Nokia Fires Volley of Patent Lawsuits at Competitors
It may be folly to engage in lawsuits that tie up resources and create a climate of confusion when a company has a solid footing in the market, but for a company that's slipping -- like Nokia -- it could be a sensible strategic move. Uncertainty in the market is not always a bad thing, noted law professor Andrew Beckerman-Rodau. "It can delay a competitor and make it difficult for that competitor to make sound business decisions."
05/02/12 12:44 PM PT
Nokia announced Wednesday that it has filed a complaint with the United States International Trade Commission (ITC) against HTC, as well as lawsuits in the U.S. and Germany against Research In Motion and Viewsonic, claiming the three firms violated a total of 45 patents.
Six of the patents in this new round of litigation also figured in Nokia's lawsuit against Apple over technology used in the iPhone. The companies settled that dispute last year, with Apple agreeing to make a one-time payment and subsequent royalties.
The patents now in question cover hardware inventions for power management, multimode radios and dual-function antennas, as well as software features such as application stores, multitasking, navigation, conversational message display, dynamic menus, data encryption and retrieval of email attachments on a mobile device.
"Nokia is a leader in many technologies needed for great mobile products," said Louise Pentland, chief legal officer at Nokia.
"We have already licensed our standard essential patents to more than 40 companies. Though we'd prefer to avoid litigation, Nokia had to file these actions to end the unauthorized use of our proprietary innovations and technologies, which have not been widely licensed," she maintained.
"HTC has been a licensee of Nokia on wireless essential patents since 2003," said HTC spokesperson Lori Rodney. "We are waiting to receive a complaint and won't have any comments until our legal team has received and reviewed it."
The Lawsuit Games
Filing lawsuits against one another seems to be just part of doing business for technology firms. In fact, the companies that are at odds with each other one day may be partners on another. Nokia and HTC, for example, previously joined forces to fight patent-infringement claims by IPCom, which reportedly obtained mobile-phone patents from Robert Bosch in 2007.
It's only rarely that these engagements actually go to trial, though.
"The public has a great misconception of lawsuit," Andrew Beckerman-Rodau, a professor at the Suffolk University Law School, told the E-Commerce Times. "Most settle or work out a licensing deal, and rarely do you actually end up in court."
Still, litigation is expensive, time-consuming, and full of uncertainty.
"This point is not specific to patents of course," said Polk Wagner, professor of law at the University of Pennsylvania. "It is almost always Pareto-improving to settle lawsuits rather than litigate."
If the Patent Lawsuit Fits
There are several possible explanations for why companies look to lawsuits as a business practice.
"It is a way of keeping a competitor away from technology," said Beckerman-Rodau. "In Nokia's case, they went from being the largest mobile phone maker in the world to practically being irrelevant in the space. For them, this is a death struggle, as a way to fend off competition."
It can also be a method to negotiate a better deal, and even provide cross-licensing opportunities. All parties know that lawsuits can be extremely expensive. However, they can also create uncertainty, and that's not always a bad thing.
"It can delay a competitor and make it difficult for that competitor to make sound business decisions if they are facing a lawsuit," noted Beckerman-Rodau.
It can be difficult to settle disputes when the parties involved have widely divergent views on the expected value of the litigation, however.
"For example, if Nokia and RIM agreed that the relevant patent licenses were worth [a specific sum], then settlement would be easy," stressed Wagner. "This is not the case."
One of the major problems with patents is that their scope and validity are often highly uncertain.
"It is hard to settle in many cases, and I think this is especially the case in the smartphone area because of a number of technological aspects," added Wagner. Hundreds of patents can apply to a single product.
"Thus, you get a lot of litigation," he said. "I suspect that most of these cases will ultimately be settled -- at some point, the costs outweigh the possible gains -- but the market is growing so fast that that point may be a long ways off."
In the case of Nokia, which is fast losing ground to competitors including Samsung and Apple, the lawsuits could be one of the last ways for the company to fend off competition. However, even if Nokia wins, it won't be the biggest winner.
"This is another in a long line of these disputes," said telecommunications analyst Jeff Kagan.
While it could mean significant licensing fees for Nokia -- which may be worth the time and effort -- the company still may not come out on top, he emphasized. "This is a cost proposition, and the winners on both sides are the lawyers."