It's been nearly two years of legal posturing for Nokia and Apple, but the two companies have finally settled their patent dispute, with Apple agreeing to pay a one-time settlement fee and ongoing license royalties to Espoo. That's more or less what I assumed would happen back when I first examined Nokia's complaint, but I wouldn't necessarily call this a straight victory for the Finnish team: a lot's changed in the past 20 months, and there are a number of reasons these two could have finally been pushed into making a deal. A quick rundown of the three most obvious:
- Remember, the original conflict wasn't really about patent infringement, but always about what rate Apple would pay for Nokia's patents on various "essential" GSM and WiFi-related technologies. (I'm putting "essential" in quotes because determining what's essential to a standard and what's not is anything but simple.) For all we know, Apple finally decided that simply paying Nokia's price was cheaper and less risky than ongoing litigation across multiple lawsuits in multiple venues; losing any one of those cases would have likely cost Apple far more than whatever fee they negotiated.
- On the flipside, Nokia might have decided that having Apple challenge the validity of some 30-odd patents in multiple venues was too risky and offered up a cheaper license rate. Nokia licenses its "essential" patents across the industry, a revenue stream that's becoming vitally important as the company begins a rocky transition to Windows Phone 7 and tries to reassure investors that things will get better. Putting that source of income under the gun may have simply been too much of a risk for Stephen Elop -- it's somewhat telling that Nokia's press release announcing the deal is subtitled "Apple payments to Nokia to settle all litigation and have positive financial impact."
- Lastly, it's entirely possible that Nokia's decision to adopt Windows Phone 7 as its preferred platform played a major role in ending this fight. Apple claimed that Nokia demanded a cross-license to various iPhone patents as part of its patent fees, and that always seemed like too high of a price for Cupertino, which clearly views its iPhone IP as a key competitive advantage. But Microsoft and Apple have long had deep cross-license agreements of their own, and it's possible that Nokia simply falls under Redmond's patent umbrella by using Windows Phone 7 -- meaning that all Nokia and Apple had to do was figure out a reasonable cash royalty. We'll likely never know, but the timing is certainly right.
Now, it's likely we'll never know what exactly triggered Nokia and Apple to settle; it could be one of these reasons, a combination, or something else entirely. It's also likely we'll never know exactly how much Apple's going to pay, although I have a feeling that number may leak out eventually. But it's definitely good to see two major players finally come to terms and begin to offer some much-needed stability to the mobile landscape -- hopefully a few of these other lawsuits will start heading towards reasonable settlements now as well.
Update: Apple's quoted in the New York Times as saying that the deal includes a cross-license for some of its patents, but "not the majority of the innovation that makes the iPhone unique." We don't know the scope of that license or what patents it does include, of course, but on balance it seems like Nokia definitely walked away the bigger victor here.