Our present generation is most defined by the advent and rise of the smartphone, which brought technology from our desktops to our hands and further to our wrists. In a fray that saw technology companies like Apple grow to be world’s most valuable companies, the fight for market dominance has been fought as much in the marketplace as in patent courts — starting with Nokia attacking Apple in a series of lawsuits in 2009 and 2010.
Nokia filed its first patent case against Apple, igniting the so-called smartphone patent wars, on October 22, 2009 in the US District Court for Delaware. Nokia was visibly seething from the loss of its earlier prominence on the industry and as it became evident Nokia could not compete with the iPhone’s rise, it looked over to its huge patent portfolio to take as big a bite from the apple as it could. In this first complaint, Nokia accused Apple of infringing on 10 patents covering essentials of the GSM, UMTS and WLAN standards. In its complaint, Nokia stated that it has not only committed billions of dollars into research and development (including helping formulate industry standards) but also has been committed to licensing its standard essential patents under Fair, Reasonable And Non Discriminatory (FRAND) terms. Nokia had declared at least some of the ten patents as being essential to the GSM, UMTS and WLAN standards – all of which were implemented in the iPhone – and was entitled to royalties from Apple, even if under FRAND terms. The questions whether the ten patents were in fact standard-essential and whether Nokia was genuinely seeking fair and reasonable royalties were hotly debated and never fully answered.
As was expected, Apple responded to the first case in equal measure shortly afterward with its own patents – filing a one-up case covering 13 patents on December 11, 2009. What followed then was a series of tit-for-tat cases between Nokia and Apple – in all covering over 60 patents across 6 district cases, 2 ITC complaints and at least 3 cases in Europe, running concurrently and none betraying any sense of who had the better of the other.
While Nokia and Apple battled it out in the court, however, sales continued to grow for the iPhone as well as for Android phone manufacturers such as Samsung, Motorola and HTC – and Nokia slipped further behind. Torn between its own Symbian OS and Microsoft’s new Windows Phone OS, Nokia made one wrong decision after another – giving up market share to its rivals not only in the US and Europe but in the developing world as well.
Sensing rightly that marketplace competition from the new Android players was far greater threat than a patent war with Nokia, Apple shifted gears as well. Having already got a taste for battle from Nokia, Apple started targeting the major Android OEMs (HTC, Motorola and Samsung) with its own patent lawsuits in late 2010 and 2011 while simultaneously pursuing settlement negotiations with Nokia.
Nokia and Apple buried their disputes in June 2011 for an undisclosed (but presumably big) settlement including a one-time payment to Nokia – and Apple could then focus on the larger fight with HTC, Motorola and the even larger fight with Samsung, the new dominant player across the globe. The fight between Apple and Samsung would rage on in multiple courts for the next 5 years – and continues even today after the recent Supreme Court ruling vacating the damages calculation by lower courts in favor of Apple – and setting new precedent for calculating damages in design infringement cases.
Over the subsequent years, the smartphone patent wars drew swords from virtually every industry player – Apple, Microsoft, HTC, Motorola, Google, LG, ZTE, Ericsson, Qualcomm and Blackberry (RIM) individually as well as in cohorts like Rockstar Consortium and RPX Corporation which pumped billions of dollars in buying telecom and smartphone patents on behalf of the companies.
Nokia, while relatively absent from the fray after its settlement with Apple, had not been sitting idle. It sold its dwindling phone business rather richly to Microsoft in 2015 for $7.9 billion. The overpriced acquisition is seen by industry analysts as a $10 billion mistake by Microsoft. Regardless, it bought Microsoft a place in the smartphone roster that may have cost more had Microsoft chosen instead to enter the smartphone market from scratch.
Having lost its core competence, i.e. handsets, Nokia has no doubt been aching and preparing to get back into the fight. It seems to have taken two parallel approaches:
First, Nokia grew its patent portfolio by over a half in a merger with another telecom powerhouse Alcatel Lucent. While staying little more than a footnote in the smartphone marketplace, Alcatel Lucent is credited with a wide number of component technologies that make smartphones a reality – as well as a sizable number of standard essential patents.
Second, with its own patents, Nokia has allegedly been fighting a proxy war against Apple and Android manufacturers by transferring patent rights to multiple patent assertion entities (PAE) like Acacia Research and Conversant Property Management. These PAEs alone have sued Apple more than 12 times using former Nokia patents.
Being targeted by PAEs is nothing new for Apple — but in an anti-trust complaint dated December 20, 2016, Apple finally said enough was enough. Pulling no punches, Apple accused the PAEs of “conspiring with Nokia in a scheme to diffuse and abuse [standard essential patents] and, as the PAEs and Nokia fully intended, monetize those false promises by extracting exorbitant non-FRAND royalties in way Nokia could not”.
Using PAEs for direct attacks against Apple would be a smart, albeit sneaky, strategy for Nokia. Since PAEs do not themselves sell any products, there would be little risk of a countersuit from Apple – as well as a general lack of commitment to FRAND licensing terms that spell lower royalties.
Apple’s anti-trust complaint was exactly the flag Nokia had been waiting for. Over the very next couple of days, after five years of sitting on the sidelines, Nokia fired new shots directly at Apple – at least 12 new cases across the globe, covering 40 patents ranging from H.264 video encoding to RF and power management technologies used in Apple products.
- Regional Court, Dusseldorf, Germany – 8 patents
- Regional Court, Mannheim, Germany – 4 patents
- Regional Court, Munich, Germany – 2 patents
- Market Court, Helsinki, Finland – 3 patents
- High Court, London, UK – 3 patents
- Court of Turin, Italy – 4 patents
- Patent and Market Court, Stockholm, Sweden – 3 patents
- Commercial Courts, Barcelona, Spain – 1 patent
- District Court, The Hague, Netherlands – 3 patents
- High Court, Paris, France – 1 patent
- High Court, Hong Kong – 1 patent
- Tokyo District Court, Japan – 2 patents
- International Trade Commission, US – 8 patents
- US District Court for Eastern District of Texas – 18 patents
For at least some of these patents-in-suit, Nokia alleges that it has been trying to negotiate FRAND royalties with Apple – which Apple believes to be unreasonable and excessive. The timing and range of the cases two days after Apple’s anti-trust complaint show that Nokia was all but ready with a finger on the trigger to file the complaints that undoubtedly required months of due diligence and research beyond what Nokia would have performed as part of the FRAND negotiations.
Apple has so far not filed a countersuit against Nokia, but has pulled all Withings (owned by Nokia) products from its stores. A fresh slew of tit-for-tat cases are no doubt on the way as well, as these things usually go.
It seems unlikely that all of these different cases will reach trial and a wide-ranging settlement would be the most likely the endgame for both companies however long it takes. For its own sake however, Nokia will not only have to come out a winner in these cases but also manage public perception of its intentions – as a number of industry analysts start drawing parallels between Nokia (or what remains of it) and patent assertion entities. The proxy war approach if indeed it was a well thought-out strategy on Nokia’s part can undermine the otherwise respectable position Nokia has long held in the evolution of telecommunications technology across the world.
But tides can change quickly and public opinion has continued to shift against patent holders in the last few years. Whether that trend continues or reverses by the time Nokia and Apple get into the thick of these various cases remains to be seen. In the end, the human civilization is and always has been in a constant state of war with only intermittent periods of peace. The smartphone industry has had relative peace for the last year – the next few might not be as forgiving.