Network infrastructure and 5G-technology provider Nokia (NOKIA.HE) said on Friday it had signed a new long-term patent license agreement with Apple, as the current license between the companies expires at the end of 2023. The terms of the agreement remain confidential between the companies, but Nokia says it covers its inventions in 5G and other technologies. The company expects to recognize revenue related to the agreement starting January 2024, which is consistent with its long-term outlook.
The new deal comes amid a series of legal battles between the two technology giants over what Nokia says is Apple’s failure to pay fair royalties for its intellectual property. The dispute centers on standard patented features in most smartphones, such as a hole for the camera lens in the back of the phone and room for the battery beneath the display. Apple has accused Nokia of trying to extort money for these patents, and it has filed lawsuits against the Finnish company in 14 venues, from Texas to Japan.
Apple has also been a target for several other smartphone makers, including Samsung (SSNLF.KR), Motorola, HTC, and LG Electronics (LGE.KR). In addition, the company has been pursuing legal action against Chinese smartphone maker Vivo, which Nokia accuses of infringing its intellectual property and violating antitrust laws.
Despite the legal battles, Nokia continues to see strong demand for its wireless technology. The company reported second-quarter profits that beat expectations, with margins in its mobile networks group improving due to a shift to emerging markets from developed ones like North America. Nokia CEO Pekka Lundmark said the company saw a “meaningful shift in sales mix” in the quarter, with growth in India and other emerging markets offsetting weaker performance in Europe, Latin America, and Asia Pacific.
Last month, Nokia said independent analyst firm PA Consulting had again ranked it as the world leader for ownership of granted patents deemed essential to developing 5G standards. However, the vendor has struggled to monetize its patents and has been selling portions of its portfolio to so-called patent trolls, who buy other people’s intellectual property and file suits against patent users to collect royalties.
While the new agreement with Apple demonstrates that Nokia can reach agreements with major patent holders, it still needs to turn its massive intellectual property assets into a profitable business. The company relies on its mobile network unit to offset declining sales in its traditional smartphone businesses. The unit saw revenues rise, and profit improved in the third and fourth quarters, but margins remained lower than a year earlier. The company also has a lot of debt. This could be a problem for the company if interest rates increase or it needs to raise additional funds in future periods. The company has said it intends to use the proceeds from its recent asset sales to reduce debt and free up cash for acquiring more technological innovation.
