Daniel Eran Dilger in San Francisco
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Reality Check: Nokia’s iPad patent infringement headlines

Daniel Eran Dilger

Headlines tell such a sensationalized side of the story. Here’s the missing bits of recent tech media events that have been reported with a slant, this time featuring:

Nokia sues Apple over iPad patent infringement.

.The suggestion: Apple stomped all over Nokia’s technology portfolio to bring you the iPad, meaning that it’s really Nokia that should be getting the credit for the iPad’s success.

The reality: Nokia’s new patent lawsuit is based on the same thing its last one was. It’s all about 3G and WiFi patents that Nokia legitimately owns, but illegitimately claimed it would offer to other vendor under nondiscriminatory terms, up until it realized that its own smartphones and tablets were getting trounced by Apple.

Nokia demanded three times as much money from Apple as other vendors (reportedly demanding as much as $12 per 3G device in royalties) while also insisting on gaining access to Apple’s own iPhone patents as well.

Nokia is promoting the idea that it only wants royalty payments for its technology, but the truth is that Nokia is trying to take credit for establishing open standards while also leveraging those open standards to punish Apple for being successful in a last ditch effort to prop up the tail end of its domination over the smartphone market.

Imagine the outcry if Apple were to attempt to extort licensing royalties for patented ideas in WebKit or HTML5 Canvas that it has already committed itself to sharing for free. You can bet the tech media wouldn’t be giving Apple a free pass on that like the one they’re currently affording Nokia.

Why Nokia is suing Apple over iPhone GSM/UMTS patents

Nokia’s smartphone slide

A major part of the reason Nokia is making a public relations splash out of its patent suit is that it’s doing really poorly in the business of actually designing, marketing and selling phones. It’s still the world’s largest vendor, but in the six months since I last reported on Nokia’s fortunes, it’s only slipped further toward the abyss.

Average selling prices for Nokia’s mobile phones dropped 7% in the first quarter of 2010, but its smartphones’ ASPs dropped by 18% (from 190 to 155 euros; currently $196 US. Apple’s iPhone ASP has consistently remained at around $600). In other words, the things Nokia calls a smartphone are selling for, on average, a third the price of the iPhone.

Nokia’s smartphones include very basic touchscreen models such as the Nokia 5230 and 5530. Nokia’s iPhone-class phone, the N97, is about as long in the tooth as Apple’s iPhone 3GS. The difference, however, is that Apple has a highly anticipated 4th generation iPhone coming out in a month along with the new iPhone OS 4, while Nokia has delayed its Symbian ^3 operating system launch to the third quarter, and has little to hype in terms of hardware.

Nokia would certainly like to focus on its more profitable high end smartphones, but that’s not where its sales are. Which is also why the company is now stretched across a variety of platforms: its Nokia OS “no frills” Series 30 and “basic” Series 40 embedded systems for simple phones; Symbian OS, its flagship smartphone system; various flavors of Linux that power the company’s not-quite-a-phone devices; and Windows 7 on its netbook experiment.

Like Verizon’s “two for one” BlackBerry and Android giveaway strategy in the US, Nokia is reacting to the iPhone juggernaut by dumping as many cheap devices into the market as it can to pad its sales volumes and market share figures. This was also the strategy the PC makers followed, leaving Apple as the cream on top of the PC market while they plunged to the bottom of the barrel with unprofitable sales of ultra cheap desktops and netbook devices.

Reality Check: NPD’s Android vs. iPhone sales headlines

Nokia Tablet going nowhere

While the company can still brag about selling the most mobiles and smartphones, it can’t say its selling anything significant in the emerging tablet category. Nokia’s been trying to sell tablet devices running desktop Linux for some time now, but they haven’t really caught on.

It has to be embarrassing to see Apple make its move into that category with iPad and immediately sell a million units. Without a competitive product to sell, all Nokia can do is blow dust in the air for a distraction, and what better way to do that than to suggest that iPad is a bunch of technology Apple illegitimately took from Nokia, regardless of whether that’s actually true or not.

All it has to do is see the idea by releasing an ambiguous statement about patent infringement allegations, and the tech media jumps to write the story for Nokia.

24 comments

1 Alan { 05.11.10 at 12:42 pm }

Nokia is better off just concentrating on their dumb phones aka feature phones and stop wasting time trying to compete with Apple, RIM, HTC, and few others in the smart phone arena. Symbian is doomed and so is their replacement OS. Smart phones will continue to be a minuscule part of the worldwide market of phones for decades to come simply because most of the third world can’t afford them. And even in wealthy countries, many people for whatever reason prefer just a basic feature phone. maybe they should just stick to that market.

