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SEC Pressed Apple for Information on Nokia Patent Settlement

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Apr 12, 2001
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The U.S. Securities and Exchange Commission (SEC) today published a series of letters it exchanged with Apple between June and August of this year addressing Apple's patent settlement with Nokia.

It was revealed in mid-June that Apple had entered into a patent license with Nokia to settle a series of lawsuits between the two companies, but Apple did not make any disclosure regarding the licensing agreement in its financial filings, despite the fact that analysts have suggested that the licensing fees could run into the hundreds of millions of dollars.

nokia.jpg



The SEC was apparently unsatisfied with Apple's lack of disclosure about the transaction, and sent a letter (PDF) to Apple in late June asking for more detail on the terms of the deal and information on Apple's decision not to address the topic in its regulatory filings.
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.
Click to expand...
Apple responded to the SEC on July 12th, offering at least some of the requested information, although details of the transaction are not included in the publicly-available document as Apple included a request and justification for confidentiality on portions of the letter. Information on Apple's disclosure analysis is, however, included, and it reveals that the company considered the deal to be part of its "ordinary course of business" and not material to its financial statements. Consequently, Apple determined that it was not required to discuss the agreement in its filings.

Apple's response was apparently still not entirely sufficient in the SEC's eyes, however, as the SEC sent a follow-up letter (PDF) on July 19th requesting additional information.
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.).
Click to expand...
Apple's response dated August 1st included five pages of confidential material not included in the publicly-available version, with three of those pages dedicated to full disclosure of the terms of the patent deal with Nokia.

Apple's response apparently satisfied the SEC, as the agency sent a notice (PDF) on August 17th acknowledging that it had completed its review of Apple's regulatory filing, although such notice does not prevent the SEC from taking additional action with respect to the filings in the future.

Article Link: SEC Pressed Apple for Information on Nokia Patent Settlement
 
Article Link
https://www.macrumors.com/2011/10/03/sec-pressed-apple-for-information-on-nokia-patent-settlement/
FriarNurgle

FriarNurgle

macrumors regular
Jan 2, 2011
233
0
The agreement didn't include any money, but rather pressed Nokia to do everything in it's power to assist in crushing Samsung.
 
foodog

foodog

macrumors 6502a
Sep 6, 2006
911
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So basically, this story is about not finding out anything more substantive than we knew previously... except Apple and the SEC exchanged letters. Slow news day?
 
S

shurcooL

macrumors 6502a
Jan 24, 2011
939
118
Chunk Style said:
You've waited this long, you can wait another day...

At this point, I'd rather not hear details about the phone so there can be some surprise at the keynote.
Click to expand...
Sorry...

iPhone 4S (N94)
- iPhone 4 case design (3.5" Screen), but improved internals
- CDMA and GSM in one phone, "World Phone"
- HSPA+ (at least 14.4mbps)
- 1GB RAM
- A5 Processor
- SGX 543MP2 GPU (Same as iPad 2)
- Assistant Voice Recognition
- iOS 5
Click to expand...
 
kas23

kas23

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Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_3_5 like Mac OS X; en) AppleWebKit/533.17.9 (KHTML, like Gecko) Version/5.0.2 Mobile/8L1 Safari/6533.18.5)

shurcooL said:
Chunk Style said:
You've waited this long, you can wait another day...

At this point, I'd rather not hear details about the phone so there can be some surprise at the keynote.
Click to expand...
Sorry...

iPhone 4S (N94)
- iPhone 4 case design (3.5" Screen), but improved internals
- CDMA and GSM in one phone, "World Phone"
- HSPA+ (at least 14.4mbps)
- 1GB RAM
- A5 Processor
- SGX 543MP2 GPU (Same as iPad 2)
- Assistant Voice Recognition
- iOS 5
Click to expand...
Click to expand...

You pretty much nailed it except for one small detail; option of a 64GB model. Considering all these "improvements", I'm surprised to hear so much complaining about "Apple had a year and a half...." Seems like a reasonable update to me, even if it only costs Apple about $10 per phone to implement these changes.
 
K

KPOM

macrumors P6
Oct 23, 2010
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7,872
foodog said:
So basically, this story is about not finding out anything more substantive than we knew previously... except Apple and the SEC exchanged letters. Slow news day?
Click to expand...

The SEC will regularly review the financial filings of large companies like Apple and send comment letters if they think that the company might not be disclosing everything required. My guess is that ultimately Apple's attorneys were able to convince the SEC that the amount and nature of the arrangement with Nokia were relatively insignificant. Had it been a large dollar amount (relative to Apple), or represented a significant exchange of intellectual property, then perhaps Apple would have been requested to re-file its quarterly financial statements including more discussion. It's also possible that Apple satisfied the SEC by agreeing to discuss it in further detail in a future filing (i.e. its annual report).
 
J

JAT

macrumors 603
Dec 31, 2001
6,473
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Hmm, I thought the SEC would be more interested in the revenue stream, not expense. Why didn't they press Nokia for the details, instead?
 
P

Phayer

macrumors newbie
Oct 3, 2011
2
0
Yeah so anyway...

I think we will all witness how integral Steve Jobs has been to Apple's success tomorrow with his absence. I'm holding out for half way through the iPhone 4S presentation, Steve Jobs to roll in wielding an iPhone 5, cue chants of U S A, U S A in the media audience...

