Nokia's rejection of Android may help resolve patent war with Apple

Posted:
in iPhone edited January 2014
Nokia's decision to partnership with Microsoft rather than adopt Google's Android may ease patent negotiations between the company and Apple, which is more likely to support strengthening weak rivals rather than empowering an already ubiquitous one.



A report by Florian Mueller of FOSS Patents notes Nokia's patents are one of the company's strongest assets; resolving its complaint with Apple quickly may give it a better opportunity extinguish its "burning platform" and get back to business.



"In his presentation to investors, Nokia CEO Stephen Elop said that they have 'one of the strongest patent portfolios out there,'" Mueller wrote, "and they are willing to license it to others 'at an appropriate royalty rate.' This translates as stepping up their outbound licensing efforts."



Nokia and Apple are currently embroiled in a series of patent disputes, with Nokia accusing Apple of refusing to pay royalties for its use of technology standards that involve Nokia's intellectual property (including WiFi, GSM and 3G).



Apple counters that Nokia is demanding an unfair premium for patents which the company has previously promised to offer under fair, reasonable and nondiscriminatory (F/RAND) terms, and adds that Nokia is infringing upon its iPhone-specific patents, which were never pledged to be offered under F/RAND terms as part of an open standard.



One reason why Nokia rejected Android: patents



In contrast, Google has a weak footing in patents, with a much smaller patent portfolio than other players in the smartphone business. That will prevent Google from being able to resolve patent disputes through cross licensing, because it doesn't have much to offer in trade.



Google's Android is a lawsuit magnet, with already a dozen disputes noted by Mueller. This includes Apple's suits against Motorola and HTC, Microsoft's suit against Motorola, Oracle vs Google, a variety of other companies suing Google and its licensees, and even licensees suing each other, such as the case between Sony and LG.



In addition to being in a weak position itself, Google is not stepping in to support is Android licensees as they come under attack. Instead, it's piling on more controversy by pushing WebM, another technology with a patent target painted on its back but no indemnity protection offered by Google.



What Microsoft offers Nokia with Windows Phone 7



"The partnership between Nokia and Microsoft should make it much easier for Apple and Nokia to work things out between them and strike a cross-license deal," Mueller wrote, adding that Apple would be unlikely to file suit against Microsoft, given that the two are also partners (in the area of Exchange Server particularly) and have already resolved their differences in a series of cross licensing agreements.



Further, the patents Apple is now asserting against Nokia largely relate to touchscreen interfaces. A partnership with Microsoft's Windows Phone 7 could allow Nokia to move forward without infringing upon Apple's patents, or could involve a new cross-licensing agreement where Microsoft served as a moderating factor.



Thirdly, Mueller notes that "in light of market dynamics, it would now make a whole lot of sense for Apple and Nokia to stop wasting resources on their fight with each other and instead focus on license deals with all those makers of Android-based devices."



Apple likely to view WP7 as a minor threat



Apple's patent dispute with Nokia has dragged on because the iPhone maker does not want to hand its proprietary iPhone inventions to the world's mobile maker simply to gain unfairly priced access to royalties related to network standards that it believes should be available at F/RAND terms without such concessions. The most idea resolution for both companies would be for Nokia to adopt Windows Phone 7 for its high end smartphone business.



Apple likely sees little threat from WP7, given Microsoft's failed launch last fall, with nearly nonexistent demand from consumers and even a feeble showing from developers.



Android, on the other hand, exerts a plausible threat to Apple because even though Google has far less experience in managing a development platform than Microsoft, the software can be picked up for free for use by cloners to flood the market with knockoff goods.



One rapidly growing Android licensee, the Chinese maker Huawei, is being sued for refusing to pay standard licensing fees managed by Helferich Patent Licensing, a group that represents the patent interests of Apple, Microsoft, HTC and more than twenty other companies. Apple (and other companies) would clearly prefer to deal with companies that play by the rules rather than chasing foreign Android licensees through the courts, particularly ones doing business in countries that don't respect intellectual property rights.



Once Nokia and Microsoft begin to collaborate on new WP7 phones, the supply of such devices will be relatively small, because Nokia's current smartphone business is largely made up of handsets incapable of running a full screen system on the order of WP7 or Apple's iOS. Most of Nokia's "smartphones" would be easily confused with other makers' feature phones, sporting small screens and simple, button-oriented interfaces.



