Nokia (NYSE:NOK) and Samsung Electronics extended their patent-licensing agreement for another five years, a move that will likely be a boon for Nokia as its sells its handset business to Microsoft (NASDAQ:MSFT) and patents become a more important part of its business.
The Nokia/Samsung agreement was due to expire at the end of 2013. According to Nokia, Samsung will pay additional compensation to Nokia starting Jan. 1, 2014 onwards, and the amount of such compensation will be "finally settled in a binding arbitration," which is expected to be concluded sometime in 2015. Therefore, the terms of the deal were not disclosed. TechCrunch reported that Nokia said the terms of its license agreements are confidential, and that Nokia currently has deals with 50 companies, "including most of the major handset suppliers."
"This extension and agreement to arbitrate represent a hallmark of constructive resolution of licensing disputes, and are expected to save significant transaction costs for both parties," said Paul Melin, chief intellectual property officer of Nokia.
According to AllThingsD, in a statement, Samsung said it has "in essence agreed to extend our cross license agreement with Nokia, and will enter into arbitration to determine the royalty amount."
"This deal demonstrates the opportunities for the new Nokia in intellectual property rights," Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki, told Bloomberg. "It's significant because it relates to Samsung, the client with the biggest potential in such rights. It's good timing for Nokia and shows they will be able to benefit from the device-unit divestment from the first day."
Following the closing of the Microsoft deal, which is expected sometime in early 2014, Nokia's largest business will be Nokia Solutions and Networks, its network infrastructure unit. In addition to NSN, the company hopes its HERE mapping and location services platform, which it will license to other companies, will become more important as more devices are connected to the cloud and connected cars become more of a reality. Finally, Nokia is banking on its Advanced Technologies division to serve as a research and development hub within the company. The Advanced Technologies unit will handle Nokia's patent portfolio and intellectual property licensing.
During its third-quarter results, Nokia said the unit currently generates around $675 million in revenue per year, according to ZDNet, which excludes the $2.23 billion Nokia it will get from Microsoft for a 10-year licensing deal once Microsoft's acquisition of Nokia's handset business closes.
The Nokia/Samsung agreement comes days after a patent consortium owned by Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Ericsson (NASDAQ:ERIC), Sony, EMC and BlackBerry (NASDAQ:BBRY) filed a battery of lawsuits against Google (NASDAQ:GOOG) and Android manufacturers like Samsung, HTC, Huawei and others. The lawsuits stem from the Rockstar patent consortium, which paid $4.5 billion for the 6,000 patents that bankrupt Nortel Networks offered up for auction in 2011.
For more:
- see this release
- see this ZDNet article
- see this Bloomberg article
- see this AllThingsD article
- see this TechCrunch article
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