One thing I can say about Nokia, their phones seem to be able to pick up signals better than almost any other phones I have used. My mom has an old Nokia that gets just about perfect coverage in her house on AT&T where my niece’s iPhone gets almost no bars and drops calls. Their OS might suck, but you can’t fault them on their call quality.

2 JohnWatkins { 05.11.10 at 1:20 pm }

Maybe Nokia and Apple can settle if Apple will pony up some UI UP in exchange for some Nokia signal reception, antenna design, or signal processing IP. Nokia could step up their semi-smart phones and Apple’s palm-size mobile computers (iPhones) could actually work as phones!
(Disclaimer: I have no bad experience with iPhone reception, but hear the pundits (from SF and NY) complain endlessly.)

3 JohnWatkins { 05.11.10 at 1:29 pm }

Whoops,
“UI UP” should be “UI IP” (and only some basic starter stuff. Nothing too Apple-rific!)

4 md5sum { 05.11.10 at 1:36 pm }

“It’s all about 3G and WiFi patents that Nokia legitimately owns, but illegitimately claimed it would offer to other vendor under nondiscriminatory terms, up until it realized that its own smartphones and tablets were getting trounced by Apple.”

Source???

5 KenC { 05.11.10 at 2:01 pm }

@md5sum, if you followed all the articles written back when Nokia first sued Apple, you’d have seen a link to some legal filings where it was revealed that Nokia’s suit was over 3G and wifi patents which make up the standard and are licensed under FRAND terms, and that in the Apple filing, their lawyer laid out that Nokia wanted over triple the rate they were charging others, and a cross-license to Apple’s IP. It’s there, you may need to do a little search.

6 Netudo { 05.11.10 at 2:03 pm }

Is this going to come to an end quickly? Or is this going to be like SCO and take a decade to settle.

I want to be alive to see all this backfire to Nokia.

7 KenC { 05.11.10 at 2:03 pm }

“Nokia is reacting to the iPhone juggernaut by dumping as many cheap devices into the market as it can to pad its sales volumes and market share figures. This was also the strategy the PC makers followed, leaving Apple as the cream on top of the PC market while they plunged to the bottom of the barrel with unprofitable sales of ultra cheap desktops and netbook devices.”

Yep, its smartphone shipments were way up, I think 8M more units this quarter alone, and yet, their ASPs keep falling. The real hurt has been to their brand value, as flooding the market with cheap smartphones is a race to the bottom that Apple will gladly let them win.

8 md5sum { 05.11.10 at 2:12 pm }

@KenC — I’m sorry, I’ve followed back-links through several articles, and I’ve found no legal filings as yet to show how the patents are licensed. I’m also not finding any links containing information as to what Nokia has licensed the same technology to other companies for in terms of pricing. I’d just like a couple of sources to verify those statements.

Thanks!

9 MikieV { 05.11.10 at 4:37 pm }

@md5sum

Interesting! You’ve got me looking, as well.

In the Scribd post of the Nokia lawsuit

http://www.scribd.com/doc/21458614/Nokia-vs-Apple-Complaint

page 13, paragraph 44: it only states that Nokia made various offers to Apple with regards to patent royalties – “made subject to reciprocity” – which Apple refused to accept.

The Guardian has an article on Apple’s coutersuit

http://www.guardian.co.uk/technology/2009/dec/11/apple-nokia-countersuit

Which has a link to a downloadable PDF of the suit

http://image.guardian.co.uk/sys-files/Guardian/documents/2009/12/11/ApplevNokia.pdf

On page 2, paragraph 3, Apple claims that Nokia is trying to charge “unwarranted” fees for patents, and “by seeking to obtain access to Apple’s intellectual property”

page 4, paragraph 9: Apple asserts that Nokia has violated the F/RAND licensing commitments “by demanding unjustifiable royalties and reciprocal licenses to Apple’s patents covering Apple’s pioneering technology – patents unrelated to any industry standard.”

So there is evidence that Nokia is asking for [demanding?] reciprocal patent licensing, and that Apple asserts that the royalties are “unjustifiable”…

I’ll have to keep looking to see if there is any mention of why Apple considers them “unjustifiable”.

10 MikieV { 05.11.10 at 4:56 pm }

The Guardian article

http://www.guardian.co.uk/technology/2009/dec/11/apple-nokia-countersuit

“In May this year, for instance, Apple alleges that Nokia demanded a royalty payment that was three times the figure it had been suggesting the previous year.”

But they don’t source it.

