Source of this article: Times Finance Author: Wang Ting
Nokia Source: Pixabay
According to foreign media Foss Patents, a few days ago, the German District Court of Mannheim ruled that vivo infringed Nokia's patents. The relevant person in charge of vivo said in an interview with Times Finance that it is appealing the first-instance judgment and will evaluate further measures.
According to the financial report, the vast majority of Nokia's technology business group's net sales and profits came from patent licensing. In 2022, the business group's operating margin was as high as 75.7%, while Nokia's overall operating margin was only 9.3%.
In addition, Times Finance noted that although the patent licensing business accounted for a very low proportion of Nokia's overall revenue, it contributed nearly 40% of the profit. Since 2021, Nokia has successively launched lawsuits against OPPO, OnePlus, Realme, and vivo in many countries.
The old license agreement expired and Nokia launched a patent war
Since 2021, Nokia has filed patent lawsuits in many countries in Asia and Europe, involving more than 30 patents, and a number of Nokia patents have been judged to be valid and infringed in Germany, the Netherlands and the United Kingdom.
In 2022, the German District Court of Mannheim issued an injunction to OPPO on Standards-Essential Patents (SEP) EP2981103, which prohibits OPPO from using the patents involved in the case in Germany. Because of this ban, OPPO will withdraw from the German market. Earlier this year, however, Indonesia's Supreme Court rejected Nokia's appeal against OPPO's patent dispute.
According to Nokia's financial report, in 2022, the company filed a patent infringement lawsuit against vivo in Germany and several Asian countries. In response, vivo filed lawsuits against Nokia devices in China and Germany, and also filed lawsuits against Nokia in China over licensing of SEPs.
The patent involved in Nokia's lawsuit with vivo is also EP2981103, a 4G/5G standard essential patent that describes a method of "assigning a leading sequence" when accessing a mobile radio network.
According to the International Telecommunication Union (ITU), a standard-essential patent is "any patent or patent application that may fully or partially cover the draft standard". In layman's terms, it is the patent that must be used to implement the standard. Under international agreements, patent owners are expected to grant licenses on "FRAND" (Fair, Reasonable and Non-Discriminatory) terms.
Times Finance learned that the patent cross-licensing agreement signed by Nokia and Vivo expired in 2021, after which the two sides negotiated to update the agreement, but so far no agreement has been reached. At present, it seems that the main difference between the two sides is the licensing fee.
The relevant person in charge of vivo told Times Finance that he regretted the judgment of the German court Mannheim and was ready to suspend the sales and marketing of related products in vivo German official channels if necessary.
Vivo believes that Nokia has not fulfilled its obligation to provide licenses under "FRAND" terms and will continue to negotiate with Nokia to resolve the matter in accordance with "FRAND" terms. Markets outside Germany are not affected by the case.
Patents are "cash cows" and contribute 40% of profits
Times Finance observed that Nokia's patent licensing business contributed nearly 40% of profits, and the gross profit margin was extremely high, a large part of which came from the smartphone market. It is worth mentioning that Nokia's own mobile phone division was acquired by Microsoft as early as 2014.
Nokia phone Source: Pixabay
According to Nokia's recently released annual report, in 2022, the company's net sales will be 24.911 billion euros (about 188.7 billion yuan), with a comparable operating profit of 3.109 billion euros and an operating profit margin of only 9.3%.
Among them, Nokia Technologies business group net sales of 1.595 billion euros, accounting for only 6.4% of the company's overall proportion, but operating profit as high as 1.208 billion euros, accounting for 38.85% of the company's comparable operating profit, cost of sales of only 5 million euros, gross margin as high as 99.7%.
At present, Nokia mainly has four business groups, including network infrastructure, mobile network, cloud and network services, and Nokia technology, and the operating profit margins of the first three business groups in 2022 are 12.2%, 8.8%, and 5.3%, respectively, which is very different from the technology business group.
Taking Nokia Network Infrastructure as an example, in 2022, its net sales of 9.047 billion euros were 5.67 times that of Nokia Technologies, but its operating profit was lower than that of 1.1 billion euros, with a gross margin of 36.6%.
According to the earnings report, Nokia has one of the broadest and strongest patent portfolios in the telecommunications industry, with about 20,000 patent families (each family can include several separate patents), of which more than 4,500 patent families have been declared key patents for the 5G standard.
With limited numbers of large players in the smartphone industry and a volatile market, Nokia is looking to expand its licensing activities to other industries, such as automotive, consumer electronics and the Internet of Things, which could involve litigation, according to the earnings report.
It is worth mentioning that the operating profit margin of Nokia Technologies has declined for three consecutive years, with 80.7%, 80.1%, 78.9% and 75.7% in 2019, 2020, 2021 and 2022, respectively.
According to previous media reports, an industry insider close to vivo said that in the new agreement offer, Nokia proposed a far more favorable offer than the previous agreement, and once accepted, it will have a greater negative impact on Chinese mobile phone manufacturers.
According to the "Global 5G Patent Activity Report (2022)" of the China Academy of Information and Communications Technology, Nokia's patent family accounts for 7.6%, and the total 5G patent cost of the entire device is 40 euros, which is equivalent to 271 yuan, that is, each 5G mobile phone must give Nokia 271 yuan in patent fees.