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POSTED BY Bridget Sarpu

Earlier this month Microsoft and Nokia struck a deal unlike any other.  Microsoft will obtain Nokia’s devices and services unit and license the company’s mapping services in a deal worth $7.2 billion.  Specifically, the two-part transaction included Microsoft spending $5 billion on Nokia’s mobile phones unit, in hopes to compete with companies like Google and Apple in the smartphone market, and then it spent another $2.18 billion to license Nokia’s patent portfolio.  What is included in that patent portfolio?  The deal gives Microsoft use of more than 8,500 Nokia design patents, as well as a 10-year license to around 30,000 feature patents and patent applications, intellectual property that is estimated to be worth about $6 billion.  So what is left for Nokia?

For years, patents have been a vital part of the technology business.  A patent is an intellectual property right granted to an inventor “to exclude others from making, using, offering for sale, or selling the invention.”  Patents allow companies to protect ideas, however, companies are also able to buy and sell patents to other companies, as well as profit by licensing them out to others for use.  Patents have recently become hot topics since big tech companies like Apple and Samsung continually sue one another for billions of dollars over the technologies found in smartphones, computers, tablets, and other gadgets.  With the rights of licensing patents, persons or companies can enforce patent rights against accused infringers who do not acquire the necessary patent license.  Unfortunately, some companies dedicate all of their resources to enforce patent rights in order to collect licensing fees, however they do not manufacture products or supply services based on the patent in question.  These companies, known as patent trolls or patent assertion entities, exist solely to exploit and intimidate competitors by threatening litigation for overly broad patents.  This in turn hurts businesses and stifles innovation.

So what is left for Nokia? To be clear, Nokia is keeping most of its patent portfolio.  All Microsoft is gaining are the design patents, along with licenses to the patent portfolio, not complete ownership of the portfolio.  Selling Microsoft its smartphone business could make way for Nokia to enforce its patents more aggressively.  Having sold all their physical devices and equipment, Nokia is now free to pursue any company they feel is “infringing” their patents.  Best of all they can threaten litigation on infringers without worrying about counter attacks against their own technologies (they have no real technologies that could be violating other patents).  This setup leaves Nokia as potentially an unlikable patent troll, most likely seeking to pursue infringers who rival Microsoft.

Because the patent licenses are nonexclusive, Nokia can use them any way it wishes and they will presumably use them as a profit center.  For example, Nokia is the holder of the only patents known to read Goggle’s video compression format software (VP8).   Nokia has already made clear that it has no intention of licensing to Google to use its patent thus leaving Google with a blocked technology with little hope to progress.  In the past, Google could retaliate by attacking Nokia’s infringement of its own patents.  However, because all of Nokia’s products belong to Microsoft, that line of defense is no longer available.  Nokia can now analyze EVERYONE’S business and identify and challenge all potential infringements.  With access to a substantial budget, Nokia can afford lengthy litigation and seek substantial fees from any industry that competes with Microsoft.

In sum, Nokia has ample opportunity to join the patent troll business, threatening not only big competitors like Apple, Google, and Samsung, but also threatening the progression of all future innovations.  For a company that seemed to be on the downfall for selling the majority of their products, Nokia now has a newfound and concerning power in the tech world.

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