Nokia’s Patents Chief Gets Pushback in Bid to Make Firms Pay
(Bloomberg) -- Nokia Oyj, moving to expand its profitable licensing business beyond smartphone makers, is learning that its old ways of negotiating may not always work.
Having recently tussled with automakers to make them pay for its inventions used in connected vehicles, Nokia is now preparing for talks with the makers of other connected devices. These gadgets, which are expected to proliferate with 5G technology, will let consumers turn on the dishwasher from their morning commute and farmers monitor crops, livestock and equipment from their phone. In doing so, they’ll use cellular connectivity technology that Nokia helped pioneer and continues to invest in.
With a strong portfolio of patents for 5G and 6G technology, Nokia is approaching would-be licensees and being met with some resistance, Jenni Lukander, president of the company’s technologies unit, said in an interview.
“Some of these companies simply take the view that they don’t want to take a license until somebody has sued them,” she said.
Depending on the industry, licensing deals will vary based on “what works in each category,” she said without giving specifics. “It’s still very early days and we are testing that market, but in the future it will be a good opportunity.”
Licensing accounts for about half of Nokia’s profit and the company wants to ensure those earnings are sustainable. But the Finnish company and many consumer device makers disagree on who should pay.
When Nokia started seeking royalties from the burgeoning market for connected cars, automakers balked, pushing responsibility to parts suppliers. That’s the way the auto industry always worked, with components makers handling any royalty agreements. Nokia argued that a piecemeal approach doesn’t work since its technology is integrated in the vehicle in so many ways.
Part of the friction is cultural -- most industries aren’t used to the rough-and-tumble patent licensing disputes common among telecommunications and Silicon Valley companies, though Nokia’s name recognition might help, said Steve Skelley of Folio Law Group. He negotiated with Nokia at his prior job working for patent-licensing firm Intellectual Ventures.
“The concept of having to train a market is real if you’re attempting to license companies in an industry that is not familiar with the patent owner,” Skelley said. “Nokia has savvy negotiators, so they’re not going to come in with unreasonable demands.”
It’s a fine balance to strike: you can’t charge so much that companies stop using the technology, but inventors need enough of an incentive to keep investing in research and development, Lukander said.
At Nokia, licensing has grown more important over the past decade since it stopped making phones and focused on networking gear and intellectual property. While the company doesn’t break out the source of its patent revenue by industry, it continues to rely heavily on royalties from its inventions used in the $378 billion global smartphone market.
“Smartphone licensing is the far biggest opportunity for us, and I think it will remain so,” Lukander said. “Almost every consumer has a smartphone but not everybody has a car, for instance.”
Over the years, Nokia has been embroiled in high-profile disputes, like its ongoing fight with Chinese handset maker Oppo Co., a former licensee. In an effort to limit potential confrontations, the company has published some of its rates and joined with rivals Qualcomm Inc. and Ericsson AB to create a one-stop licensing shop for 2G, 3G and 4G technology.
“The vast majority of our dealings and agreements are actually entered into completely amicably,” Lukander said.
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