Top global cellphone maker Nokia Oyj on Thursday charged Apple Inc with infringing Nokia patents, accusing the iPhone maker of trying to hitch a free-ride on Nokia's technology investments.
Nokia dominates the global handset market but it has lost some ground to new smartphone entrants like Apple, which entered the market with its iPhone in mid-2007.
The 10 patents in the lawsuit, filed in the U.S. state of Delaware, relate to technologies fundamental to devices using GSM, UMTS and/or wireless local area network (LAN) standards, Nokia said.
In its complaint filed with the U.S. District Court for the District of Delaware, Nokia said it was seeking compensation for Apple's use of the patents and a declaration that Nokia is entitled to an injunction until Apple pays compensation, along with interest, for past infringement.
It did not specify an amount.
Apple's wireless communication devices take advantage of the decades of continued investments by Nokia to build today's communication protocols, Nokia said in the filing. By refusing to compensate Nokia for its patented technologies, Apple is attempting to get a 'free-ride' on the billions of dollars that Nokia has invested.
Apple declined to comment on the lawsuit.
Analysts said the suit could have an impact on the iPhone maker, who is likely one of the biggest net payers of royalties in the industry. As a latecomer, Apple has limited intellectual property assets compared with rivals, when all vendors work under cross-licensing agreements.
It's quite likely Nokia has a case, said Tero Kuittinen, an analyst with MKM Partners. Plenty of companies come to handset manufacturing and don't pay for all the IP in early years. Several Asian vendors started paying GSM license fees years after they began manufacturing GSM phones.
The patents cover wireless data, speech coding, security and encryption and are infringed upon by all iPhone models shipped since the iPhone was introduced in 2007, Nokia said.
About 40 companies have entered into license agreements with Nokia, including virtually all the leading handset vendors, but it has not struck a deal with Apple.
In its court filing, Nokia said it made various offers to Apple for a license agreement, which Apple rejected.
This is about competition against Apple, said Alfred Zaher, partner and intellectual property attorney at Blank Rome LLP in Pennsylvania. He added that if Apple settles the lawsuit, it may represent tens of millions of dollars, at most, over a 10-year period.
However, he said Nokia is facing an eroding market position that could represent billions of dollars.
I don't think Apple is as concerned about the patent infringement lawsuit from a global perspective as would be Nokia, looking at its market share and what it's losing, Zaher said.
Even if Apple were to pay past due royalties, it would still enjoy a market share it otherwise would not have but for a period of 'free-riding,' the complaint said.
Nokia said that because it was difficult to predict whether it can regain market share lost to Apple, Nokia's harm cannot be compensated by payment of past due royalties alone.
Legal battles over as many as 10 technology patents can easily take several years.
Nokia's enormous patent portfolio doesn't make this a big surprise but it could have severe repercussions for Apple and its component supplier, said CCS Insight analyst Geoff Blaber.
Once again intellectual property has become the secondary battleground in a highly competitive mobile phone market.
Last year, Nokia ended a more than three-year legal battle with U.S. chipmaker Qualcomm which spanned three continents and involved more than a dozen separate cases.
Apple shares closed up 0.1 percent at $205.20 on the Nasdaq. Nokia shares closed in Helsinki 0.3 percent lower at 8.82 euros.
(Additional reporting by Ian Sherr in San Francisco; Editing by Elaine Hardcastle and Karen Foster, Gary Hill)