Nokia and Apple have finally settled the telecom industry's largest patent dispute. The legal battle, which has raged on for almost two years, covered Apple's unlicensed use of 2G (GSM), 3G (UMTS), and Wi-Fi in the iPhone. As part of the agreement, Apple will pay Nokia a lump sum settlement, and a royalty for every mobile device that it ships with 2G, 3G, or Wi-Fi functionality. The exact figures haven't been disclosed, but the one-time payment will almost certainly be hundreds of millions of dollars, and the royalty is likely to be a few dollars per iPhone, iPad, and iPod touch.

While this agreement might look like a big deal, it's important to realize that it's just money -- and Apple has a lot of money. Most telecom companies own large patent portfolios which they cross-license to each other -- but because Apple is a relative late-comer, it doesn't own any telecom-related patents of its own. In other words, Apple simply has to pay some license fees or stop making iDevices. In a world with protected-by-law intellectual property, that's the way the cookie crumbles. Incidentally, Nokia also has a monopoly on 4G (LTE) patents, which means Apple will probably have to pay royalties to Nokia for many years to come.

If you look past the money, however, the real story is about Microsoft, and whether the rumors about its purchase of Nokia will come to pass. If Microsoft buys Nokia it will inherit the Finn's entire portfolio of some 10,000 telecoms-related patents. Apple will then have to pay Microsoft a license fee for every iDevice sold. If you think that's scary, Microsoft has also claimed that Android infringes on its intellectual property -- and back in April 2010, HTC consented to a $5 royalty for every Android phone that it sells. Microsoft is also suing both Motorola and Barnes & Noble with the hope of securing between $7.50 and $12.50 for every Android device that they sell.

There are a few companies that have significant mobile patent portfolios of their own, like Ericsson and Qualcomm -- and in theory, they could make a stand against Microsokia -- but in reality, that won't happen. Let's not forget that Qualcomm already powers everyWindowsPhone7 device -- and on top of that, next-generation Qualcomm chips are slated to power the first Windows 8 devices as well. Microsoft and Qualcomm might not be that close enough for a merger or acquisition, but they certainly seem very close.

In other words, if Microsoft bought Nokia and kept Qualcomm's portfolio of 3G patents close to hand, it would wield one of the largest collections of mobile software and hardware patents in the world. Not only would it have the predominant desktop operating system, but almost every mobile phone and tablet manufacturer would have to pay Microsoft a license fee.

The launch of Windows Phone 7 might have been lackluster, and Windows 8 might turn out to be awful, but if Microsoft can secure between $5 and $15 for every smartphone and tablet sold by Apple, Samsung, HP, and LG, who cares? That's about the same amount of money that an OEM pays to installWindows7 on a new desktop machine, incidentally.

http://www.extremetech.com/article2/0,2845,2386887,00.asp