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Will Nokia?s victory over Apple buy it breathing room?

Finnish phone manufacturer Nokia has won a two-year suit it had with Apple in a settlement that awards the company a one-time sum, as well as ongoing royalty payments.

The settlement withdraws Nokia and Apple?s respective complaints. Additionally, the settlement says that Apple will pay Nokia in compensation for using the company?s intellectual property in iPhone devices.

"The settlement is a slight positive for Nokia and a slight negative for Apple," said Neil Mawston, England-based director of global wireless practice at Strategy Analytics. 

"The settlement confirms that Nokia has a relatively strong mobile patent portfolio and it will give Nokia increased confidence to pursue other potential licenses if it needs to," he said. "The settlement confirms that Apple has been underpaying for some of its mobile IPR and it may need to dip into its cash reserves to settle the multimillion-dollar deal.

"However, Apple's cash pile is in the tens of billions of dollars range, so the firm should not have too much trouble settling up with Nokia."

Unlocking potential
The settlement coincides with another major move for Apple: the electronics giant will sell unlocked iPhone 4 devices.

Consumers can buy the smartphone without a contract or commitment. The phone starts at $649, with 16GB and 32GB models.

Additionally, customers can use it on the supported GSM cellular network of their choice.

Meanwhile, a suit that Nokia filed in October 2009 with the Federal District Court in Delaware alleged that Apple?s iPhone infringed Nokia patents for GSM, UMTS and wireless local area network standards.

Nokia and Apple have been going back and forth with patent infringement lawsuits.

It all began in October when Nokia filed a complaint against Apple (see story).

In response to that lawsuit, Apple filed a countersuit claiming that Nokia is infringing 13 Apple patents (see story). 

Then, in December, Nokia filed a complaint with the United States International Trade Commission (ITC) alleging that Apple infringes Nokia patents in virtually all of its mobile phones, portable music players and computers (see story). 

That all came to an end this week.

License to bill
Nokia announced that it signed a patent license agreement with Apple yesterday.

The specific terms of the contract, including the one-time payment and on-going royalties, is confidential.

?We are very pleased to have Apple join the growing number of Nokia licensees," Nokia said in a statement.

?This settlement demonstrates Nokia's industry-leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market," it said.

According to Nokia, the agreement is expected to have a positive financial impact on the company?s recently revised outlook for the second quarter of 2011.

While the settlement is a great feat for Nokia, it might not change fundamentally what it is doing in the coming years with Microsoft. The Windows Phone operating system will appear on all Nokia smartphones.

Additionally, many industry experts believe that the settlement will lead to more licensing deals for Nokia, especially with Android original equipment manufacturers.

"It has long been widely acknowledged within the industry that Nokia has a strong portfolio of mobile IPR," Mr. Mawston said. "The Apple IPR deal reconfirms some of those strengths and they will inevitably give Nokia renewed confidence to chase down any further licensing deals that may be outstanding with other companies.

"Nokia is struggling to grow its core handset business, due to tough competition from Apple and Android vendors, so Nokia may be keen to discover new revenue streams from fresh sources in the mobile IPR world that can offset those revenue declines in its traditional handset shipment division," he said.

"We expect Nokia to continue exploring for IPR offenders in the mobile world, potentially sniffing around the emerging wave of 3G Android smartphone players from Asia."