Nokia converting its relatively meager high end phones to WP7 is a far better situation for Apple than were the world's largest phone maker to embrace Android and begin converting its large piece of the overall smartphone market into Android market share.



Nokia's WP7 deal creates an Android competitor for Apple



An amicable patent cross licensing agreement between Nokia and Apple would allow Apple to continue expanding its iOS business and allow Nokia to move forward with plans to stabilize its huge, broad market for simple Symbian models on one hand (to be managed under the newly created Mobile Phones unit) while it also experiments with MeeGo and Symbian and works to transition toward new WP7 models on the other (within a separate unit to be named Smart Devices).



So, rather than simply pushing Nokia's roughly 38 percent share of the smartphone market into Microsoft's column, as some have imagined, Nokia will continue to build a broad range of cheap "smartphones" based on Symbian for sale in emerging markets, and divert only its poor showing on the high end to Microsoft's new platform. Nokia's high end smartphone business was passed by Apple a long time ago.



At the same time, Nokia will breathe some credibility into Microsoft's WP7 platform, giving carriers and their customers more choices among the next generation of modern smartphones: WP7, HP's webOS, RIM BlackBerry, Android, and Apple's iOS.



The problem for Nokia is that it is partnering with what is the biggest failure in smartphones; WP7 has nosedived at launch, despite upbeat-sounding reviews and the marketing strength Microsoft pushed behind it. LG, its biggest licensee, described the platform as 'a bit boring' and suggested it might find a following among low end users with simple needs. That's not really what Nokia wants to do with its high end smartphones.



The problem for Microsoft is that it is partnering with the failed end of Nokia. While the largest phone maker globally, Nokia's efforts to launch a modern smartphone have been scattered and incomplete. It describes is N900 pocket computer smartphone as an experiment, while its flagship iPhone competitors have failed to see the same demand as Apple, particularly in the US where Nokia recently canceled its X7 launch.



Nokia's existing smartphone business is broad but short in profits per phone, as depicted in a report by Asymco.



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Comments

  • Reply 1 of 30
    Quote:

    Nokia's existing smartphone business is broad but short in profits per phone



    Yep, and now they get to pay the Microsoft tax out of those slim margins, making them even slimmer. Not to mention competing with the other Windows Phone clone makers in a race to the bottom pricing.
  • Reply 2 of 30
    Ah Yes! I've been really hoping AI would update us a bit more on the patent wars.



    I'm hoping for an article update on multi-touch (fingerworks) patent lawsuits sometime soon!
  • Reply 3 of 30
    maestro64maestro64 Posts: 5,005member
    Finally an analysis who has somewhat of a clue
  • Reply 4 of 30
    mgkwhomgkwho Posts: 167member
    Someone needs to do some proofreading...



    -=|Mgkwho
  • Reply 5 of 30
    cpsrocpsro Posts: 2,893member
    It might have far more to do with existing technology-sharing agreements between Microsoft and Apple than the strengthening of a weak opponent.
  • Reply 6 of 30
    mjtomlinmjtomlin Posts: 2,446member
    Quote:

    The problem for Nokia is that it is partnering with what is the biggest failure in smartphones; WP7 has nosedived at launch, despite upbeat-sounding reviews and the marketing strength Microsoft pushed behind it.



    Really?



    I think I saw a few WP7 commercials and have never seen a print ad. The biggest obstacle (in the US) to get people to adopt ANY platform, is the carriers, who pick and choose what they are willing to offer to customers.



    Right now, the iPhone is at the top of carrier's list.

    Second is Android.

    Third, RIM

    Then everyone else, including Microsoft and Nokia.



    In the US market, either Microsoft or Nokia, or both will have to make deals with the carriers to push their platform. Otherwise, it'll never take off here. As far as the rest of the world... not sure if Nokia was synonymous with Symbian or not, so we'll have to see which begat loyalty.
  • Reply 7 of 30
    archosarchos Posts: 152member
    Quote:
    Originally Posted by mjtomlin View Post


    Really?



    I think I saw a few WP& commercials and have never seen a print ad. The biggest obstacle (in the US) to get people to adopt ANY platform, is the carriers, who pick and choose what they are willing to offer to customers.



    You must not be the demographic MS targeted in its $500 million ad campaign for WP7.



