Will Nokia Unleash its Inner Warren Zevon?
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Warren Zevon, the musician, once said in an interview that he wrote his hit song, "Send Lawyers, Guns and Money" on a wet cocktail napkin as a result of imbibing in too much of the local product at an exotic locale. Nokia Corporation (NYSE: NOK) is now looking at a similar plan due to its inability to sell enough its product at any location around the globe, no matter how mundane. With its formidable patent portfolio, unleashing legal firepower looks to be the most viable strategy left to make Nokia money.
At present, Nokia Corporation has more than 30,000 patents and about 10,000 patented innovations. Nokia Corporation already books substantial royalty income from its patent portfolio. In its first quarter earnings for 2012, Nokia Corporation reported that it expected to register about $500 million annually from its intellectual property holdings. That is about 7% of Nokia's present market capitalization.
This would not be a first for Nokia Corporation. In the past, Nokia has filed lawsuits for patent infringement. Last year, Nokia sued Apple (AAPL, quote). Apple, the maker of the iPhone, agreed to pay Nokia a settlement and future royalty payments.
The campaign on the legal front continues for Nokia Corporation. Recently, Nokia took legal action against Research-in-Motion (NASDAQ: BBRY), the Canadian maker of the Blackberry, and HTC on a variety of charges of patent infringement. Lawsuits were fueled in the United States and Germany. It is reported that Nokia Corporation is considering a lawsuit against Google (NASDAQ: GOOG) for infringing on its Wi-Fi patents for the Nexus 7 tablet.
Becoming litigious might also entice Microsoft (NASDAQ: MSFT) to be more accommodating to Nokia in its time of need. A partner on the Windows Phone, Microsoft introduced Windows 8 without it being compatible with any existing Nokia products. Needless to say, the impact on the stock price of Nokia was negative and immediate at a time when it was least needed.
At one time, patent lawsuits were frowned upon by the high tech community in Silicon Valley. But as the stakes have become bigger and the products more complex, it was inevitable that "lawyers, guns and money" would somehow become involved. Microsoft just emerged from a legal battle with Motorola (NYSE: MMI) that went all the way to the United States International Trade Commission for adjudication, with one administrative law judge calling for a complete ban of the Xboxes in the United States due to Microsoft violating the patent rights of Motorola. Apple is currently reported to be considering a lawsuit against Google for its patent for a head-mounted display apparatus that is very similar to Google's Glass prototype.
The stakes could not be any bigger for Nokia Corporation than at present as the company is literally in a battle for survival with the share price under $2, sales and earnings-per-share growth falling, and hemorrhaging money with a negative profit margin of 9.24%. Until now, Nokia Corporation has refrained from being a "patent troll" and going after its high tech brethren for tribute for infringing on its intellectual property portfolio, whether real or imagined.
Such a strategy might be all that Nokia Corporation has left to generate income, keep rivals away from its intellecutal assets, and encourage Microsoft to find a place for it as it plans for the future. Microsoft is pushing for the ruling on the Xbox by the International Trade Commission to be revised, so it certainly does not want to encounter a similar legal fate with the Windows Phone. A patent battle with Nokia Corporation could result in such draconian legal action, as happend with the Xbox.
Former French Premier Charles DeGaulle once said, "Nations do not have friends, they have interests." Nokia Corporation might be utilizing this approach with patent legal action in the future in its battle for survival.
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.