Back to top

Analyst Blog

Zacks Equity Research

Nokia Files Suit Against RIMM

AAPL NOK

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Nokia Corporation’s (NOK - Analyst Report) patent licensing agreement with Research in Motion is in disarray as the struggling Finnish handset manufacturer has sued the Blackberry maker for breach of contract in Britain, US and Canada. If Nokia manages to win, then Research in Motion will become the second closest rival after Apple Inc. (AAPL - Analyst Report) to loose a legal battle with the company in the last 15 months.

Back in 2003, Nokia entered into a patent licensing agreement with Research in Motion which allows the later to use some of the industry standard technologies for mobile devices. As per the agreement, Nokia will receive a royalty payment from the maker of Blackberry. However, Nokia claimed that Research in Motion has sell products compatible with its Wi-Fi technology without agreeing on the royalty payment details and has filed a patent-infringement suit against research in Motion in Germany.

Research in Motion has argued that it does not need to pay additional royalty as the patent agreement with Nokia provides it the right to use the Wi-Fi technology. In that context, the Canadian company has filed an arbitration process in the Stockholm Chamber of Commerce in March 2011.

Earlier in the month the Stockholm chamber of commerce declared a ruling against Research in Motion. To make matters worse, Nokia filed an enforcement suit that will impose the tribunal’s ruling to stop research in Motion from selling Wi-Fi enabled products without first agreeing on the terms of royalty payment.

If Research in Motion loses it will have to pay an additional royalty of $2-$5 per phone to Nokia. Losing the legal tussle could be a major blow for the Blackberry maker on the wake of its much anticipated launch of BB10-based smartphones. A smartphone without Wi-Fi will significantly reduce the value of its BB10-based devices.

Nokia’s impressive patent portfolio is the only jewel left in its crown. The company has the strongest patent portfolio in the wireless industry and has spent almost $62 billion in research and development in the last two decades. Furthermore, the company has patent licensing agreements with around 41 mobile handset manufacturers, who use its patents. The company receives a healthy royalty from this licensing agreement.

We believe this patent dispute provides Nokia a win-win situation. If Nokia allows Research in Motion to sell Wi-Fi enabled products then it will provide a steady cash flow stream to them. On the flip side, if Research in Motion losses it will provide an opportunity for Nokia to win some of the Blackberry customers as a smartphone without Wi-Fi will be less attractive to the data hungry customers.

We retain our long-term Neutral recommendation on Nokia Corp. However, it holds a Zacks #2 Rank, implying a short-term Buy rating.
 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%