    Apple has a smaller ad budget than MS, but it leverages the media a lot better. And these days, everyone is advertising iPhone for it, from broadcasters to competitors (Creative, Real, and now Motorola).
  • Reply 8 of 30
    Why would they choose a microsoft "paid" license instead of the superior free google android OS?
  • Reply 9 of 30
    mjtomlinmjtomlin Posts: 2,446member
    Quote:
    Originally Posted by bullhead View Post


    Yep, and now they get to pay the Microsoft tax out of those slim margins, making them even slimmer. Not to mention competing with the other Windows Phone clone makers in a race to the bottom pricing.



    Not necessarily. We don't know what the deal is. An exclusivity deal could mean Microsoft gave up license fees hoping to making it up in ad revenue. If they felt the potential was there to subsidize the initial costs. Besides, Microsoft doesn't need the money... the spent billions pushing XBox on the market.



    Second, they will no longer need the developers and all those R&D funds. That'll take a lot off the top. They can keep just enough developers to create customized services on top of WP7 and will no longer need to invest in future platforms.
  • Reply 10 of 30
    Sorry Motorola and HTC is patents have nothing to do with Android... But Oracle does. But lets be serious Apple and Google know that these arguments go no where and really the fact that this is constantly reported on just about every website is just plain stupid. Remember how HTC wanted all iphones to be removed from the US because of some stupid patents.... things got settled (because one sewed the other one i do believe...) Oracle and Google will solve this problem with google just giving a ton of money to Oracle probably or Oracle will loose because the recent evidence has been proven useless...

    The real reason Nokia chose Microsoft is because they are buds... (formet microsoft is head of american sales of Nokia) I mean its really that simple. Nokia is dying and will continue to die even if they did pick Android. Microsoft got a great deal and Nokia got owned.

    Look at the phones nokia have released they are way behind the iPhone 4! heres a great article that will help people better understand the situation.



    http://www.huffingtonpost.com/2011/0..._n_822149.html
  • Reply 11 of 30
    xsuxsu Posts: 401member
    Quote:
    Originally Posted by stevetim View Post


    Why would they choose a microsoft "paid" license instead of the superior free google android OS?



    Because choosing android would be like the finnish boy who pissed in his pants for warmth.



    Seriously, choosing Android OS make you a commodity hardware vendor with little to distinguish yourself from the competition. And as just one of the many vendors, you wouldn't get any attention from Google regarding your own concerns.
  • Reply 12 of 30
    tbelltbell Posts: 3,146member
    That will be cheaper then defending Android related patent suits. I, however, think Nokia has made a mistake. Apple's strength is the tight integration of the OS and hardware. HP will share the same strength (although it might ultimately not execute well) with WebOS. Nokia now has to rely on Microsoft for updates. Further, it will have little say in the direction of the OS, and Microsoft is already behind Apple in terms of creating a full featured phone OS.



    Apple products demand a premium because Apple controls the quality across the board. I think the move is good for Apple though.



    Quote:
    Originally Posted by bullhead View Post


    Yep, and now they get to pay the Microsoft tax out of those slim margins, making them even slimmer. Not to mention competing with the other Windows Phone clone makers in a race to the bottom pricing.



  • Reply 13 of 30
    Quote:
    Originally Posted by bullhead View Post


    Yep, and now they get to pay the Microsoft tax out of those slim margins



    If NOKIA adopted Android Microsoft would be speaking with them as well. Don't forget every HTC pays Microsoft money for every Android phone they ship.
  • Reply 14 of 30
    Quote:
    Originally Posted by stevetim View Post


    Why would they choose a microsoft "paid" license instead of the superior free google android OS?



    2 reasons off the top of my head (was going to write more but can't be bothered)



    - Its an awesome platform. They may be last but they've learnt from everyone elses mistakes. Its not fully featured yet, but it does a lot of very simple things a lot better. A bit like when ipods paused your music when you took the headphones out. Not worth advertising but a sign of quality.

    - Clear roadmaps. One minute googles producing the os, then thee own phone. MS tends to keep people well informed.

    -
  • Reply 15 of 30
    melgrossmelgross Posts: 33,034member
    Quote:
    Originally Posted by mjtomlin View Post


    Not necessarily. We don't know what the deal is. An exclusivity deal could mean Microsoft gave up license fees hoping to making it up in ad revenue. If they felt the potential was there to subsidize the initial costs. Besides, Microsoft doesn't need the money... the spent billions pushing XBox on the market.



    Second, they will no longer need the developers and all those R&D funds. That'll take a lot off the top. They can keep just enough developers to create customized services on top of WP7 and will no longer need to invest in future platforms.



