Nokia 2005 Annual Report Download - page 117

In 1999, Nokia entered into a license agreement with InterDigital Technology Corporation (‘‘IDT’’)
for certain technology. The license provided for a fixed royalty payment through 2001 and most
favored licensee treatment from 2002 through 2006. The patents being licensed were subject to
litigation by other manufacturers. In March 2003, IDT settled patent litigation with Ericsson and
Sony-Ericsson and announced that it intended to apply the settlement royalty rates to Nokia under
the most favored licensee provision. After failed attempts at negotiating a settlement, Nokia filed
an arbitration demand seeking access to withheld information necessary to an evaluation of the
matter. IDT responded with a counterclaim seeking to apply the Ericsson and Sony-Ericsson
licenses to Nokia. An arbitration hearing was completed in January 2005 and an award (‘‘Award’’)
was issued by two of the three arbitrators in July 2005. The Award was accompanied by a lengthy
dissent from the third arbitrator. In the Award, which Nokia believes was internally inconsistent,
the majority generally set royalty rates that IDT has publicly contended imposes $232 to
$252 million in royalty obligations on Nokia for the period of 2002 through 2006. Nokia disputes
this calculation. Immediately after the Award was issued, IDT filed a demand with a federal
district court in New York to confirm the Award. Nokia asked the same federal court to vacate the
Award in its entirety under applicable law. On December 28, 2005, the federal district court issued
an order confirming the Award and denying Nokia’s motion to vacate. Two days prior to the
issuance of the federal district court’s order, IDT announced its intention to invoke the dispute
resolution mechanisms under the parties’ 1999 agreement with regard to Nokia’s royalty reporting
and payment obligations under the Award. In late January, Nokia filed a notice of appeal of the
federal district court’s order, and a schedule for briefing those matters to the Second Circuit Court
of Appeals is in place. In addition, the parties have engaged in continued settlement discussions in
an effort to resolve issues that are in dispute. Nokia continues to believe that the Award should be
vacated under applicable law and is currently evaluating its options with regard to both the
appeal process and IDT’s request for further dispute resolution proceedings under the parties’
agreement.
In November 2005, Qualcomm Incorporated (‘‘Qualcomm’’) and its wholly owned subsidiary Snap
Track, Inc. filed a patent infringement suit against Nokia Corporation and Nokia Inc. in the Federal
District Court for the Southern District of California. The lawsuit involves twelve patents that
Qualcomm apparently contends apply to the manufacture and sale of unidentified GSM products.
On December 20, 2005, Nokia moved to stay the lawsuit pending resolution of a confidential
arbitration pending between Nokia and Qualcomm. Nokia also simultaneously moved to dismiss
the lawsuit for failure to state a claim for patent infringement or, in the alternative, for a more
definite statement by Qualcomm of its purported claims. Nokia’s motions are currently pending
before the federal court with a hearing scheduled for mid-March 2006 and rulings expected shortly
thereafter. Nokia will vigorously defend itself against these claims.
On April 6, 2004, Irving Greenfeld filed suit against Nokia, Jorma Ollila, Pekka Ala-Pietil¨ a, Matti
Alahuhta and Richard Simonson in the United States District Court for the Southern District of New
York on behalf of all purchasers of Nokia’s stock between January 8, 2004 and April 6, 2004.
Subsequently, six individuals, Marc Abrams, Emery Chu, Zoe Myerson, Thomas Pflugbeil, Michael
Devine and Donald L. Siefert, filed related actions, each alleging that Nokia’s January 8, 2004
earnings guidance was materially misleading, as allegedly revealed in Nokia’s April 6, 2004 press
release. In addition, the complaints allege that Nokia’s senior executives possessed material
adverse information about the success of Nokia’s reorganization and fraudulently failed to disclose
this information. In September 2004, the court appointed Generic Trading, Martin Bergljung and
Gerald Hoberman as lead plaintiffs and Milberg Weiss and Entwistle & Capucci as lead counsel. On
January 7, 2005, lead plaintiffs filed a consolidated class action complaint (the ‘‘Consolidated
Complaint’’), on behalf of all purchasers ‘‘worldwide’’ of Nokia securities during the class period.
The Consolidated Complaint expanded the original class period (January 8, 2004 through April 6,
2004) to October 16, 2003 through April 15, 2004. The Consolidated Complaint also added two new
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