Context: In July 2021, Nokia sued OPPO almost immediately upon the expiration of a prior three-year license agreement. A year later, OPPO left the German market as a result of several Nokia injunctions. More recently, things had been going way better for OPPO, with a FRAND determination by a Chinese court (Chongqing) and the total affirmance of an OPPO 5G patent that would almost certainly have resulted in a German infringement holding (previous article on this dispute). This month, OPPO settled a standard-essential patent (SEP) dispute with Philips (January 16 article).
What’s new: This morning, both companies announced that they have settled all pending litigation and concluded a global patent cross-license agreement. The announcement appeared on OPPO’s website and was near-simultaneously distributed by Nokia via email. The terms are, as always, confidential other than saying that the scope includes “standard-essential patents in 5G and other cellular communication technologies.”
Direct impact: It is unclear whether OPPO will now return to the German market. There still is litigation pending with InterDigital. But by settling with Nokia and Philips, OPPO is paving the way for a greater freedom to operate. Both companies have freed up litigation resources.
Wider ramifications: The implications for the two companies are addressed further below. There is a parallel dispute pending between Nokia and vivo, raising similar issues. It started later and also resulted in a withdrawal from the German market. The key question here that will affect many licensing discussions going forward (beyond these two parties) is whether Nokia had to recognize in the end that a vendor like OPPO, which sells most of its products in very price-sensitive markets that prefer low-cost devices, can’t pay the same per-unit royalties as an Apple or a Samsung. There are two ways in which license agreements can reflect those circumstances: there can be separate rates (as decided by the Chongqing court) for different world regions, or there can be a generally lower rate (which would, however, be more likely to be held against the licensor with respect to the ND (non-discrimination) part of FRAND).
Through its steadfastness and strategic savvy, OPPO has displayed enormous strength that will inform future licensing negotiations with other parties. As OPPO’s Chief Intellectual Property Officer Feng Ying says in the press release, “OPPO continues to advocate for reasonable royalty fees and a long-term approach to intellectual property that supports the resolution of disputes through amicable negotiations and mutual respect for the value of all intellectual property.”
As Jenni Lukander, President of Nokia Technologies, notes in the same press release, “[t]he new agreement – along with the other major smartphone agreements [they] have concluded over the past year – will provide long-term financial stability to [Nokia’s] licensing business.” This means Nokia has largely concludes its smartphone license renewal cycle with five key agreements over the past 400 days: Huawei in December 2022; Samsung in January 2023; Apple in June 2023; Honor on January 4, 2024 (ip fray article), and now OPPO.
The litigation between Nokia and OPPO took almost as long (more than 2.5 years) as the duration of the prior license agreement (3 years). It’s a safe assumption that the new license agreement covers more than three years, as there would otherwise be an urgent need to renegotiate and the potential of another outbreak of litigation this summer.
Given the overall situation, it’s unlikely that Nokia could have obtained decisive leverage over OPPO anytime soon. OPPO was prepared to leave individual markets rather than enter into a global license agreements on terms it rejected. But the Chinese FRAND determination would have become enforceable at some point (after the appeal; no provisional enforcement pending an appeal is allowed there), and OPPO was on track to obtain its own German SEP injunction against Nokia (where the sole remaining question to be analyzed by the court would have been Nokia’s FRAND defense).
In light of the above, it’s a safe assumption that the agreement is a reasonable compromise that enables OPPO to preserve its competitiveness while helping Nokia to meet its objectives in its licensing business. The one-time payment of back-royalties is now going to be a nice cash influx for Nokia, and they know what they will get paid for some more time.
Toward the end of its press release, OPPO touts the strength of its own patents:
“As of December 31, 2023, OPPO has deployed 5G communication standard patents in over 40 countries and regions, with a total of more than 5,900 patent families globally, over 3,300 5G standard patents declared to ETSI, and more than 11,000 standard documents submitted to 3GPP. According to the 2023 5G report published by the China Academy of Information and Communications Technology (CAICT) and a report from IPlytics published in October, 2023, OPPO ranks among the top companies globally in terms of 5G standard-essential patent strength.”
OPPO’ January 24, 2024 press release on Nokia cross-license agreement
It is unfortunate that this became a protracted dispute and that consumer choice was adversely affected by some German injunctions that were ordered on debatable and in part highly questionable grounds. The fact that German SEP case law is partly out of line and even embarrassingly unsophisticated (with a childish focus on behavior rather than economic facts and numbers) is the primarily if not only reason why the European Commission proposed a SEP Regulation that will, with amendments that won’t change the overall thrust, be adopted by the European Parliament’s Legal Affairs Committee later today. OPPO would, in fact, not have benefited if that regulation had been in place in time to govern this dispute. Some events would have been delayed, but the legal standard in Germany would have been the same (and Nokia would likely have placed greater emphasis on other jurisdictions; in fact, Nokia also won an injunction in Brazil).
It’s a good thing that both companies can turn the page and focus on other priorities. OPPO turned out to be the strongest, smartest and most determined adversary Nokia has faced in its patent litigation history (even including the time when Nokia was mostly on the receiving end of such cases). At the same time, those who need a license from Nokia also know about the enormous sophistication and determination on that company’s side. It was a clash of titans, especially in the sense of titanium being one of the strongest metals in the world.