Nokia to License Significant Patent Rights to Microsoft

Microsoft announced on Monday that it is acquiring Nokia’s smartphone business. Microsoft will pay €3.79 billion ($5 billion) for Nokia’s “Devices and Services” division and another €1.65 billion ($2.2 billion) to license Nokia’s patents.

Below are some key intellectual property-related deal terms published by Microsoft in its “Strategic Rationale” for the acquisition:

(a) Microsoft is acquiring 8,500 design patents and ownership of the Lumia and Asha brands. Presumably ownership of these brands includes trademark rights.  Microsoft is also acquiring a 10-year license to use the “Nokia” brand on feature phones.

(b) Microsoft is acquiring a fully paid-up 10-year license to Nokia’s utility patents, which covers Nokia’s patents and applications as of the closing date of the deal.  Microsoft has an option to convert the 10-year license to a perpetual license.

(c) Nokia is assigning benefits under more than 60 patent licenses with third parties to Microsoft, including licenses with Qualcomm, IBM, Motorola Mobility, and Motorola Solutions.  Microsoft will benefit from potentially attractive royalty arrangements negotiated by Nokia.

This deal with Nokia, in conjunction with current patent agreements with Samsung, Apple, LG, Nortel, Kodak, and others, will provide Microsoft with sophisticated and wide-ranging intellectual property rights surrounding smart phones and devices.

For its part, Nokia is providing a non-exclusive patent license to Microsoft.  This will allow Nokia to continue receiving licensing revenue from its existing licensees, as well as to seek out additional licensees in the future (Nokia reportedly stood to earn $615 million in yearly licensing revenue from its worldwide patent portfolio in 2012).

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