From the Guardian’s PDF of Apple’s filing:

page 22, paragraph 7: Apple asserts Nokia “departed from well-establish F/RAND requirements, and its own prior acknowledgements of the meaning of F/RAND, and demanded unfair, unreasonable, and discriminatory licensing terms from Apple. In particular, Nokia insisted on both exorbitant royalties and ‘grantbacks’ of licenses to Apple’s patented technology [italics start] not related to any standard -… [italics end]

It will be interesting to see what supporting documentation Apple can produce to back-up their claim that Nokia’s terms are “exhorbitant.”

11 chucklehead { 05.11.10 at 5:26 pm }

See page 41, paragraph 82:

Approximately a year later, in or about May 2009, Nokia demanded a royalty approximately three times as much as the royalty proposed the prior spring, which was itself in excess of a F/RAND rate, as well as “picks” to Apple’s non-standards-essential patents. Nokia never represented that its 2008 demand was below F/RAND, and its tripling of that demand in May 2009 was in flagrant violation of its F/RAND commitments. …

PDF of court filing obtained here:
http://stadium.weblogsinc.com/engadget/files/apple-nokia-answer.pdf

12 ShabbaRanks { 05.12.10 at 2:56 am }

You know, it’s funny.

I did a Google search which took me directly to a pdf copy of the actual court filing from Apple. One quick text search later and I was presented with the paragraph noted above by chucklehead. All this took less than 3 minutes. One accurate source found.

In other news I have to agree with Alan at the top. Nokia don’t make easily usable smartphones and IMHO Symbian’s touch interface is horrible but you can’t fault the call quality. Even their cheap phones are very good at actually doing what a phone is meant to do.

13 airmanchairman { 05.12.10 at 3:04 am }

I still maintain that Nokia’s legal strategy is not so much for the purpose of shaking Apple down for more royalties as for the more short-term strategy of obtaining an injunction against them trading much in the manner that RIM obtained against RIM a few years ago, slowing Apple down enough for Nokia to play catch-up.

It is said that what doesn’t kill you makes you stronger (as witness RIM’s resurgence after its monster payout to NTP), and perhaps forcing Apple to concentrate its own R&D efforts in devising its 3G and Wi-Fi radios may well prove to be the factor that eliminates AT&T’s network issues once and for all…

14 airmanchairman { 05.12.10 at 3:05 am }

Ouch!

“much in the manner that RIM obtained against RIM” should have read “much in the manner that NTP obtained against RIM”

15 airmanchairman { 05.12.10 at 3:16 am }

“Even their cheap phones are very good at actually doing what a phone is meant to do.”

You can’t deny the maturity of hardware platforms like Nokia and Motorola that have been around from the very early days of mobile handsets.

You also have to remember that Apple’s been in the smartphone game only 3 years, hard though that is to believe. Give it a little more time.

16 bOMBfACTORY { 05.12.10 at 9:07 am }

Dan – While I’m definitely an Apple proponent, I’d be interested in knowing if there are ANY other tech firms out there that are doing a good job and making competent products. Why is it that no one seems to have their shit together these days except Apple?

[Making great products is a lot of work, especially when they're technically complex devices. Most tech companies pay a lot of attention to making the tech details work, but fail to understand the user experience, the genius of keeping things simple and therefore usable and accessible, and the attraction of making things look and behave in an attractive and desirable way. - Dan]

17 darinburris { 05.12.10 at 9:36 am }

“Imagine the outcry if Apple were to attempt to extort licensing royalties for patented ideas in WebKit or HTML5 Canvas that it has already committed itself to sharing for free.”

I’m not quite sure I understand this comment. WebKit is an open source rendering engine, not originally started by Apple but derived by them from earlier work (KDE project’s HTML layout engine KHTML), and used in such browsers as Safari (Apple), Nokia’s S60 browser, and even Google’s Chrome browser. Additionally, HTML5 is an open standard, of which the canvas is merely an available element (e.g. cool stuff goes here). So to somehow say Apple would be in a position to extort royalties in relation to the use of either of the aforementioned technologies is confusing to say the least.

And what exactly are these “patented ideas” anyway?”

[Well actually, it is the WebCore low level rendering engine that is a fork of KHTML. WebKit provides a high level API that was not derived from KHTML at all. You can attempt to give all the credit of WebKit to KHTML, but that's simply not accurate. If it were, everyone could just use KTHML instead, and they're clearly not doing that.

Apple has contributed (for free) plenty of patented intellectual property to both WebKit and to portions of the HTML5 spec (Apple created Canvas for example, and subsequently pledged that patented IP that was included in Canvas would be licensed for free to anyone who wanted to implement or use it once it became part of the HTML5 spec).

