Apple Says Uncle to Nokia; Welcome to the Next Phase of Mobile Competition

Apple (AAPL) occasionally blinks in business dealings, as its backpedalng on publisher subscription plans for iPads and iPhones showed. However, the company rarely completely capitulates. And yet, that's exactly what happened as Apple entered a patent license agreement with Nokia (NOK).

Apple tried to put on a brave marketing face, stressing that some cross licensing didn't include "the majority of the innovations that make the iPhone unique." But Nokia obvious won decisively. The bigger implication, though, is that intellectual property, which has always been important to high tech, has become a make-or-break factor. If you don't have the patents or licenses to use them, you can conceivable find yourself muscled out of the field.

Oh, wait, you mean I'm already holding a big stick?
For decades, most technology companies paid superficial attention to IP. Some companies -- Microsoft and IBM, for example -- kept legions of lawyers in work. A few used patents both offensively and defensively. But these were secondary tactics. Tech companies got ahead through ingenuity and speed.

That's no longer enough. Companies realize how powerful IP litigation and licensing can be to advance their strategic interests, particularly in mobile. Corporations that patented early and thoroughly in that technology have an assortment of cudgels. Here's a count to date of how many patents (not all mobile) some of the mobile leaders have in the U.S.:

Nokia -- 9,051
Motorola -- 20,673
Microsoft -- 17,862
Samsung -- 43,041
LG Electronics -- 9,371
Qualcomm â€" 4079
Broadcom -- 5059

Are all of these actual mobile patents? No, but it doesn't matter. Surging smartphone popularity makes that question immaterial. These are computers that also make telephone calls. They use semiconductors and other components. They execute applications that perform functions. This can make a company vulnerable at many levels -- or give it weapons that it hadn't previous considered.

No more Mr. Nice Manufacturer
In the past, handset manufacturers would license a pool of patents and cross-license with competitors to keep clear of legal problems. That's over, largely because the major newcomers, Apple and Google, have been wildly successful but didn't grow up in the mobile industry. Neither had shown much interest in the issue of IP leverage. However, here are some recent results of the mobile patent wars:

Staff at the International Trade Commission sided with Nokia and HTC over Apple's suits targeting phones that run Google (GOOG) Android. Although not final by any means, the rulings weren't good news considering Android's IP vulnerability.
An ITC judge ruled for Kodak in Apple's allegations of patent infringement. That leaves Apple facing Kodak. A win on the latter's part will mean more patent licensing in the iPhone's cost structure.
Microsoft pushed HTC into a patent license agreement that may pay $5 a unit, with other Android vendors possibly paying as much as $12.50 per unit.
Nokia may have received a $608 million payment from Apple in addition to ongoing royalties.

Patents have become the bottom line to the mobile industry. It's why Microsoft is so concerned over Google buying Nortel's patents and why Apple is trying to intercede in the lawsuit that patent troll Lodsys has brought against a number of app developers.

As Billy Holiday wrote: Them that's got shall get; them that's not shall lose. We're seeing a scramble to get while the getting is good.

Related:

Image: morgueFile user southernfried, site standard license.

Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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