Nokia-Microsoft tie-up could shift mobile patent wars

There are many assured changes coming to the mobile world with the deal struck between Microsoft and Nokia today. But an uncertain future scenario with broad implications concerns how the combination of Nokia's very large patent portfolio and Microsoft's slew of licensing deals will alter the mobile patent landscape.

Over the last two years it's begun to seem as if all the major smartphone players are involved in one patent spat or another with Nokia a chief antagonist in the drama. The company has more than 10,000 patents and says it has reached licensing agreements with most major mobile phone makers to use some aspect of its technology.

In his presentation to investors today announcing the milestone strategic shift for the Finnish handset maker, Nokia CEO Stephen Elop said the company has "one of the strongest patent portfolios out there" and that it will offer licenses to its intellectual property "at an appropriate royalty rate."

Microsoft did not have a comment on how the partnership would specifically be structured in regard to the two companies' patents. But the companies underscored Nokia's strength in that area in the open letter from Elop and Microsoft CEO Steve Ballmer today: "We each bring incredible assets to the table. Nokia's history of innovation in the hardware space, global hardware scale, strong history of intellectual property creation and navigation assets are second to none."

They're making clear they're both counting on Nokia's IP portfolio as an asset in this new strategic tie-up. And it's become obvious that Nokia is very aware of the value of its patent portfolio and will not hesitate to get as much as it can for it from the industry.

In late 2009 Nokia went after one of the few holdouts that has yet to license any of its technology: Apple. Nokia accused the Cupertino, Calif.-based company of violating 10 mobile patents it owns. Apple turned around and slapped the world's largest cell phone maker with a few patent violation accusations as well, and over the last year and a half the companies have gone back and forth picking apart each other's IP portfolios and looking for ways to demand licensing deals from each other. With subsequent additions to the lawsuits, there are almost 40 patents involved now, and the spat has spread outside the U.S. to include the U.K., Germany, and the Netherlands.

Apple has got deep pockets and a deep patent portfolio. Nokia is obviously no slouch and can handle itself on this front, so until now we've been set for a long slog through the courts before we arrive at an eventual cross-licensing deal between the two. But adding Microsoft to the mix could affect the course Nokia and Apple are currently pursuing.

Patent activist and blogger Florian Mueller writes today that he thinks this new partnership will have a powerful effect on the current dynamic in the world of mobile patents. Chiefly, he says, because Apple and Microsoft do not sue each other. That's because, as he puts it, "they need each other." It's also probably related to the cross-licensing deal Apple and Microsoft struck 14 years ago when Microsoft invested $150 million in Apple.

The beef between Apple and Nokia is over some pretty broad patents. Nokia says that for any phone to run on a GSM, 3G, or Wi-Fi network, it would have to license one of its patents, which Apple has refused. Apple for its part says Nokia's smartphones rip off the iPhone's display features: like scrolling and document translation, scaling, and rotation on a touch-screen display.

It's possible that if Nokia does as it says and makes Windows Phone 7 the primary platform for its phones, that will obviate the need for Apple to continue to pursue its suit against Nokia.

Mueller also points to the possibility that Apple and Nokia could stop fighting each other and team up against Android--really Google and its handset partners--because Google's patent portfolio, he says, is weak and poorly managed.

Alexander Poltorak, CEO of General Patent Corporation, says he sees no real possibility of that happening, for antitrust reasons and because of the self-interest of Microsoft, Nokia, and Apple.

"There's so much competing with each other, I can't possibly see any source of alignment between Nokia and Apple against Google," he said. "I just can't see it happening. They have too much going on against each other."

However, the pieces for that scenario are already in place: Microsoft has sued Motorola saying its Android phones violate the company's mobile IP. Apple and Motorola are also embroiled in a patent spat. And Apple is currently going after HTC, another high-profile Android handset manufacturer.

Even if they don't officially or legally cooperate, should the three decide to tacitly team up and go after Android handset makers individually, the combination of Nokia, Microsoft, and Apple on the same side would be a major momentum shifter as the mobile platform wars play out.