(NOK) Nokia Counters UK Patent Ruling

The leading mobile phone maker in the world, Nokia Corp. (NOK) recently got involved in a legal tussle with German-based patent owning company IPCom in a UK High Court. IPCom alleged Nokia of infringing their two patents rights. However, the British High Court said that Nokia has not been found violating any patent rights of its existing product portfolios.

Nokia responded positively to the British court judgment. According to the court, none of the products in Nokia’s portfolio violate any patent rights and thereby can continue selling these products in the U.K market. However, Nokia has also agreed to take this matter to European Patent Office for further clarification.

It all started four years back when IPCom bought two product licenses related to how phones connect to a GSM (Global System for Mobile Communications) network from German-based firm Bosch. Nokia also tried to acquire similar patent rights but was unsuccessful. Finally, Nokia adopted a similar concept on its 3G handsets that allegedly violated IPCom’s newly acquired patent rights.

The British High Court verdict was a reason enough for Nokia to celebrate at last. The company has also resolved all its patent related legal disputes with Apple Inc. (AAPL).

Both the companies were entangled in a lawsuit for nearly 2 years regarding patents associated with several key features for high-end smartphones. These include touchscreen technology, multitasking operating systems, data synchronization, positioning, call quality and the use of Bluetooth accessories. According to the new agreement, both the companies will withdraw their respective lawsuit filed with the International Trade Commission. Apple will make a one-time payment and will also pay regular royalties to Nokia.

Although the financial terms of the agreement were not disclosed, several analysts estimate that the one-time payment will be in the range of $600 million – $650 million and the rate of royalty on iPhone revenue may vary from 1%-2%. The one-time payment as well as royalties will boost Nokia’s revenue guidance for 2011.

In the recently concluded Telecompaper Mobile conference held in Netherlands, Nokia discussed its plans to launch its much hyped Windows Phone 7 based smartphones in six European nations namely France, Germany, Italy, the Netherlands, Spain and the U.K. The upcoming smartphones will be launched by the end of 2011.

The recent settlement with Apple coupled with Windows Phone 7 based smartphones launch will improve Nokia’s outlook going forward.

We, thus, maintain our long-term Neutral recommendation for Nokia. Currently, Nokia has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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