Print 16 comment(s) - last by fteoath64.. on Oct 5 at 8:27 AM

SEC is the only party who will likely be privy to the terms of closed-door deal

Apple, Inc. (AAPL) has been quite active legally of late, carrying out a massive litigation war [1][2][3][4] [5][6][7][8] [9][10][11][12] with its top rivals who use Google Inc.'s (GOOG) Android OS.  But back in June, Apple was in court-endorsed settlement talks in a separate legal spat with Finland's Nokia Oyj. (HEL:NOK1V).  

Formerly the world's top smartphone maker, Nokia was bumped out of first place by Apple.  But in court it looked on the verge of victory, so Apple opted to enter a cross-licensing agreement, which some estimated could involve hundreds of millions of dollars in licensing payments to Nokia.

But here's the interesting thing:  Nobody knew what the settlement was worth, as Apple did not disclose it in its legal mandated financial filings.  Apple explains this away in that it felt the deal was in the "ordinary course of business" and not necessary to report to shareholders.

But the U.S. Securities and Exchange Commission (SEC) wasn't happy with this response.  It sent a frustrated letter [PDF] to Apple in June asking for the company to share with it the missing information.  It writes:
We note various news articles discussing the patent litigation settlement between Nokia and Apple. Supplementally tell us the amount and terms of such settlement agreement, any amounts accrued, the periods in which they were recognized, and the timeline of the negotiations with Nokia that led to the June settlement agreement. Also, tell us how you considered including a discussion regarding this matter in your MD&A [Management Discussion and Analysis] disclosures and financial statement footnotes, including disclosure of a reasonably possible range of loss in excess of amounts accrued. Further, tell us how considered disclosing this event in a Form 8-K or tell us how you determined that such disclosure was not necessary.

Apple complied filing some information on July 12, but including a "request for confidential treatment for selected portions of this letter."  In doing so Apple fought to keep details of the settlement out of the eyes of the public -- and its Android competitors.

Of course this isn't exactly uncommon in closed-door settlements in legal disputes between major corporations.  Still the SEC, privy to the secret information, apparently felt Apple was holding back.  It wrote [PDF] requesting more information, commenting:
Please describe in further detail the terms, arrangements, obligations and rights associated with the Settlement Agreement and Patent License Agreement entered into between the company and Nokia. Also, describe for us each element of these Agreements (i.e. settlement portion, past usage, future usage, etc.).

Apple fulfilled that request with five pages of non-public confidential information filed on August 1.  On August 17 the SEC acknowledged receiving the document and stated [PDF] that it was satisfactory.  While not ruling out future inquiries against Apple, it now appears to be satisfied that it has sufficient details about the transaction.

As for the public, though, they are unlikely to ever find out what those details are, including how much per handset Apple is paying Nokia.

Sources: MacRumors, SEC [1],, [2],, [3]

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Utter bollocks.
By dark matter on 10/3/2011 3:37:34 PM , Rating: 4
All patent fights outcome should be disclosed once filled. Even if settled out of court.

Might make companies think twice before embarking on stupid lawsuits in the first place.

RE: Utter bollocks.
By masamasa on 10/3/2011 4:00:43 PM , Rating: 5
Agreed. Everyone is sick of Apple's meritless, fabricated lawsuits based on smoke and mirrors. Would love to see the Android makers team up and take them to the cleaners!

RE: Utter bollocks.
By Samus on 10/3/2011 6:27:29 PM , Rating: 5
Filed in a public court, so the outcome should be public.

I don't see how this is actually legal. Even if settled out of court, it must be made public record unless the judge dismisses the case or it is a matter of national security.

RE: Utter bollocks.
By crimson117 on 10/4/2011 1:22:00 PM , Rating: 2
Both parties agree to drop the case, so the judge dismisses it.

RE: Utter bollocks.
By fteoath64 on 10/5/2011 8:27:19 AM , Rating: 2
@masamasa: Apple is not the only one. MicroSoft recently did such patent licensing indemnity to Samsung, HTC, ACER and Viewsonic on Android handsets. This is commercial blackmail in its purest form and if it is legal, the legal system is severely flawed.

This is a case of predatory business practice using an unspoken threat as a motive for licensing potentially bogus patent claims.

RE: Utter bollocks.
By Natch on 10/4/2011 8:08:59 AM , Rating: 3
They just want to hide the part that says (in legal terms, which I have converted to layman's terms to assist you guys),

"Apple agrees that they have been a bunch of litigious douchebags, and seeks permission to use Nokia's technology that we did, in fact, use without prior permission."

"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings

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