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Nokia Tags Apple on Patents

Stocks in this article: NOK AAPL

ESPOO, Finland ( TheStreet) -- Nokia (NOK) fired the first shot in what looks to be a new patent battle, only this time it's with Apple (AAPL), not Qualcomm (QCOM).

The Finnish phone giant filed a patent infringement lawsuit against Apple Thursday, saying the iPhone maker has not been paying royalty fees for the wireless technology used in the device.

The move comes as Nokia prepares to enter the smartphone market with a crop of new touchscreen devices aimed directly at Apple's iPhone success.

As UBS analyst Maynard Um points out, Nokia's complaint is likely a preemptive strike and a negotiation tactic should Apple make legal objections to Nokia's use of the multi-touch technology that Apple developed.

These patent cases can take years to sort out and often end with court-determined or out-of-court settlements. For example, after several years of legal wrestling, Qualcomm and Nokia settled a patent dispute last year. The resolution was deemed a victory for both players since Nokia was able to strike a new licensing agreement at a lower rate, and Qualcomm won assurances that it would continue to collect royalties not only on 3G but also 4G devices in the future.

Um describes two possible scenarios in a research note. One, Apple is forced to pay a 1% royalty fee to Nokia for use of the technology. This would amount to an estimated $6 per iPhone, Um writes.

A second, more likely scenario is that Nokia and Apple negotiate a cross-licensing agreement giving Apple rights to the wireless technology used in the iPhone and Nokia would be allowed to use Apple's multi-touch system on its new phones.

Apple shares were unchanged and Nokia was up 2% in mid-afternoon trading Thursday.

-- Written by Scott Moritz in New York.

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