    They're paying license fees estimated as being from $10 - $20 per phone, which is one reason why Nokia's stock has been pounded as much as it has been the last two days. Down about 8% on Thursday, and about 14% today.
  • Reply 16 of 30
    melgrossmelgross Posts: 33,034member
    Quote:
    Originally Posted by TBell View Post


    That will be cheaper then defending Android related patent suits. I, however, think Nokia has made a mistake. Apple's strength is the tight integration of the OS and hardware. HP will share the same strength (although it might ultimately not execute well) with WebOS. Nokia now has to rely on Microsoft for updates. Further, it will have little say in the direction of the OS, and Microsoft is already behind Apple in terms of creating a full featured phone OS.



    Apple products demand a premium because Apple controls the quality across the board. I think the move is good for Apple though.



    I doubt that patent disputes over Android was a big factor here. Likely it was some consideration, but not a big one.
  • Reply 17 of 30
    melgrossmelgross Posts: 33,034member
    Quote:
    Originally Posted by timgriff84 View Post


    2 reasons off the top of my head (was going to write more but can't be bothered)



    - Its an awesome platform. They may be last but they've learnt from everyone elses mistakes. Its not fully featured yet, but it does a lot of very simple things a lot better. A bit like when ipods paused your music when you took the headphones out. Not worth advertising but a sign of quality.

    - Clear roadmaps. One minute googles producing the os, then thee own phone. MS tends to keep people well informed.

    -



    It's not an awesome platform. It's a decent platform, which is why it hasn't taken off.
  • Reply 18 of 30
    I think in the end (well it's never the end but in the near future) in a few years it will be an apple and windows mobile market. Not becuse WP7 is great now but becuse MS now has a reliable partner that will make dedicated hardware for them and if Nokia can tough it out it will get much better. MS has a history of sticking things out and evolving them despite losing money for years in the process just to get market share. e.g. Xbox.



    MS is actually in a good position right now. They are financially healthy. The negative press about them has died down considerably the last couple years and windows 7 is doing well and has finally reached the status of a decent operating system. Google has even replaced them as the new Dr. Evil.



    Nokia on the other hand is in world of hurt. When your business is to sell phones and you can't make one anyone wants to buy and don't have a roadmap that gets you a phone that people will buy you are pretty much open to anything that comes along. But Nokia does know phones. They have a huge patent portfolio and lots of loyal dedicated customers around the world. It wil be a rough couple of years but if they stick it out they will be the de-facto Windows Phone provider and will help slowly increase its market share.



    Android will not weather the storm. I know everyone thinks I'm crazy but it has no roots or reason to stick around. Manufacturers don't have any motivation to support it after they ship it. There is massive fragmentation among devices and versions. No huge installed base of paid apps that will keep users loyal to phones the run Android. Basically they have become expensive feature phones that get replaced at the end of the contract with the next one in the line up.



    The thing that keeps me tied to my iPhone and pretty much insures my next phone will be an iPhone too is that I can keep using my apps. A few hundred dollars in apps is a huge investment to have to throw away just to gain a few new features in a new platform. It's not just the apps, its the content and settings and just comfort feeling I get using them. Eventually MS/Nokia will be able to do what google can't - control their ecosystem. By building an app store that they can control and providing stable long supported phones that can run those apps they can effectively create a virtual lock-in for their customers. It won't happen today but in time MS will do what MS does well... and in its borg like style it will consume a huge chunk of the mobile market. Nokia is actually lucky enough to get to come along for the ride.
  • Reply 19 of 30
    Quote:
    Originally Posted by columbus View Post


    If NOKIA adopted Android Microsoft would be speaking with them as well. Don't forget every HTC pays Microsoft money for every Android phone they ship.



    Not necessarily. Nokia may already have a license in place for their patents. The patents in question are broad and apply to any phone OS, like the patent on the FAT file system and patents dealing with contacts, email.



    Of course if Nokia wanted to they could send Microsoft into the stone age with their portfolio. Unlike HTC Motorola doesn't need to be nice to Microsoft since they ditched WinMob a long time ago.
  • Reply 20 of 30
    Quote:
    Originally Posted by xsu View Post


    Seriously, choosing Android OS make you a commodity hardware vendor with little to distinguish yourself from the competition. And as just one of the many vendors, you wouldn't get any attention from Google regarding your own concerns.



    You do realize by choosing Windows Phone 7 they have little to distinguish themselves from the competition? They are just a clone maker now who has to pay the Microsoft tax like the other cloners.
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