Nokia may have sold its handset business to Microsoft Corp, but by
hanging on to its valuable patent portfolio, the Finnish company could
also get a big future payoff at the expense of Android phone makers.
agreed on Tuesday to pay 3.79 billion euros for Nokia's handset
business and another 1.65 billion euros for a 10-year license for
Nokia's patents, considered some of the highest-quality patents in the
"This involves the right to, in effect, make use of
Nokia's inventions," Microsoft general counsel Brad Smith said on
Tuesday. "It doesn't involve the transfer or ownership of the patents
Until now, Nokia has not widely licensed many of its
patents, preferring instead to use them to protect its handset business
against competitors, Nokia spokesman Mark Durrant said in an email to
"Once we no longer have our own mobile devices business,
following the close of the (Microsoft) transaction, we would be able to
explore licensing some of those technologies," he added.
world's dominant handset maker, Nokia has failed to close a huge lead
opened up by Apple Inc and Samsung Electronics Co Ltd in the highly
competitive market for smartphones. It will now concentrate on its
networking equipment unit, navigation business and technology patents.
Finnish company has long been a savvy player in the intellectual
property market. It sued Apple in 2009 and then reached a licensing deal
with the iPhone maker. The terms were not disclosed, but the deal was
believed to be worth hundreds of millions of dollars to Nokia.
Microsoft, taking a license for Nokia's patents rather than buying them
serves a strategic objective as well. Microsoft has already convinced
about 20 Android manufacturers to pay patent royalties as part of its
effort to raise the cost of Google Inc's mobile operating system.
Nokia remains free to go after the same Android manufacturers for
royalties as well, although Nokia spokesman Durrant did not reveal
"It wouldn't surprise me at all to see
litigation filed by Nokia in coming months," said one senior IP
executive who has dealt with both companies, but did not want to be
identified to maintain those relationships.
Had Microsoft bought
Nokia's patents outright, the pincer movement against Android likely
would have been precluded, the executive said.
Nokia also gave
Microsoft the option to convert the 10-year agreement to a perpetual
license, which Smith said Microsoft would exercise.
The market for
high quality mobile patents, such as Nokia's, could be quite strong
judging by past deals. Google, for instance, paid $12.5 billion in 2011
for Motorola Mobility, a transaction largely driven by the patent value.
Nokia to sell the business, and not sell the patents, there must be
something else cooking to recover value," said Michael Pierantozzi, a
partner at Lumen SV, an intellectual property advisory firm.
could decide to try to sell its patent portfolio as a whole if the
company thought it could get a price approaching the Motorola deal,
Pierantozzi said, adding that Microsoft likely was not willing to pay
Nokia "probably just weren't getting the price they were looking for," he added.
© Thomson Reuters 2013