Nokia 2006 Annual Report Download - page 112

Superior Court in the District of Columbia. The cases are in the initial stages and motions to dismiss
have been filed.
We believe that the allegations described above are without merit, and intend to defend these
actions vigorously. Other courts that have reviewed similar matters to date have found that there is
no reliable scientific basis for the plaintiffs’ claims.
Financing or agreement related litigation
One of our customers in Turkey, Telsim Mobil Telekomuniksyon Hiz. A.S., has defaulted on its
obligations under a financing arrangement secured by us. In February 2004, the Arbitral Tribunal in
Z¨urich rendered an award fully approving the claim against Telsim, which was owned and controlled
by the Uzan family and their affiliates. In June 2004, the Swiss Federal Supreme Court dismissed
Telsim’s appeal which rendered the award final and enforceable. In addition, in conjunction with co
plaintiff Motorola Credit Corporation, we have been successful in a US lawsuit against individual
members of the Uzan family and certain Uzancontrolled corporations. The lawsuit alleges that the
defendants fraudulently induced us and Motorola, through a pattern of misleading and illegal
conduct, to provide financing to Telsim. In July 2003, the trial judge held that Nokia was entitled to
a USD 1.7 billion judgment. The defendants’ appeal from that judgment was dismissed by the
appeals court in October 2005. In August 2005, we reached a settlement with Telsim and Turkish
Savings and Deposit Insurance Fund (TMSF), which then controlled and managed Telsim’s assets. In
December 2005, the Turkish government completed an auction of Telsim’s assets to Vodafone.
Nokia’s settlement payment, 7.5% of the purchase price i.e. USD 341 250 000, was received in May
2006 in connection with the closing of the sale. On the basis of the US judgment, we, however, are
continuing to pursue the recovery of the amounts due to us from the Uzan family. We wrote off our
total financing exposure to Telsim by the end of 2002.
Nokia is also involved in a number of lawsuits with Basari Elektronik Sanayi ve Ticaret A.S. (‘‘Basari
Elektronik’’) and Basari Teknik regarding claims associated with the expiration of a product
distribution agreement and the termination of a product service agreement. Those suits are currently
before various courts in Turkey. Basari Elektronik claims that it is entitled to compensation for
goodwill it generated on behalf of Nokia during the term of the distribution agreement. The
goodwill claim has been dismissed by the Turkish courts and referred to arbitration. That dismissal is
currently on appeal. Basari Teknik has filed several suits related to alleged unpaid invoices and a suit
that claims that the product service agreement between the parties was improperly terminated.
Nokia will continue to vigorously defend itself against these claims.
Intellectual property rights litigation
In 1999, Nokia entered into a license agreement with InterDigital Technology Corporation and
Interdigital Communications Corporation (together ‘‘IDT’’) for certain technology. The license provided
for a fixed royalty payment through 2001 and most favored licensee treatment from 2002 through
2006. 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, which would have resulted in Nokia allegedly owing over USD 500 million. Nokia disputed
IDT’s contention. After an arbitration hearing was completed in January 2005, an award was issued
that generally set royalty rates, which IDT publicly contended at that time imposed USD 232 to
252 million in royalty obligations on Nokia for the period of 2002 through 2006. In January 2006,
Nokia filed a notice of appeal to the Second Circuit Court of Appeals. During that time, the parties
engaged in continued settlement discussions. In April 2006, Nokia and IDT resolved their contract
dispute over the patent license terms originally agreed to in 1999 and the impact to Nokia of IDT’s
licenses with Ericsson and SonyEricsson. The agreed upon settlement terms resolved the legal
disputes related to 2G products, with Nokia obtaining a fully paidup, perpetual, irrevocable,
worldwide license to all of IDT’s current patent portfolio, and any patents IDT may later acquire, for
purposes of making or selling 2G products, including handsets and infrastructure. The settlement
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