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From - The Skeptic: Nokia Slogs It Out With QCOM:



By Angelo Franchini
A DOW JONES NEWSWIRES COLUMN
LONDON (Dow Jones)--Nokia's second defeat in two months in its legal wrangle with Qualcomm should make investors wonder whether it's the company or its lawyers that stand to benefit the most from taking on its U.S. rival over mobile technology patents.

But the hundreds of millions of dollars at stake for Nokia, quite apart from the fundamental are a strong argument in favor of pursuing its case through Europe's courts.

That said, even a company of Nokia's heft and track record needs to pick its battles carefully when it's operating in as fast-moving a sector as mobile telecommunications.

At stake are the royalty fees Nokia has been paying to use the CDMA mobile technology, a standard for the mobile phone industry, mostly developed by Qualcomm.

Those fees are between 4% and 5% of the average wholesale price of Nokia's phones. Some analysts estimate Nokia was paying Qualcomm about EUR340 million a year before the patent expiry but others put it nearer EUR1 billion.

The Dutch court ruled against Nokia's objections to Qualcomm's patent demands Wednesday, and ordered Nokia to pay legal costs amounting to about EUR2 million.

Nokia has about another 10 intellectual property right cases pending in courts around the world, suggesting a minimum, optimistic annual cost of EUR20 million.

A more conservative estimate of the legal expenses that Nokia might nearer EUR140 million which is one estimate of the legal fees that Qualcomm may have to pay in 2007, though Qualcomm has other litigation on its hands.

A saving of at least EUR200 million for the coming year, not to mention the forward annual savings once the legal battle is won, against the worst-case scenario of a possibly one-off EUR140 million loss, make the fight worthwhile.

And when intangibles like IPR make up to two thirds of a company's market value, as it is the case for leaders in the technology industry, a strenuous defense of such assets is all the more important.

The issue for Nokia is more one of picking up the right fight and finding allies, while avoiding the scattergun approach of its recent suits in Germany and the Netherlands.

Nokia has sided with Ericsson, Broadcom, Texas Instruments, NEC and Panasonic Mobile Communications in asking the European Commission to investigate Qualcomm's licensing fees.

The request was filed two years ago. The EC's antitrust division asked for Qualcomm's feedback to its preliminary inquiry only on Oct. 1.

That's a long time for Nokia to wait when there's so much money at stake, hence Nokia's frustration, and decision to pursue Qualcomm on a country-by-country basis. The problem is that Nokia's lawyers seem to have done a sloppy job, at least in the Netherlands, in presenting its case.

Nokia has received strong verbal backing from Ericsson in its fight with Qualcomm, but so far the Finnish company is the only handset maker whose contract with Qualcomm has expired, so it can't expect much more than that for now.

Legal wrangles are complex enough at the best of time, so if Nokia needs to keep fighting Qualcomm through Europe's courts, it needs to get its act together or try a different approach in terms of protecting its intellectual property without wasting shareholders money.

(Angelo Franchini, a Special Writer on Dow Jones Newswires' Skeptic team, has previously worked in research and development in the biotechnology and software sectors. He can be reached at [phone] or by e-mail: [e-mail])

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(END) Dow Jones Newswires

November 15, 2007 10:37 ET (15:37 GMT)