Monday, April 9, 2007

Nokia Pays Up

by Doug Pollack

As reported earlier this month, Nokia made a "$20MM quarterly payment to Qualcomm based on its own valuation of patents covering Nokia handsets that use the WCDMA" (WSJ 4-06-07). The general counsel at Qualcomm stated that "they have no right to do that....what they have done is they have simply made up a number."

This tactic represents an effort by Nokia to reduce its current royalty rate paid to Qualcomm, which is estimated to be around 4.5% of the cost of the cellphone. They are arguing that they should be paying a lower royalty rate to Qualcomm for WCDMA technology than on early generations of technology.

Nokia contends that the $20 million figure that they paid as estimated quarterly royalties as a "good faith" estimate of the value of Qualcomm patents it expects to be using after their current agreement expires. It would be instructive to see the methodology that was used by Nokia to determine the value of these patents.

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