Nokia Corporation (NOK) has entered into a legal battle claiming that its patents have been violated by rivals Research in Motion Ltd (RIMM), HTC and Viewsonic Corp. The case has been filed in U.S. and Germany against infringements of Nokia’s dual function antennas, power management for mobile devices and various software related patents.
Presently, Nokia is in dire straits, losing on every front. Nokia remains severely challenged owing to stiff competition, primarily from Apple Inc’s. (AAPL) iPhone, and an array of other smartphone manufacturers using Google Inc’s. (GOOG) Android platform. In this situation if the company fails to protect its patent portfolio, the outcome can be worse.
The company has the strongest patent portfolio in the wireless industry and has spent almost $62 billion in the last two decades in research and development. Nokia possesses a very strong portfolio of around 10,000 patents.
Furthermore, the company has patent licensing agreements with around 41 mobile handset manufacturers who can use its patents. The company earns a healthy royalty income from this licensing agreement. Recently, the company has lost its title as the world’s biggest mobile manufacturer to Samsung Electronics. We believe that Nokia will fight till the end to protect its patent.
For quite some time now Nokia has been defending its patents against other handset manufacturers. Last year, the company filed a lawsuit against iPhone manufacturer Apple Inc. for some of its patents which were settled after Apple agreed to pay a one-time payment and royalty fees.
In this current round of litigation, Nokia has sued HTC for unauthorized use of its proprietary innovations which are not widely licensed. They have also accused California-based tablet maker Viewsonic corp. of infringing four patents relating to 3G and Wi-Fi technology industry standards. According to Nokia, they just want to stop the illegal use of their proprietary technologies in any form.
Therefore, we retain our long-term Underperform recommendation on Nokia. Currently, Nokia has a Zacks #5 Rank, implying a short-term Strong Sell rating.
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