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Patent settlement between Nokia and Daimler sets new market precedent with effects to be felt in many industries

18.06.2021
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Nokia and Daimler have reached a settlement in their long-running patent dispute. The resolution of the dispute affects all industries that use 4G and 5G technologies or the Internet of Things (IoT), estimates Sami Aroma, Partner and European Patent Attorney at Kolster.

Network equipment manufacturer Nokia announced in early June that it had reached an agreement in its long-running patent row with German car company Daimler over the licensing of network technologies used in vehicles. In the future, Nokia will license its mobile communications technology to Daimler in exchange for royalties on the use of the patents. At the same time, the companies announced they would resolve all pending legal disputes.

”The settlement is significant as a landmark case that will influence market practices. It demonstrated the strength of Nokia's patent portfolio of standardised network technology. Daimler joins many other car companies in licensing its technology from Nokia. The decision also makes licensing negotiations with car companies easier for other network technology companies,” says Sami Aromaa, Partner and European Patent Attorney at Kolster.

Nokia and Daimler had each sued one another in Germany. According to Daimler, obtaining the necessary licences was the responsibility of car component suppliers. In Nokia’s view, the manufacturer of the end product, Daimler, should pay for the licence. As the price of a licence is largely determined by the price of the product, the interpretation affects the amount of royalties paid to Nokia.

“Since the companies settled their dispute at the negotiating table, the court did not rule on the basic question of who in the value chain is responsible for purchasing licences,” says Sami Aromaa.

The dispute extends beyond car manufacturing as the question of technology licensing expands rapidly into new areas. It applies to virtually all industries that use 4G and 5G technologies and the Internet of Things. Today, network technologies are found in an increasingly wide variety of devices, such as household appliances.

Companies must be prepared for royalty demands

“It is important for companies that use network technologies to understand the shift in market practice and the risks involved. Companies should be prepared for royalty demands by licence owners and take into account the increased frequency of such requests in their resourcing and budget. It is also helpful for companies to have a ready strategy for handling royalty demands, as the price is always determined by negotiations that may end up being extremely resource-intensive,” says Sami Aromaa.

One of the principles of standardised technology is that licences must be issued on fair, reasonable and equal terms. The aim of standard patents is to encourage companies to develop mutually compatible mobile communication systems that are able to communicate with each other.

“It is not in licence owners’ interest to see royalties become so high as to threaten the profitability of their own business. The settlement between Nokia and Daimler reinforces the practice that the price of a licence is typically determined by the price of the final product in which the technology is used. The larger the company and the more valuable the end product, the more lucrative they are seen by the licence owner.”

Further information:

Sami Aromaa, Partner, European Patent Attorney, Kolster
sami.aromaa@kolster.com
tel. +358 40 563 4735