arly 2021 saw Nokia and Lenovo, once embroiled in a series of disputes across multiple jurisdictions, reach a constructive global settlement that promises to be a win-win situation for both companies. Consumers also stand to enjoy the fruits of this futuristic collaboration between a leading innovator and a technology giant.
What is most interesting about this settlement is the fact that the closely watched, hard-fought battle around the violation of Nokia’s 20 video-compression technology patents didn’t just conclude with the settlement of disputes concerning the said technology, but actually culminated in a global multi-technology, multi-year license agreement that holds promise of an extremely productive relationship.
Another notable aspect of the deal, although one might debate its effectiveness, is the use of litigation as a tool for speeding up negotiations.
Genesis of the dispute
In line with the prevalent industry practice in licensing of standard essential patents (SEPs), Nokia offered Lenovo licences to its SEPs relating to the fields of cellular telecommunication and video coding technologies on terms that were fair, reasonable and non-discriminatory (FRAND).
In 2019, Nokia launched its legal battle against Lenovo over the alleged infringement of its video-compression technology patents and had filed cases in the US, Brazil, Germany and India. To raise the stakes further, Nokia was also countersued by Lenovo in California.
The Indian litigation was filed in October 2019, before Delhi High Court, and an order for the deposit of sales figures for infringing devices was granted in favour of Nokia on the very first day.
In September 2020, a German court granted an injunction in favour of Nokia against Lenovo in one of the suits filed by Nokia. While the enforcement of the injunction was stayed shortly after, the litigation in India picked up pace and Delhi High Court commenced hearing the parties’ submissions on whether Lenovo must be restrained from selling its infringing products in India.
These developments, along with other outcomes in these and other pending litigations, acted as a catalyst towards more fruitful negotiations between the parties.
In essence, the litigations were the catalysts for a settlement owing to:
The massive scale of litigation to match the size of the opponent’s market share and reach. The Nokia-Lenovo patent litigation was spread across four continents, with multiple actions in Germany, a flagship action in India, and also actions in the US and Brazil. Outside China, these jurisdictions represent some of the biggest markets for Lenovo, and also some of the more desirable jurisdictions for enforcing SEPs. The scale of litigation therefore was designed to match Lenovo’s market size and reach, such that the company simply could not afford to ignore it.
- Litigation and the threat of an injunction on Lenovo’s products. While it used to be subject to debate, the appropriateness of seeking injunctive relief against unwilling licensees is now nearly universally established. Even though the underlying dispute between Nokia and Lenovo was essentially related to the payment of appropriate licensing fees, the parties had clearly reached an impasse in inter partes (between parties) negotiations – which could only be resolved after litigation was initiated. The pendency of the litigation, and the progress in the interim proceedings in Germany and India, helped level the playing field and negated any incentive the implementer would have had in continuing to hold out.
- The undesirability of negative publicity, and the diversion of time and resources in contesting litigation, as opposed to investing them into their respective core business areas, appealed to both parties in equal measure.
While IP litigations spanning jurisdictions can act as a hotbed for hostility, this deal shows that parties can always choose to resolve disputes in a manner that benefits everyone, and can therefore enjoy a more productive relationship in the long haul. Here, while Nokia added a prized licensee to its ever growing and successful SEP licensing programme, Lenovo secured access to market leading technologies, and the legal right to use them in its products.
The outlook of both the parties is rather clear from their public statements, appreciating the constructive spirit and possibilities of further innovation.
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