Tuesday, March 29, 2011

Escalation: Nokia files new ITC complaint against Apple (plus a corresponding federal lawsuit)

Two days ago I just reported on an ITC judge's "final initial determination" (not a definitive ruling) to dismiss a complaint filed by Nokia against Apple over 7 patents back in December 2009. I also updated my battlelines diagram. Now the next update is already due: Nokia just filed another ITC complaint against Apple over seven patents -- and a complaint (over six of those seven patents) with the US District Court for the District of Delaware.

Today Nokia issued this press release. It's the most aggressive one Nokia has issued in this dispute, and probably the most aggressive one since its epic battle with Qualcomm.

Seven more patents asserted, virtually all Apple products accused

In its headline, Nokia "[a]lleges Apple infringes additional Nokia patents in virtually all products". The first paragraph of the announcement describes that product range as "virtually all of its mobile phones, portable music players, tablets and computers." Nokia's lists of accused products for the various patents are interesting. When the iPhone is named, some patents are claimed to be infringed by "at least Apple's iPhones for the AT&T network" and others by "at least Apple's iPhones for the Verizon network."

According to Nokia, the seven patents-in-suit relate to inventions "in the areas of multi-tasking operating systems, data synchronization, positioning, call quality and the use of Bluetooth accessories" (more details on the patents further below). Paul Mellin, Nokia's intellectual property VP, stresses Nokia's role as a pioneer by stating that "many [of those patents were] filed more than 10 years before Apple made its first iPhone."

It's actually not new for Nokia to attack a host of Apple product lines simultaneously. If you look at my reference lists on the previous complaints Nokia and Apple filed against each other (pages 24 to 34 of this document), you can see that Nokia already did this on other occasions. Some examples: page 27 contains a matrix that shows Nokia's first ITC complaint already accused products from the iPhone, iPod, Mac and MacBook lines. On page 31, you can find a similar table for a complaint that related to different iPhone, iPad, iPod and MacBook products.

Figuring out Nokia's motivation to do this

It's not a coincidence that Nokia takes this step so shortly after Friday's unfavorable determination. Preparing such a complaint always takes time, but Nokia probably knew it had an unfavorable determination coming, and Nokia must have been searching for some time for patents that it can assert against Apple. If you already know which patents you wish to assert against which products and have the claim charts (tables describing the language of the patent claims and the relevant characteristics of the allegedly infringing products) in place, you can also put together a complaint within a few days.

Many observers and analysts will now try to form an opinion on whether this latest action by Nokia is a sign of strength or weakness. I have thought about this and concluded that there is a significant degree of frustration shining through Nokia's announcement because things take so long, but more than anything else, Nokia is sending out a strong and unambiguous message that at the end of this epic battle Apple is going to have to send royalty checks to Finland.

Nokia's patent portfolio is roughly five times larger than Apple's. They both operate in the same industry resulting from the convergence of computing and communications technologies. Theoretically one "killer patent" can be stronger than a thousand other patents, and there are indeed significant quality differences between the patent portfolios of major high tech companies. But it's hard to imagine that Nokia's patents are, on average, so much weaker than Apple's that the outcome could be anything else than Apple being required to pay.

We haven't yet seen the end of this. If Nokia wants to, it can probably bring many more patents into position against Apple. I'm sure Apple also has the potential to make some more allegations, but at some point Apple will run out of patents that Nokia needs.

Trying to understand both parties' perspectives

I can very well understand Apple's perspective. Apple looks at the innovative breakthroughs it achieved in recent years -- a period during which Nokia was poorly managed. But Apple has always and especially recently been a proponent of a strong patent system, and you just can't have your cake and eat it. Those patents are valid for up to 20 years, a long time in this industry. It's the name of the game that patents give a pioneer like Nokia a strategic advantage over a late entrant like Apple.

There are no signs of Nokia trying to drive Apple out of business with its patents: between two players of that kind, destruction would be mutually assured. The question simply comes down to who will be the net payer. Nokia appears to be very convinced that it brings the more powerful patent portfolio to the table.

Strategically, Nokia would have a lot to gain from requiring Apple to take a royalty-bearing license. As I mentioned in my previous post, Nokia's management plans to monetize the company's patent portfolio more proactively now. Even if Nokia couldn't charge Apple royalties, it could probably still find many others in the industry who are weaker than Apple and have to pay. But if Nokia can show that it has the strength and the determination to bring Apple to its knees, most other device makers will think very, very hard before ever picking a fight with those Finns.

This is a total power play. I will soon update my visualization of the battlelines.

[Update] The patents-in-suit

I have now obtained a copy of the Delaware complaint (filed yesterday, case no. 1:11-cv-00259), so I can list the six patents Nokia asserted there:

All seven patents asserted in the ITC complaint are listed by law360.com. According to that list, the ITC complaint relates to the six patents listed above, plus the following one:

  • US Patent No. 7,558,696 on a "method and device for position determination" (that must be the patent Nokia meant by "positioning" in the list of technology areas in today's press release)

Nokia asserts the three database patents (the three first ones on the list) specifically against "Apple's iPhones for the AT&T network, iPads, iPod Touches, and MacBook, MacBook Pro, and MacBook Air computers". The fourth patent ('932) is asserted against that same list except the MacBooks. The fifth and sixth patent are asserted against "the Apple iPhone 4 for the Verizon network".

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