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Nokia v. iPhone: Business as Usual, Alas

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If you can't beat 'em, sue 'em.

Earlier this week, Nokia filed suit in the U.S. to force Apple to pay royalties on Nokia patents involving cell phone technology. Nokia claims the iPhone infringes on its patents.

As I write in The Laws of Disruption, for better or for worse (mostly for worse) litigation has become an everyday weapon in the strategy arsenal of companies trying to slow down, distract, or simply stop competitors. Compared to traditional competitive tools such as better products or superior services, these days litigation can be a relatively inexpensive way to put a thumb on the scales of competition. (Emphasis on "relatively.")

Nokia, of course, is not simply a patent troll. It has smart phone products of its own and is continuing to develop them, hoping to compete with Apple, especially as the iPhone moves into the European smart phone market. Unlike NTP, which used an injunction against Research in Motion to extract half a billion in tribute or face shutdown of the Blackberry network in 2006, Nokia is asking only for compensation (amount not yet determined) based on "fair and reasonable" rates.

I haven't reviewed any of the ten patents that Nokia claims Apple infringes. I don't have to. It's almost certain that the iPhone infringes them. It's also nearly certain that Apple has patents of its own that Nokia infringes. All of these patents are bound to be overly broad, perhaps ridiculously so.

An overwhelmed U.S. Patent Office has, for many years, simply approved most applications and outsourced to the courts the actual determination of which patents ought to have been granted in the first place. More than half of all patents litigated to a final decision are found to have been improperly granted, and the number is growing. (The problem is just as bad in Europe.)

Not that anyone expects in this or most cases like it that a trial and appeals will actually determine if the patents are valid. That's not the point. Nokia has already "convinced" 40 other device makers to license its patents, regardless of their merit. Negotiations with Apple weren't moving along fast enough, so Nokia brought suit to up the ante.

Now there will be more posturing, name-calling, counterclaims, and overblown rhetoric about preserving Nokia shareholder interests and Apple's right to innovate the American way. Nokia's vice-president for legal and intellectual property was already quoted in The Wall Street Journal as saying the suit was necessary to stop Apple's attempt to "get a free ride on the back of Nokia's innovation."

In the meantime, the two companies will continue to negotiate, feign, and trade draft cross-licensing agreements in a dangerous game of "chicken."

Shaw Wu, an analyst with Kaufman Brothers, gets it just right when he says in the Journal article that "I really think this is more a function of Nokia trying to compete with Apple more than anything else, even if it's through the courts."

So long as the patent system remains in ruins, expect more of this kind of "competition." And if you don't expect it, you're likely to be a victim rather than a competitor.

For better or worse...