Beleaguered handset manufacturer
) has reached a patent licensing agreement with
Research In Motion
), whereby the companies decided to end all patent-related
disputes between them.
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Nokia boasts an industry-leading patent portfolio and agreements
of this nature will certainly help it generate cash inflow. For
quite some time now, Nokia has been struggling in the smartphone
business due to stiff competition from
) iOS and
) Android platform. Nokia has the strongest patent portfolio in
the wireless industry but have been offloading its assets to
boost its cash position. Thus, this settlement is a positive for
Nokia as Research in Motion will need to pay cash to Nokia.
As per the new agreement, Research in Motion will make a one-time
payment and will also continue to make payments to Nokia for use
of its patents. However, the financial terms of the deal were not
This settlement comes after the Finnish handset manufacturer
settled a long-standing patent dispute with Apple Inc. Nokia has
also filed claims against HTC Corp and Viewsonic Corp., accusing
these two for infringement of patents in the U.S. and
Back in 2003, Nokia had entered into a patent-licensing agreement
with Research in Motion, which allowed the latter to use some of
the industry-standard technologies for mobile devices against
royalty payments. However, Nokia claimed that Research in Motion
sold products compatible with its Wi-Fi technology without
adhering to the payment terms.
Research in Motion argued that it does not need to pay additional
royalty as the patent agreement with Nokia provides it the right
to use the Wi-Fi technology. In that context, the Canadian
company filed an arbitration process in the Stockholm Chamber of
Commerce in March 2011.
Last month, the Stockholm Chamber of Commerce declared a ruling
against Research in Motion. To make matters worse, the handset
manufacturer field an enforcement suit against Research in Motion
to stop them from selling Wi-Fi enabled products without agreeing
on royalty terms.
We believe that settling the patent dispute exhibits a major
triumph for Nokia. Allowing Research in Motion to sell
Wi-Fi-enabled products will provide a steady cash flow stream to
Nokia, thereby improving its ailing liquidity situation. However,
if the sales of new Blackberry phones fail to impress, then
Nokia's cash benefit could be limited.
We retain our long-term Neutral recommendation on Nokia Corp.
Currently, it holds a Zacks #3 Rank, implying a short-term Hold