Profiles in Innovation: Nokia – Honing IP to Business Needs

Nokia filed over 850 international patent applications in 2005, making it one of the top five users of the Patent Cooperation Treaty (PCT). It ranks among the ten Most Innovative Companies in the World in a 2005 survey by the Boston Consulting Group. And it added several more iF Awards in 2005 to its long list of design awards. One of the world’s largest mobile phone manufacturers, Nokia’s ability to stay at the cutting-edge of innovation and design has been essential to its success in this highly competitive industry.

In this interview with WIPO Magazine, Nokia’s Vice President for Intellectual Property Rights, Mr. Ilkka Rahnasto, explains how intellectual property (IP) is integrated into the company’s business strategies, and how Nokia uses the tools of the IP system to protect and leverage its innovation-based assets.

What does Nokia consider its biggest innovative break through?

Nokia has had a significant role in defining key elements of data downloading technologies into mobile devices, and easy-to-use mobile phones. We are now in a lucky position as no mobile phone manufacturer can make mobile phones without using several of our patents.

It is difficult to name any single breakthrough, because Nokia is in a business in which no single company can rely only on its own innovation, and no single innovation is enough. Nokia has been successful in relying on open standards, on the combination of good technologies from a number of sources and on some unique differentiation features that consumers have preferred.

Can you give examples of how the company uses the different forms of IP protection?

Nokia uses patents to protect innovative concepts, such as downloading ringing tones and the exchangeable phone covers developed in the 1990s; registered designs for the shape of the products, such as displays, batteries and keypads; and trademarks, such as Nokia, Connecting People and the Nokia ring tune.

OHIM Nokia tune reg: Nokia’s signature tune is registered as a trademark.

We are an active proponent of open standards, and contribute a lot of our innovation to the development of the entire industry. Some IP rights, particularly in user interfaces, are used to protect the differentiation of our products and some to protect our end-users. For instance, design registrations are used in the fight against dangerous counterfeit batteries.

Companies are increasingly hesitant to invest in anything new without first understanding the IP terms. So in the early phase of a product cycle, it is important to encourage the industry to invest in the new technology by giving favorable IP terms. In the matured markets, the focus is on companies who want to copy products and to share the benefits of a technology without investing in R&D. In those markets, the key is to establish a fair distribution of R&D expenses through licensing.

Can you say more about your use of licensing and cross-licensing?

We have an active patent licensing program for companies that manufacture mobile phones or network equipment for cellular standards, such as GSM, CDMA or WCDMA. We are also about to launch new licensing programs to enable others to benefit from some of our easy-to-use concepts, or mobility elements, in products other than mobile phones.

We rely on open standards in most of our products, which typically requires the use of IP rights. Nokia develops and contributes its own IP to the development of such standards, as well as licensing IP from other contributors. Network economy is one of the popular words in the industry. For Nokia it means that we use a number of component suppliers and developers to complement our own development activities.

How would you describe Nokia’s IP strategy?

Our IP strategy is deeply integrated into Nokia’s business strategy. Nokia’s IP rights strategy in the early 1990s focused mainly on acquiring new IP rights, using them to defend the growing business. In recent years, the focus has increasingly been on understanding the role of IP in each Nokia business and on improving the return on our technology and IP investment.

IP assets are managed by a centralized IP department reporting to the Chief Strategy Officer, with very close links to Nokia business groups and technology groups to enable full strategic alignment.

What has been the trend in Nokia’s patent filings over the years?

Nokia has undergone a major shift in its patenting activities over time. Nokia more or less started intensive patenting only in 1990, after some difficult experiences in the U.S. market. Thereafter, we increased our patent filings steadily, and currently make about 1,300 to 1,500 new first filings a year in very focused field of technology.

We filed our first PCT application in 1982. Growth in the telecom area in the 90's increased sharply the volume of our use.

What are the advantages and drawbacks of the PCT from Nokia’s perspective?

One of the principal benefits of the PCT is that it delays incurring costs until the importance of the invention is known. Telecommunications is a standards-governed area. Standardization takes time and often the priority year is too short to see whether a patent application might be relevant for a standard, but the 30-month period offered by the PCT provides a longer opportunity to identify which applications are important, which not, and accordingly adjust the national phase filing program.

The PCT also provides a central location for the amendment of applications during the International phase. This is often necessary to get valid claims in countries where applications go directly to grant with no or minor examination in the national phase. Another advantage is that the PCT provides valid search/examination reports before the need to make further expenses in national phase filings.

The disadvantage is the added costs and that the PCT search/examination does not guarantee success in the national phase.

We also use the traditional Paris and the European Patent Convention routes because the time to grant is shorter, which is important when there is a need for a quick grant. We must also use alternative routes for non-PCT Contracting States.

How would Nokia like to see the IP system evolve?

For the prosecution of new rights, we see traditional issues such as cost, time and quality as key elements of further development. A globally evolving discussion around the challenges of the IP system calls also for new rules and thinking around how IP rights may be used. We see an increasing need for rule-making in the licensing markets. On one hand, rights owners need protection against copying and free-riding. On the other hand, the sustainability of interoperability and open standards require that the licensing regime be fair, and that any single part cannot demand higher royalties than its contribution to the development of the technology justifies. A long-term sustainability of the IP system requires that both of these aspects are secured.