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The Reason Nokia Kept The Patents

Jim Probasco, Benzinga:

Nokia (NYSE: NOK [FREE Stock Trend Analysis]) sold its handset business to Microsoft (NASDAQ: MSFT). What it did not sell to Microsoft, or anyone else, is its patents. And Nokia has a bunch of them. The reason? Income, according to Reuters.

In technology, patents are like gold. And if there is one thing Nokia knows, it’s how to mine “patent” gold. First the company rented (licensed) its patents to Microsoft for just north of $2 billion for 10 years. This is in addition to the $5 billion Microsoft paid for Nokia’s handset business.

By retaining ownership of its patents, Nokia is free to license them to others (the contract with Microsoft is non-exclusive), thereby doubling down on possible income from the same patents.

In addition, Nokia’s “rent-but-don’t-sell” strategy with Microsoft also makes it possible for the company to go after some of the very same Android manufacturers with which Microsoft already has patent royalty deals according to ars technica.

As a bonus, now that Nokia will no longer make smartphones, the company will be free to sue without fear of lawsuit retribution from competitors.

As ars technica pointed out, despite the potential for increased patent litigation, Nokia will not become a full-blown patent troll. It could become more “troll-like” but with its other businesses, including the HERE mapping platform and NSN, Nokia’s telecom and network infrastructure subsidiary, it will remain very much a viable company with actual products.

This is not to minimize the income potential from patent licensing and lawsuits. According to Reuters, Nokia’s patents are widely considered some of the highest quality in the mobile world.

Related: Microsoft Buying Nokia for $7.2 Billion, Here's Why

Furthermore, Nokia has made its strategy clear. In an email to Reuters, Nokia spokesman Mark Durrant said, "Once we no longer have our own mobile devices business, following the close of the (Microsoft) transaction, we would be able to explore licensing some of those technologies."

No stranger to lawsuits over intellectual property, Nokia sued Apple (NASDAQ: AAPL) in 2009 and reached a licensing deal believed to be worth hundreds of millions of dollars, according to Reuters.

Finally, The Washington Post noted that Nokia already receives $658 million a year in patent royalties. The newspaper said that with an estimated 30,000 utility patents and 8,500 design patents, plus the fact the company has not been afraid to sue some big players in the past, leads to the obvious conclusion that patent income may soon become a huge moneymaker for the company. At the time of this writing, Jim Probasco had no position in any mentioned securities.

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