it faces in the smartphone market.

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1. Nokia may sue Google over Nexus 7 tablet, BGR.com, Jul 2nd, 2012 [↩]