Please ensure Javascript is enabled for purposes of website accessibility

Apple Inc. and Ericsson Forgive, Forget, and Move On

By Anders Bylund – Dec 21, 2015 at 7:51PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This accord cancels lawsuits in five different jurisdictions, which adds to the warm fuzzies for everyone involved.

Image source: Ericsson.

Apple (AAPL 2.44%) is no stranger to the courtroom, but the tech giant will also bury the hatchet on occasion. On Monday morning, Apple and Ericsson (ERIC -1.50%) canceled all patent litigation between the two companies, instead settling for a seven-year partnership.

The new cross-licensing deal works on a global level, and includes all standards-essential technology patents from both Ericsson and Apple along with an undisclosed handful of other patents.

The pact starts off with an initial payment from Cupertino to Ericsson, and then Apple will continue to pay ongoing royalties to the Swedish telecommunications veteran over the years. All of the specific terms and costs are confidential. Ericsson's next quarterly report might provide some clues, assuming that Apple's payments are large enough to make an obvious difference to Ericsson's income statements.

This action ends legal proceedings in Texas, California, and three European countries. You know how it works: One suit is met by counterclaims, with additional complaints filed in other courts to keep the other party on their toes.

Next up, the combatants turn into partners, pooling their resources to research next-generation networking management, video traffic improvements, and the general 5G wireless standard.

Kasim Alfahali. Image source: Ericsson.

"We are pleased with this new agreement with Apple, which clears the way for both companies to continue to focus on bringing new technology to the global market, and opens up for more joint business opportunities in the future," said Ericsson's Chief Intellectual Property Officer Kasim Alfalahj in a press statement.

Talking to Swedish newspaper Svenska Dagbladet , Alfahali clearly wanted to hold back but still offered some additional detail on the deal.

"We have been having discussions for the last two years in order to put a new agreement together," Alfahali said. "It is broad, global, and extends over seven years. An important agreement."

When asked how this might affect Ericsson's hiring needs, he backed down: "It is too early to say what traction this may get."

Ericsson shares jumped as much as 7% higher on the news. The stock is still trading 22% lower year to date, including a 14% drop over the last six months. The company has struggled to grow sales or cash flows in recent years, as the telecom infrastructure industry has consolidated all around Ericsson.

Apple shares rose 1% on Monday, just ahead of the general market. Ericsson never threatened to kill or bankrupt the much larger company, but a peaceful agreement is always better than the uncertainty of swirling lawsuits.

The Apple accord is not a game-changer, or Ericsson would have had to report the approximate size of Cupertino's life-saving checks. But it certainly goes in the "good news" column, and may to used as leverage to land other agreements and patent-supported sales in the near future.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.