Nokia response: Looking forward to negotiations. After the "litigation war", vivo will suspend sales of product standards | patents | Nokia in Germany

On the morning of June 8th, Nokia told First Financial that it did not want to see Vivo withdraw from the German market in response to the suspension of sales in the German market.

According to the latest official news from vivo Germany, vivo has suspended the sale of its products and has taken down all product introductions, leaving only the homepage and support page. The official website of vivo Germany shows: "vivo products are currently unavailable in Germany, so there is no product information on our German website. If you are using vivo products, you can still rely on our customer service and you will receive future software updates."

In April this year, the Mannheim Regional Court in Germany ruled in favor of Nokia in a patent case and granted vivo a sales ban in the local market. In addition to vivo, another domestic mobile phone manufacturer OPPO has also cleared its official website in Germany since last year due to Nokia's patent lawsuit.

Both parties failed to reach an agreement on the patent fee

"We are only seeking fair compensation for the technology used in their devices," Nokia told a reporter from First Financial on the morning of the 8th. "vivo can renew the license agreement on fair terms, just like its competitors, to easily solve this problem.". Nokia has always kept the door open for friendly negotiations on this matter.

On April 6th this year, the Mannheim Regional Court in Germany ruled in the first instance that vivo had infringed on Nokia's three essential cellular standard patents, and the court granted Nokia an injunction against vivo.

According to materials provided by Nokia to reporters, the German court's ruling involves three patents, namely EP 2 981 103, EP 3 220 562, and EP 2 087 626. The first two patents disclose the effective allocation of preambles when initiating random access in LTE networks, while the third patent relates to adaptive modulation in 3G networks, particularly the disclosure of additional modulation information signaling for high-speed downlink packet access.

Nokia stated that it has taken legal action in multiple jurisdictions around the world, including Germany and India, focusing on a combination of essential patents for cellular standards and implementation patents for coverage connections.

Regarding the ruling of the German court, vivo has told reporters that it is appealing and will evaluate further measures. Vivo believes that Nokia has not fulfilled its obligation to provide reasonable licenses based on the "FRAND" principle, so the two parties have not yet reached an agreement.

Vivo has not provided a public response to the latest developments in the aforementioned judgment. But based on the latest actions, vivo has decided to suspend the sales and marketing of related products through official channels in Germany.

In recent years, the patent litigation war has become increasingly fierce worldwide. After the patent lawsuit between Qualcomm and Apple, Nokia has also launched a new round of lawsuits against global smartphone manufacturers, aiming to gain the initiative in patent fees.

Starting from 2021, Nokia sued OPPO in countries such as the UK, Germany, the Netherlands, Brazil, and India, demanding that OPPO pay Nokia for the patents used. In 2022, Nokia sued vivo on similar grounds in Germany, Indonesia, India, China, and other places.

OPPO has previously announced a suspension of sales in Germany. "The company respects intellectual property rights and advocates for reasonable fees, advocating for the resolution of intellectual property disputes between licensors and licensees through friendly negotiations, and respecting each other's patent value." OPPO stated that the company firmly opposes unreasonable high fees for patents and malicious behavior of using litigation to coerce licensees to negotiate and accept unreasonable high licensing fees.

The intellectual property manager of a leading mobile phone manufacturer told reporters that the current external environment is constantly changing, and the economic model, industrial structure, and supply chain of enterprises are facing deep adjustments. These changes not only profoundly affect the global economic landscape, but also affect the competitive landscape of the communication industry in which the company operates. "Intellectual property has become a tool for gaming, and intellectual property policies and judicial practices in various jurisdictions around the world are also undergoing drastic changes. The external intellectual property environment faced by companies' globalized business is becoming more complex and severe."

How much does a mobile phone patent cost?

In the statements of both parties, it can be seen that patent rates were the trigger for Nokia to initiate this global litigation war.

Nokia claims that the patent license agreement for Nokia's patented technology used by vivo to pay for its devices will expire at the end of December 2021. Prior to the expiration of the license agreement, negotiations for renewal had already been held with vivo. "Unfortunately, vivo refused to accept our fair and reasonable offer. We also proposed independent and neutral arbitration, but it was also rejected by vivo again."

However, vivo believes that the patent quotation provided by Nokia is not reasonable and violates the FRAND principle. An industry insider close to vivo told reporters that in the new agreement quotation, Nokia has proposed a price far higher than the previous agreement. Once accepted, the industry effect will have a greater negative impact on Chinese mobile phone manufacturers.

"Although it was a 3G and 4G lawsuit, Nokia's aggressive approach is actually an attempt to pressure vivo to accept patent fee terms, including 5G patent fees, through litigation." said the insider.

Feng Ying, the Chief Intellectual Property Officer of OPPO, also holds the same view.

"When it was 4G, we had already signed a cooperation agreement with Nokia. It was really difficult to bear the high price for 5G. Now, the profit margin of hardware is not high, and more and more companies are charging patent fees. Each company is rising, which will lead to higher hardware costs." Feng Ying told First Financial in a previous interview, "If Nokia's fee standards are followed, mobile phone manufacturers cannot have profit margins.".

In a report titled "The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones," it is mentioned that a smartphone priced at $400 may have potential patent licensing fees exceeding $120. Among them, the patent licensing fees for cellular standards and WiFi reached $54 and $50 respectively. After adding up the costs of audio encoding and decoding, video encoding and decoding, and OS software, the overall patent licensing fee ranges from $121 to $124.

Taking Nokia as an example, in its 2018 public 5G patent fee standard, each 5G phone using its patent needs to pay Nokia a patent fee of 3 euros. If calculated based on the global shipment of over 100 million mobile phones by a company, it would be an annual patent fee of 300 to 400 million euros. Feng Ying believes that the patent fee for this setting is much higher than the agreement standard signed with OPPO during 4G.

But who will collect the 5G patent fees and how much? There is currently no unified standard in the industry.

According to data provided by Wisdom Sprout to reporters, the world's leading companies in the number of essential 5G standard patents include Huawei, Samsung, Qualcomm, LG, Nokia, ZTE, NTT, Ericsson, OPPO, Sharp, and others. The charging standards of top manufacturers are worth learning from.

Ericsson announced the 5G multimode mobile phone patent fee standard in 2017, which is mainly adjusted based on different phone sales prices, with a maximum patent fee of $5 per phone. Qualcomm's standard is that 5G single-mode phones will be charged 2.275% of the phone's selling price, while 5G multi-mode phones will be charged 3.25% of the selling price. Based on a unit price of $500, Qualcomm's fees for single-mode and multi-mode phones are $11.4 and $16.25, respectively.

Huawei announced a 5G patent external license in March 2020, with a maximum license fee of $2.5 per mobile phone, which is much lower than the rates already announced by other overseas patent holders. Huawei's move undoubtedly adds fuel to the already booming 5G patent licensing market, as it dominates the list of essential 5G patent families.

"Since Huawei ranks first in contribution rate, why do other companies receive more?" The head of a domestic mobile phone manufacturer bluntly stated that the patent licensing fees of the rights holders are artificially high, and the problem of not fully matching their patent strength always exists. In other words, some companies invest a high proportion of research and development in the 3G and 4G era, and it is understandable to charge more patent fees. However, 5G players are more diverse, and patent contributions are more diversified. The game mechanism between patent authorization and payment has become more complex.