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Apple paid Nokia $2 billion to escape fight over old patents

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Apple’s latest patent spat with Nokia resulted in a $2 billion up-front payment from the iPhone maker, a colossal sum that seems to indicate Apple was eager to avoid a protracted and ugly dispute that could rival the one it had with Samsung. The amount of the settlement, which was first announced back in May without the disclosure of a financial amount or the new licensing terms, was first spotted in Nokia’s second quarter earnings release by the blog Nokiamob.

“We got a substantial upfront cash payment of €1.7 billion from Apple, strengthening further our cash position. As said earlier, our plans is to provide more details on the intended use of cash in conjunction with our Q3 earnings,” reads the official transcript of Nokia’s quarterly earnings call with investors yesterday. Apple must still pay Nokia money over time, though far less on a recurring basis than this one-time lump sum settlement payment.

The lawsuit, the second high-profile patent dispute between Apple and Nokia in the last decade, began last year when Nokia accused Apple of infringing on dozens of patents it owns, as well as patents owned by Nokia subsidiaries. Given Nokia’s storied history in the phone market, many smartphone makers license the company’s patents for everything from display technology to antenna design. Apple has had a licensing deal with Nokia in place since 2011, after the two settled their last patent dispute. But Apple reportedly did not want to sign a new deal and accused Nokia of seeking unfair terms.

After Nokia filed suit in multiple countries, Apple went after the patent entities that were suing for more settlement and royalty money on Nokia’s behalf with an antitrust suit. That prompted Nokia sue Apple directly. The dispute got ugly, with Apple briefly pulling Nokia-owned Withings’ products from its online store and from Apple Stores worldwide.

The two settled in May, striking new licensing terms and agreeing to a joint effort to explore “future collaboration in digital health initiatives.” We don’t know exactly how much Apple will be paying Nokia on a recurring basis with this new patent licensing deal, or what Nokia plans to do with the $2 billion it has in the bank. For Apple, however, it’s probably not going to hurt its bottom line that much: the iPhone maker reported earlier this year that it has more than a quarter-trillion dollars in cash and investments, much of sitting outside the US because it cannot currently be repatriated without paying what Apple sees as unfavorable corporate taxes.

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