Nokia files a patent suit against Apple, claiming iPhone is getting 'a free ride'

Nokia, the Finnish cell-phone giant, filed a lawsuit against Apple on Thursday, claiming that Steve Jobs & Co. haven't paid up for technology used in Apple's hugely successful iPhone. Filed in Federal District Court in Delaware, the suit involves patents for technologies including GSM, UMTS and wireless LAN (WLAN) -- all standards used in wireless phones. Nokia licenses these technologies to other companies but claims that Apple has never paid for the right to use them.

"By refusing to agree to appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation," Ilkka Rahnasto, Nokia vice president for legal and intellectual property, said in a statement.

Nokia's (NOK) lawsuit comes while the company is taking a beating in the U.S., as mobile innovators like Apple (AAPL), Research in Motion (RIMM) and Palm (PALM) have moved forward with smart-phone design and software. Just a few days ago, Verizon Wireless, the largest mobile provider in the U.S., launched a formidable ad campaign to unseat the iPhone with its new device, the Droid, which runs Google's open-source mobile operating system, Android.

"As a leading innovator in wireless communications, Nokia has created one of the strongest and broadest patent portfolios in the industry, investing more than EUR 40 billion in R&D during the last two decades," the company said in a statement.

"Much of this intellectual property, including the patents in suit, has been declared essential to industry standards. Nokia has already successfully entered into license agreements including these patents with approximately 40 companies, including virtually all the leading mobile device vendors, allowing the industry to benefit from Nokia's innovation."

Nokia is the world's largest cell-phone maker, but it has fallen on hard times lately. Last week, it shuffled its management team one day after reporting a $836 million loss, thanks to a decline in its smart-phone market share as well as other charges.

In the wake of Nokia's third-quarter beating, Moody's Investors Service lowered its credit rating for the company from A1 to A2, saying the cell-phone market "will become more challenging for Nokia as a result of its more modest long-term growth and more formidable competition in the attractive segments of the market."

Gene Munster, an Apple analyst at Piper Jaffray, says Nokia appears to be aiming for a settlement from Apple, presumably for a hefty chunk of change. "We believe that Nokia is not seeking an injunction; rather, we believe that the company has been in talks with Apple concerning a patent royalty payment for over a year," Munster wrote in a note to clients.

He added: "With today's announcement, it appears that the companies have not come to a resolution and Nokia is attempting to hasten the process. Nokia is likely looking to obtain a patent royalty of 1 percent - 2 percent ($6 to $12) on every iPhone sold in compensation for its [intellectual property] concerning GSM, 3G and WiFi technologies on mobile devices." Apple did not immediately return a request for comment.

Apple reported blowout earnings this week that shocked even bullish Apple watchers. Knowing Steve Jobs' near-fanatical sense of brand identity and fierce competitive streak, it's hard to see Apple throwing up the white flag and bowing to Nokia's demands. In other words, this could get ugly.

Follow Sam Gustin, a reporter for DailyFinance, on Twitter here. Follow DailyFinance's tech coverage here.


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