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Nokia suit against Apple seen as battle of two Goliaths

Apple this week vowed to "vigorously" defend itself against an iPhone-related patent infringement suit from Nokia, the world's largest handset maker.

In its annual Form 10-K (PDF) with the U.S. Securities and Exchange Commission for the fiscal year 2009, Apple noted the lawsuit with Nokia, which alleges that the iPhone infringes on ten wireless technology related patents owned by the Finnish company. The suit was officially filed by Nokia in a U.S. District Court in Delaware last week.

"The complaint alleges that these patents are essential to one or more of the GSM, UMTS and 802.11 wireless communication standards, and that the Company has the right to license these patents from plaintiff on fair, reasonable, and non-descriminatory ("FRAND") terms and conditions," Apple said. "Plaintiff seeks unspecified FRAND compensation and other relief. The Company's response to the complaint is not yet due. The Company intends to defend the case vigorously."

Analyst Gene Munster with Piper Jaffray said he believes that Nokia seeks a 1 percent to 2 percent royalty on every iPhone sold, which would amount to $6 to $12 per phone. Nokia's patents are related to GSM, 3G and Wi-Fi, and cover wireless data, speech coding, security and encryption. Nokia has alleged that all iPhone models released since 2007 infringe on these patents.

Given the size of the two companies involved, Bill Merritt, head of mobile licensing firm InterDigital, told Reuters that he believes the patent infringement case is likely to last for more than a year. If Apple chooses to defend itself or countersue, he said, the case would likely last two or three years.

"It's not a David versus Goliath story," he said. "These are two Goliaths."

In a statement last week, Nokia accused Apple of "attempting to get a free ride" off of the company's 40 billion Euros in research and development over the past two decades.

As the iPhone has grown in popularity, Nokia has retained its status as market leader, but has lost significant share of the market it has dominated. As recently as August, Nokia's Symbian mobile platform was said to have a 50 percent market share, well down from the 72 percent the platform had in 2006. In the second quarter of 2009, the iPhone represented 14 percent of global smartphone sales.

The Nokia suit is among a number of legal proceedings noted in Apple's Form 10-K filed with the SEC. The company said that it is currently defending itself from more than 47 patent infringement cases, 27 of which were filed during the 2009 fiscal year.

"Regardless of merit," Apple said, "responding to such claims can consume significant time and expense."