* Has Apple licensing deal, not based at full iPhone price
* Sees quick deal unlikely in Nokia-Apple legal battle
* Sees royalty base one of key issues in Nokia-Apple deal
(Adds details from Apple filing, interview)
By Tarmo Virki, European technology correspondent
HELSINKI, Oct 27 A legal battle between Apple
Inc (AAPL.O) and Nokia Corp NOK1V.HE over patent infringement
is likely to last for more than a year, said Bill Merritt, the
head of mobile licensing firm InterDigital.
Nokia dominates the global handset market, but it has lost
ground to smartphone entrants like Apple, which has become one
of the top handset vendors. "It's not a David versus Goliath
story, these are two Goliaths," Merritt said.
Nokia filed suit in the United States last week, saying
Apple had infringed 10 patents in technologies like wireless
data transfer, a key factor in the success of iPhone. The suit
accused Apple of trying to hitch a "free ride" on Nokia's
technology investment. [ID:nLM664007]
In its form 10-K annual report filed on Tuesday, Apple said
it "intends to defend the case vigorously."
The patents cover wireless data, speech coding, security
and encryption and are infringed by all iPhone models shipped
since the iPhone was introduced in 2007, Nokia said.
"It's the first card to be played, there's a lot more cards
left. How this plays out will largely depend on Apple's
response," Merritt told Reuters in an interview, adding the
case was likely to continue for a couple of years.
"I'd be very surprised if anything gets solved in the short
term. It's at least a year before some clarity," he said.
He said if Apple decides to just defend itself, or to
countersue, the case would likely last two to three years, but
if it takes the case to the U.S. International Trade
Commission, the decision would come somewhat faster.
In its 10-K, Apple said it is defending more than 47 patent
infringement cases overall, 27 of which were filed during
fiscal 2009. In certain cases, Apple said it may consider the
"desirability of entering into licensing agreements."
InterDigital itself lost a case against Nokia at the ITC
earlier this month, and Merritt said the company was likely to
appeal the decision.
"We continue to move forward on that, it's not over," he
Apple is likely one of the biggest net payers of royalties
in an industry in which all vendors work under cross-licensing
agreements. As a latecomer, it has limited intellectual
property assets compared with rivals. Patents are playing an
increasingly important role in the industry as cellphones are
becoming increasing complex.
"These products are innovation-rich -- we are not making
hammers," Merrit said.
Most analysts estimate Nokia's demands for compensation
range from $200 million to $1 billion as it is one of the key
patent holders in mobile technologies, alongside Qualcomm Inc
(QCOM.O) and Ericsson (ERICb.ST). [ID:nLN464459]
Merritt said the Nokia-Qualcomm legal battle which lasted
from 2005 to 2008 was likely a bigger issue for the wireless
industry than Nokia-Apple. "There's a lot of talk, but I don't
think it will shape the industry."
Merritt said in addition to a royalty rate, the key issue
will be how it is calculated, as iPhone's average selling
price, $566 in the last quarter, is much higher than anything
else in the industry.
Nokia's average selling price was 62 euros ($92.30) in the
Interdigital said it has a licensing deal with Apple,
adding it had used the price of a typical feature phone to
calculate the rate, not the record-high average selling price.
Ericsson told Reuters it has a licensing deal with Apple,
and also Qualcomm said it was getting royalties for all 3G
phones sold. Motorola MOT.N declined to comment.
Merritt said likely most of the key patent holders have a
deal with Apple.
"As there are no other legal actions, probably the number
of unlicensed folks is very small," Merritt said.
(Additional reporting by Sinead Carew in New York, Mayumi
Negishi in Tokyo, Jens Hack in Munich, Nicola Leske and Marilyn
Gerlach in Frankfurt, and Gabriel Madway in San Francisco;
Editing by Steve Orlofsky and Richard Chang)