Nokia Must Beware of Litigation Impacts
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is widely accepted that the purpose of law is to limit and or contain harm to others. Unfortunately, continued abuse of the system has adapted legislation to serve the interests of the law makers or those who have the resources necessary to influence lawmakers.
Legal matters are important in the world of business because they shape a company’s strategy and effective implementation for said strategy. Laws can impede or accelerate growth. They bring companies into existence and can also dismantle or remove them. Finally, legal matters in the form of lawsuits can guide consumer behavior and business response.
Such is the case this year, with several prominent legal battles all engaging simultaneously. Companies such as Apple (NASDAQ: AAPL), Nokia (NYSE: NOK), and HTC all face their own legal woes and their response will shape how each fares in the future.
Nokia and HTC
Last December, HTC was hit with a cease-and-desist campaign from German patent licensing firm IPCom. Letters were mass distributed to retailers and wholesalers of HTC's 3G devices, even without a specific court order allowing it to do so.
IPCom began sending the letters to around 100 German retailers, including mobile operators and major chains threatening legal action against them if they continue to sell HTC products. It was not long until the Düsseldorf Regional Court barred IPCom from sending the warning letters. The court however didn't enjoin IPCom from sending out any kind of patent assertion letters to retailers, merely that the letters were “misleading”.
This didn’t stop the patent firm, it only changed its target.
With sights aimed on Nokia, IPCom claimed infringement on a key 3G patent that deals with emergency services on mobile networks. IPCom owns the "268" patent which prioritizes police and emergency services and it was found that 2 Nokia devices used the patent with licensing. The company sought to ban the sale of 3G Nokia phones in the U.K. unless Nokia agreed to pay the fees.
Nokia lost this battle when Justice Floyd found that a revised patent is "valid and infringed" by certain unnamed Nokia devices. Those devices, however, had since been removed from Nokia’s product line and are no longer sold.
Then in a strange turn of events this morning, The European Patent Office announced that the patent is actually invalid in its current form. According to Reuters, which first reported on the story, the patent relates to a mobile device's first connection to a network. IPCom has stated that it plans to appeal today's ruling, adding that it won't impact previous court decisions on its cases against Nokia and HTC.
Apple’s New Direction
These are not the only two companies entrenched in courtroom battles.
Anyone who has followed Apple for any amount of time knows that China was the recent stage on which the courtroom drama unfolded. A bankrupt electronics company had sued Apple over the name IPAD. The company said they had trademarked the IPAD name in 2000, long before Apple's iPad hit retail shelves. While this was strictly true, the company had sold rights to the name to Apple – for every other country except China. Apple is currently appealing the lower court’s decision in favor of the plaintiff.
Next, we find trouble on the home front when The U.S. Justice Department sent an official warning to Apple and five other prominent publishers of impending litigation over allegedly colluding to raise the price of ebooks. Essentially, the allegation is that Apple and the named publishers acted in concert to raise prices across the industry, thereby violating federal antitrust laws.
These high profile cases, combined with a handful of smaller ones such as The Australian Competition and Consumer Commission claiming the fine print of 4G capability on the iPad3 boxes is false and the case of 83-year-old Evelyn Paswall who broke her nose by walking into the glass door of the Apple store. She is suing for $1 million citing that Apple’s high-tech modern architecture is a danger.
To combat these legal woes, Chief Executive Tim Cook is preaching the “Settle and move on” approach. Cook, speaking on the company's quarterly conference call today, expressed his desire to end the litigation frenzy that has engulfed his company as of late. He will get the chance to do just that starting with Samsung executives to hash out the judge-ordered settlement talks.
Cook is undoubtedly a little more rational when it comes to legal battles than his predecessor. A passionate innovator like Steve Jobs rarely took anything laying down.
What Will Happen
The suits mentioned above are a small sampling of the widespread epidemic of patent lawsuits taking place throughout the technology industry. Google (NASDAQ: GOOG) and Oracle (NASDAQ: ORCL) are in their own slugging match over possible infringement of Java code used in the Android platform. In the case of that previously mentioned, a loss to Motorola has potential to wound Apple by empowering its rival Google. Google is waiting for approval to acquire Motorola and could use its library of patents against Apple.
I don’t foresee this as too great an impact however. Apple is a powerhouse, with a legal team consisting of now seasoned veterans at weathering these storms, and, I predict, just as we have heard record earnings from Apple, we will continue to see positive performance along with those companies that supply it such as Qualcomm and Nvidia.
Summary
It seems that no company can pass through the treacherous world of commerce unscathed. There will always be potential for attack by competitors, customers, and even from within. It is in the handling of these trials (excuse the pun) that some emerge as leaders and others become casualties of war. I believe Tim Cook has a clear vision of what needs to be done and will not be impeded by frivolous litigation any longer. His strategy, I believe, will result in a stronger company and continued performance.
On the other hand, companies such as Nokia and HTC must be careful how far they entangle themselves in litigation. Distracted operations run the risk of missed opportunities that could result in losing market share or irreparable damage to company image.
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