Nokia 2008 Annual Report Download - page 24

with which we work in cooperative research and development activities. Similarly, we and our
customers may face claims of infringement in connection with our customers’ use of our products,
services and solutions.
In many aspects, the business models for mobile services have not yet been established. The lack of
availability of licenses for copyrighted content, delayed negotiations, or restrictive copyright licensing
terms may have a material adverse effect on the cost or timing of contentrelated services offered by
us, mobile network operators or thirdparty service providers, and may also indirectly affect the sales
of our mobile devices.
Since all technology standards, including those used and relied on by us, include some intellectual
property rights, we cannot fully avoid risks of a claim for infringement of such rights due to our
reliance on such standards. We believe that the number of third parties declaring their intellectual
property to be relevant to these standards, for example, the standards related to socalled 3G mobile
communication technologies, including 3GPP and 3GPP2, as well as other advanced mobile
communications standards, is increasing, which may increase the likelihood that we will be subject to
such claims in the future. While we believe that any such intellectual property rights declared and
found to be essential to a given standard carry with them an obligation to be licensed on fair,
reasonable and nondiscriminatory terms, not all intellectual property owners agree on the meaning
of that obligation and thus costly and timeconsuming litigation over such issues has resulted and
may continue to result in the future. While the rules of many standard setting bodies, such as the
European Telecommunication Standardization Institute, or ETSI, often apply on a global basis, the
enforcement of those rules may involve national courts, which means that there may be a risk of
different interpretation of those rules.
From time to time, some existing patent licenses may expire or otherwise become subject to
renegotiation. The inability to renew or finalize such arrangements with acceptable commercial terms
may result in costly and timeconsuming litigation, and any adverse result in any such litigation may
lead to restrictions on our ability to sell certain products, services or solutions, and could result in
payments that potentially could have a material adverse effect on our operating results and financial
condition. These legal proceedings may continue to be expensive and timeconsuming and divert the
efforts of our management and technical personnel from our business, and, if decided against us,
could result in restrictions on our ability to sell our products, services and solutions, require us to pay
increased licensing fees, substantial judgments, settlements or other penalties and incur expenses
that could have a material adverse effect on our business, results of operations and financial
condition.
We make accruals and provisions to cover our estimated total direct IPR costs for our products,
services and solutions. The total direct IPR cost consists of actual payments to licensors, accrued
expenses under existing agreements and provisions for potential liabilities. We believe that our
accruals and provisions are appropriate for all technologies owned by others. The ultimate outcome,
however, may differ from the provided level which could have a positive or negative impact on our
results of operations and financial condition.
Any restrictions on our ability to sell our products, services and solutions due to expected or alleged
infringements of thirdparty intellectual property rights and any intellectual property rights claims,
regardless of merit, could result in material losses of profits, costly litigation, the payment of
damages and other compensation, the diversion of the attention of our personnel, product shipment
delays or the need for us to develop noninfringing technology or to enter into a licensing agreement.
If licensing agreements were not available or available on commercially acceptable terms, we could
be precluded from making and selling the affected products, services and solutions or could face
increased licensing costs. As new features are added to our products, services and solutions, we may
need to acquire further licenses, including from new and sometimes unidentified owners of
intellectual property. The cumulative costs of obtaining any necessary licenses are difficult to predict
and may over time have a negative effect on our operating results. See Item 4B. “Business
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