Jack Ellis

Nokia released its quarterly financial results yesterday, posting an overall loss for the second consecutive quarter and reigniting discussion over what happens next. As speculation mounts that the company’s assets may be sold either in part or as a whole, much talk has focused on the value of the company’s extensive patent portfolio to potential buyers.

This week, an article from the Wall Street Journal placed the blame for Nokia’s current predicament squarely on “a corporate culture that lavished funds on research but squandered opportunities to bring the innovations it produced to market.” According to the report, Nokia has spent around $40 billion dollars on research and development over the past 10 years. One of the results of this is a portfolio consisting of over 30,000 patents covering a variety of technologies relevant to the smartphone space. The WSJ story claims that Nokia had developed many of these technologies by the start of the millennium, yet its focus remained on traditional basic handsets, which were more profitable initially, while other potential products were not brought to market.

Companies whose main business is creating and marketing products should always have that as their principal focus and ultimate goal, and IP strategy needs to complement that. Essentially, it seems that Nokia spent huge amounts of money on researching, developing and patenting technologies that did not feature as a significant part of its final product offering. If its IP and product strategies had been in closer harmony, then perhaps the Finnish company would be in a different position today, with a healthier share of the smartphone market. The blame for that lies with senior managers at the company who failed to appreciate what their patents were telling them. What's more, it is yet another example of how important it is that IP strategy is aligned with overall business strategy, rather than existing in a vacuum tucked away from general view.

Nevertheless, the results of Nokia's disconnected IP creation policy could end up as its saving grace. Thanks to a high quality licensing operation, the company already rakes in an impressive $600 million annually in royalties. If CEO Stephen Elop and the rest of the company's board have learned the lessons of past mistakes, so that in future IP is managed in a way that complements Nokia's wider commercial strategy, then current and future patents could be leveraged to create even more value.