I can dream...
 
J

jonhaxor

macrumors regular
Jan 1, 2007
117
1
really makes me wonder if part of the licensing deal is apple allowing nokia to run iOS on their hardware .. i mean the N9 was a pretty decent piece of kit, and with everyone dropping MeeGo like a hot potato and windows mobile taking off like a lead balloon - it might be a wise move for apple to expand their base a bit more .. there's very little they'd have to do (N9 was a Cortex-V8), and it would probably look like a win for both companies.
 
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mikethebigo

mikethebigo

macrumors 68020
May 25, 2009
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jonhaxor said:
really makes me wonder if part of the licensing deal is apple allowing nokia to run iOS on their hardware .. i mean the N9 was a pretty decent piece of kit, and with everyone dropping MeeGo like a hot potato and windows mobile taking off like a lead balloon - it might be a wise move for apple to expand their base a bit more .. there's very little they'd have to do (N9 was a Cortex-V8), and it would probably look like a win for both companies.
Click to expand...

Nope.
 
Oletros

Oletros

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Jul 27, 2009
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jonhaxor said:
really makes me wonder if part of the licensing deal is apple allowing nokia to run iOS on their hardware .. i mean the N9 was a pretty decent piece of kit, and with everyone dropping MeeGo like a hot potato and windows mobile taking off like a lead balloon - it might be a wise move for apple to expand their base a bit more .. there's very little they'd have to do (N9 was a Cortex-V8), and it would probably look like a win for both companies.
Click to expand...

Apple licensing iOS? No way
 
Juan007

Juan007

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No doubt Apple had good reason to keep the settlement secret, now the bozos at the SEC probably leaked those 5 secret pages to all Apple's competitors. Government incompetence and corruption in action. Don't be shocked if one day soon Apple moves its stock listing from Nasdaq to Hong Kong to bypass the SEC idiots.
 
Consultant

Consultant

macrumors G5
Jun 27, 2007
13,314
34
JAT said:
Hmm, I thought the SEC would be more interested in the revenue stream, not expense. Why didn't they press Nokia for the details, instead?
Click to expand...

Because even the SEC doesn't care about the dinosaur Nokia.
 
K

KPOM

macrumors P6
Oct 23, 2010
18,031
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JAT said:
Hmm, I thought the SEC would be more interested in the revenue stream, not expense. Why didn't they press Nokia for the details, instead?
Click to expand...

It could be timing and jurisdictional issues. As a foreign filer, Nokia is not required to file quarterly statements with the SEC. They are required to file an annual report with the SEC, though that sometimes occurs after they make their local filing.
 
J

JAT

macrumors 603
Dec 31, 2001
6,473
124
Mpls, MN
KPOM said:
It could be timing and jurisdictional issues. As a foreign filer, Nokia is not required to file quarterly statements with the SEC. They are required to file an annual report with the SEC, though that sometimes occurs after they make their local filing.
Click to expand...
Probably something like that. Although this is extra info, not based on any standard filing, but just demanding the (out of) court settlement.
 
V

vrDrew

macrumors 65816
Jan 31, 2010
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rjohnstone said:
Nokia does not fall under the jurisdiction of the SEC, however Apple does. ;)
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Nokia is traded on the New York Stock Exchange, and as such is has to file with the Securities and Exchange Commision (specifically Form 20-F). It also has to meet various Generally Accepted Accounting Principles (GAAP) requirements.

To a certain extent Nokia, as a corporation organized in Finland, is going to be subject to much less oversight by the SEC than a US-organized company such as Apple.

However, in this particular instance, since Apple was being sued for Patent Infringement by Nokia, it was Apple that was at greater risk of suffering a financial loss than was greater than expected or predicted. For very understandable reasons, the SEC is more concerned about a company suffering an unexpected loss, rather than enjoying an unexpected windfall. And to that end, it makes most sense that the SEC ask Apple questions, rather than Nokia.
 
Mad-B-One

Mad-B-One

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Jun 24, 2011
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vrDrew said:
Nokia is traded on the New York Stock Exchange, and as such is has to file with the Securities and Exchange Commision (specifically Form 20-F). It also has to meet various Generally Accepted Accounting Principles (GAAP) requirements.

To a certain extent Nokia, as a corporation organized in Finland, is going to be subject to much less oversight by the SEC than a US-organized company such as Apple.

However, in this particular instance, since Apple was being sued for Patent Infringement by Nokia, it was Apple that was at greater risk of suffering a financial loss than was greater than expected or predicted. For very understandable reasons, the SEC is more concerned about a company suffering an unexpected loss, rather than enjoying an unexpected windfall. And to that end, it makes most sense that the SEC ask Apple questions, rather than Nokia.
Click to expand...

That and you don't have to issue a warning when you make more than expected but you have to warn your shareholders if predicted numbers have a setback. Either way, looking at numbers, Apple Inc. is probably right that it won't affect much.
 
iSee

iSee

macrumors 68040
Oct 25, 2004
3,539
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What? Can't the SEC be content with having the two top-ranked football teams? Now they've go to start hassling Apple, too?

(p.s. sorry if I missing anything... I just skimmed the details because this looks like one of the most boring stories ever posted.)
 
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