The point is, if Apple were go back on those free licensing promises it would (and should be) dragged through the mud for doing so. Nokia, on the other hand, has similarly pledged to license its 3G patents under FRAND (Fair, Reasonable and Non Discriminatory) terms. It then went back on those promises when it saw an opportunity to make an illegitimate profit from Apple and then later create a misleading PR attack. - Dan]

18 cadillac88 { 05.12.10 at 10:35 am }

Nokia sees Google being aggressive, even reckless, when it comes copyright, pushing boundries, challenging as many markets as possible, trying to create new markets, and generally getting ‘in your face’ in as many faces and possible. Most of these efforts are shotgun style – to see what sticks. They’ve got some money stashed in case the run afowl and need to make amends. If nothing else, this all ends up in the media and when it affects Apple the most it is given an appealing glow for some unknown reason. Nokia is hoping that if nothing else they will belikewise in the news and over time obtain an increased mind share over Apple. In short, they have nothing to lose and if all goes well they will make more per iPhone sold than they do on average with their own per phone sold. After their 7B$ NavTeq disaster, Nokia is even more desperate than Google to find new revenue.

19 md5sum { 05.13.10 at 12:41 pm }

@Everyone-Who-Posted-Links :-)

Thanks very much for providing a link to the Apple response document. While this document provides no evidence or official findings, it at least outlines the claims made by Apple, and it’s the closest thing to a “source” that I can find for the author’s statement which I quoted in comment #4, despite the fact that it doesn’t at all say what the author of this article claims; it’s worded similarly enough that someone might potentially misunderstand it.

In this document [http://stadium.weblogsinc.com/engadget/files/apple-nokia-answer.pdf], everything from the middle of page 21 is Apple’s countersuit (under “COUNTERCLAIMS”). Everything above that is Apple’s answer and defenses to the claims made by Nokia.

The counterclaim, while it doesn’t discredit the author’s statement that “Nokia demanded three times as much money from Apple as other vendors”, it certainly doesn’t support it, and I have yet to see any information which does.

What I see here is somewhat comparable to what would happen if I downloaded a copy of some software and began using it to make money. At some point I call up the writer of the software and start negotiations on the price of that software. All along I can simply disagree with the manufacturers wishes, and I continue using the software. At some point, that company is just going to file a suit against me for using their software without appropriate licensing. Despite whatever claims I make about how unreasonable that company is being in their licensing requests, the simple fact is that I’ve been using their software, for which I’ve never paid, in order for myself to generate a profit. So truly, Apple has been taking a free ride on Nokia’s innovation.

Now interestingly, I somewhat agree with Daniel on the fact that this is being blown out of proportion by the media. Patent infringement lawsuits are an extremely common occurrence. I think the only reason we’re even really hearing about this one is due to the spotlight that Apple has been in due to their recent and very public attacks on Flash, as well as some of the more recent App Store rejections that were brought to the forefront since the apps which were rejected were submitted by fairly well-known journalists, 2 of which were Pulitzer winners (who were later asked by Apple to resubmit their apps for approval after receiving negative media attention).

20 commun5 { 05.13.10 at 2:29 pm }

@md5sum

You have this bad habit of trying to place impossible burdens of proof on ideas that you disagree with and then claim that until that burden of proof is met, your notions deserve presumption. Why wouldn’t a reasonable person concluded that Apple’s counterclaim that Nokia demanded three times the ordinary level of licensing fees serve as support for the author’s statement? Would the author actually have to produce a tape recording or a written statement from Nokia to get your support?

Your arguments here make as much sense as your attempts to defend your ridiculous claim that Adobe could successfully sue Apple for violating the Sherman Antitrust Act because Apple imposed some condition on access to the iPhone that disadvantaged Flash developers. I notice you had no response to the US Circuit Court decision that concluded exactly the opposite!

21 warlock7 { 05.13.10 at 3:50 pm }

what’s a “coutersuit”? My mind wanders down dark alleys with this one… :)

22 gus2000 { 05.14.10 at 12:15 am }

@commun5

I believe the adjective you’re searching for is “troll”. Do not feed them, particularly after midnight. And NEVER get them wet.

23 Zeta2099 { 05.14.10 at 4:33 am }

lol gus loved that one XD and yep midnight… you can get into lot of trouble after midnight :P

24 chucklehead { 05.14.10 at 4:39 pm }

@md5sum
Claims and counterclaims go into the filing of a lawsuit. They define the claims to be adjudicated.

Evidence, depositions, and testimony come afterwards, if no settlement is reached, and if claims aren’t dismissed.

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