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Nokia (NYSE: NOK) announced on Thursday that it has filed a lawsuit against Apple (Nasdaq: AAPL), alleging that Apple's iPhone infringes 10 of Nokia's mobile technology patents.
Filed with the Federal District Court in Delaware, the suit asserts that the iPhone infringes Nokia patents for GSM, UMTS (also known as 3G W-CDMA) and wireless LAN (WLAN) standards covering wireless data, speech coding, security and encryption.
At issue are all Apple iPhone models shipped since the device was introduced in 2007, Nokia said.
Free Ride for Apple?
"The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards create intellectual property, which others then need to compensate for," said Ilkka Rahnasto, vice president for legal and intellectual property at Nokia.
"Apple is also expected to follow this principle," Rahnasto added. "By refusing to agree [to] appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation."
Apple did not respond by press time to MacNewsWorld's requests for comment.
More Than 10,000 Patent Families
Nokia has invested approximately 40 billion euros in research and development over the past two decades, it says, and has built one of the wireless industry's strongest and broadest patent portfolios, with more than 10,000 patent families.
Much of that intellectual property -- including the patents in this suit -- has been declared essential to industry standards, according to the company.
Nokia said it has already successfully entered into license agreements for these and other patents with approximately 40 companies, including virtually all the leading mobile device vendors.
$400 Million - or $1 Billion?
Nokia did not reveal how much it's seeking in the suit, and some have predicted it could be as much as $1 billion.
Piper Jaffray analyst Gene Munster, however, believes it may be a royalty on iPhone sales of just 1 to 2 percent per device, according to press reports, amounting to about $400 million on sales so far.
Earlier this week, Apple announced that record sales -- including those of the iPhone --had allowed it to achieve its second-best quarter ever in Q4, which ended in September. As a result, the company's stock has skyrocketed, with a midday price on Friday of about $204.50 per share.
Ironically, Nokia itself was sued by Qualcomm (Nasdaq: QCOM) over many of the same patents last year, resulting in it having to pay $2.55 billion to the U.S. mobile chipmaker.
Nokia's 'It' Factor
"Both Apple and Nokia are fine companies," wireless and telecom analyst Jeff Kagan told MacNewsWorld.
"The cellphone industry continues on its rocket flight through the last couple decades -- it becomes a new business every five to 10 years," he added.
When Motorola (NYSE: MMI) "stumbled" in the 1990s, Nokia took the lead, Kagan noted.
"It still has it," he added.
Restarting the Engine
However, "Nokia's brand name is in more traditional handsets, which are not selling now," Kagan asserted. "Today, the hot segment is smartphones."
Following Apple's "supercharging" of the smartphone segment two and a half years ago with the iPhone, "now we see smartphone makers like Apple, RIM, Palm, Samsung, LG and others doing strong business," he pointed out. "Nokia is trying to restart their sales engine."
The company sees two benefits to the suit, Kagan said. "One is to slow down Apple, if possible," he explained. "Two is that this is another revenue opportunity for Nokia, and Apple is not playing along."
Not Likely to Slow Apple Down
It's "not the kind of problem that will slow down Apple or the smartphone segment," he predicted. "This is just an Apple vs. Nokia story. They will eventually settle it; in the meantime, the smartphone march continues."
Indeed, "large companies focusing on the protection of their innovations, such as Nokia with its diverse telecommunications patent portfolio, will, by necessity, collide with other innovators and market developers, such as Apple," Raymond Van Dyke, partner with Merchant & Gould, told MacNewsWorld.
"Patents in telecom, Internet telephony and other information technologies with immense interconnectivity are rife with the potential for litigation," he added.
