Nokia and Apple settled a patent lawsuit apparently in favor of Nokia which shouldn’t have been a surprise given Nokia has been in phones far longer than Apple and has a deeper patent portfolio.   However it had been expected that the two companies would fight much longer because Nokia was in financial distress and Apple had more money than it seemed to know what to do with.    I think they settled because of Microsoft and Google.   Let me explain.

Microsoft backed Nokia

Nokia was running low on cash before Microsoft through over a billion dollars at them to lock up a Windows 7 relationship and made it clear that they would likely fund Nokia to success even if it meant buying the company.   This changed the dynamic strongly because now you had the chance that Microsoft would enter the fight on Nokia’s side and Apple and Microsoft are broadly cross licensed to ensure the two never enter a battle like this. With Microsoft financially behind Nokia the battle changed and the odds against Apple shifted in the wrong direction.    On the other hand Microsoft didn’t want Nokia distracted by the litigation either and is a firm believer in licensing so likely used its influence to push Nokia to the middle as well so that both sides wanted to settle rather than fight. Both sides agreed that settling would be best likely at least partially because of Microsoft.

This likely showcases a change in Nokia going forward as well favoring licensing over protracted litigation in order to improve its bottom line.  

Google the Common Enemy

Apple, read Steve Jobs, hates Google with a passion largely because he believes Eric Schmidt and the Google founders stole from him. The back story was while Steve was mentoring the founders and had Eric Schmidt, Google’s ex-CEO, on his board Google was secretly building Android which is basically a low cost clone of the iOS.   From Steve’s perspective the firm took the ideas he shared with Google as a friend and used it against Apple.   This is a very deep and personal betrayal.

Nokia who has spent millions patenting technology on phones and now is seeing Android products in more of its markets than Apple (Nokia is mostly strong outside the US where Apple is strongest). Likely sees Google as a cheat and their biggest problem to overcome.    Of the two firms, Google and Apple, Google represents the bigger risk because Google strips the profit out of the Smartphone business because they subsidize the Android effort with other parts of the company.    Nokia has no “other parts” to provide competitive balance.   Finally, Nokia’s biggest partner (Microsoft again), sees Google as the bigger problem as well and sees the firm as a mortal enemy.  

As a result Apple and Nokia have a common foe and combined they could do far more damage against Google than either one could do separately. Cross licensed they can, to a certain extent, coordinate their legal efforts and share strategies to deal with what both companies think is a form of intellectual property piracy and because they are dealing with a theft the typical rules against competitors collaborating shouldn’t apply.   In other words if a firm is stealing from two others there are no rules that say the two damaged companies can’t coordinate their response even if the crime is only civil.    

Google should be Worried

If I’m correct going forward Nokia, Apple, and Microsoft will be increasingly aligned against a common enemy Google.   For at least two of the three companies this is personal. Apple because Steve Jobs believes Google stole from him personally, and Microsoft because Google made its intention to put Microsoft out of business clear years ago.   Nokia isn’t likely as religious about this but for them Google is likely their biggest competitive problem and even they likely think Google is cheating.   The combination of resources is impressive the only question really is if these three companies can or will coordinate their legal efforts.   We should know shortly. 

Rob Enderle is President and Principal Analyst for the Enderle Group. To read more of his articles on TechZone360, please visit his columnist page.

Edited by Jennifer Russell