(Bloomberg) – Nokia Oyj, in the process of expanding its profitable licensing business beyond smartphone makers, is learning that its old ways of trading may not always work.
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After having recently brawled with car manufacturers to make them pay for its inventions used in connected vehicles, Nokia is now preparing for talks with manufacturers of other connected devices. These gadgets, which are expected to proliferate with 5G technology, will allow consumers to turn on the dishwasher from their morning commute and farmers to monitor crops, livestock and equipment from their phones. In doing so, they will be using the cellular connectivity technology that Nokia has helped to develop and that continues to invest in.
With a strong patent portfolio for 5G and 6G technologies, Nokia is approaching future licensees and is meeting some resistance, Jenni Lukander, president of the company’s technology unit, said in an interview.
“Some of these companies just think they don’t want to get a license until someone sues them,” she said.
Depending on the industry, licensing agreements will vary based on “what works in each category,” she said without giving details. “It’s still very early days and we are testing this market, but in the future it will be a good opportunity.”
Licenses represent about half of Nokia’s profits and the company wants to make sure those profits are sustainable. But the Finnish company and many consumer device makers disagree on who should pay.
When Nokia started charging royalties in the booming connected car market, automakers hesitated, blaming the parts suppliers. This is how the auto industry has always operated, with component manufacturers managing the royalty agreements. Nokia has argued that a piecemeal approach does not work since its technology is built into the vehicle in so many ways.
After a protracted fight, Daimler AG acceded to Nokia’s demands, a deal that Lukander says can be emulated with other automakers and auto industries. But one of Daimler’s suppliers, Continental AG, continues to press charges, a sign that Nokia may have to fight more battles.
Some of the friction is cultural – most industries are not used to the difficult patent licensing disputes common between telecommunications companies and Silicon Valley, although recognition of Nokia’s name can help, said Steve Skelley by Folio Law Group. He negotiated with Nokia in his previous job, working for patent licensing company Intellectual Ventures.
“The concept of having to form a market is real if you’re trying to license companies in an industry that doesn’t know the patent owner,” Skelley said. “Nokia has savvy negotiators, so they’re not going to come up with unreasonable demands.”
At Nokia, licensing has become more important in the last decade since it stopped making phones and focused on network equipment and intellectual property. While the company does not break down the source of its patent revenue by industry, it continues to rely heavily on royalties from its inventions used in the $ 378 billion global smartphone market.
“Smartphone licensing is by far the biggest opportunity for us, and I think it will remain so,” Lukander said. “Almost all consumers have a smartphone, but not everyone has a car, for example. “
Over the years, Nokia has been embroiled in high-profile disputes, such as its ongoing struggle with Chinese cellphone maker Oppo Co., a former licensee. In order to limit potential confrontations, the company has released some of its tariffs and has teamed up with rivals Qualcomm Inc. and Ericsson AB to create a one-stop-shop for licensing 2G, 3G and 4G technologies.
“The vast majority of our transactions and agreements are in fact made out of court,” Lukander said.
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