Nokia Corp. and Apple Inc. agreed to bury the hatchet in a long-running legal row, with some estimating Apple will likely pay the struggling Finnish handset maker hundreds of millions of dollars to settle all patent litigation between the two companies.
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Apple's and Nokia's patent lawsuit has ended, with Apple agreeing to pay a settlement plus royalties to Nokia. But the legal win may not be enough to turn the Finnish company around, WSJ's Christopher Lawton reports. (Photo: Reuters.)
Apple will make a one-time payment to Nokia and pay continuing royalties as part of a patent-license agreement, Nokia said Tuesday. Nokia—which warned several weeks ago that it might not book a profit in its core cellphone business this quarter in a market increasingly dominated by Apple's iPhone and smartphones using Google Inc.'s Android software—said it expects the deal to boost second-quarter earnings.
Nokia declined to provide specific financial terms of the settlement. Swedbank AB analyst Jari Honko estimated Apple's one-time payment to Nokia could be around €500 million, or about $720 million. "Investors should be expecting quite a significant impact," Mr. Honko said. "We are talking about hundreds of millions."
Apple, meanwhile, also claimed victory, saying the licensing agreements exclude many of the features that "make the iPhone unique." The company declined to comment on financial terms.
The dispute is one strand in a tangle of patent fights in the fiercely competitive and fast-moving smartphone industry. Companies are increasingly relying on patent litigation to slow the progress of their competitors and capture their share of surging smartphone sales.
The Nokia-Apple dispute dates back to 2009 when Nokia first demanded royalties after claiming in a U.S. federal court that Apple's iPhone had violated 10 patents, following up shortly after with additional claims against the iPad.
Apple countersued, and in March Nokia filed its second complaint with the U.S. International Trade Commission saying that Apple had infringed Nokia patents "in virtually all of its products."
That most recent complaint meant Nokia had 46 patents in suit against Apple. In addition to the two ITC complaints, Nokia had filed cases on the same patents in the U.K., the Netherlands and Germany.
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The Nokia patents in question cover a range of handset technologies and features such as touch scrolling and display illumination, Nokia spokesman Mark Durrant said, adding that the company has spent €43 billion in research and development over the past few decades to build its broad patent portfolio.
"We're glad to put this behind us and get back to focusing on our respective businesses," Apple Europe spokesman Alan Hely said.
Apple, for example, is also embroiled in legal battles with companies such as HTC Corp., Motorola Mobility Holdings Inc. and Samsung Electronics Corp. over products such as smartphones and software.
The smartphone market is expected to expand 49% in 2011 to more than 450 million units, growing more than four times as fast as the overall mobile-phone market, according to market researcher IDC.
Swedbank's Mr. Honko said Nokia's vast patent portfolio gives the company a powerful tool with which to seek fees from other handset makers, something Nokia Chief Executive Stephen Elop earlier this year said the company would do more aggressively.
The patent agreement could also have major implications for Google's Android operating system and the manufacturers using it because Android and Apple's mobile software are similar, meaning Android may also be using many of the same technologies in question, said Florian Müller, an intellectual-property consultant in Starnberg, Germany.
Most of the time, the handset maker is the defendant in such cases, he added.
A Google spokesman declined to comment.
The settlement israre good news for Nokia, after the company conceded last month that it is struggling in key markets to compete against smartphones using Android and its core handset unit might not book a profit in the second quarter.
The profit warning sunk the company's American depositary shares by 14% on May 31. The news was followed by a succession of credit ratings downgrades.
Nokia in February reached a partnership with Microsoft Corp. to use its Windows Phone software and is expected to launch its first smartphone based on that platform in the fourth quarter.
Nokia's American depositary shares rose 2.5%, or 15 cents, at $6.26 in 4.p.m. trading on the New York Stock Exchange Tuesday. Apple shares gained 1.8% to $332.44 on the Nasdaq.
—Yukari Iwatani Kane and Amir Efrati contributed to this article.
Write to Christopher Lawton at christopher.lawton@wsj.com and Dominic Chopping at dominic.chopping@dowjones.com
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