News

Microsoft-Nokia Deal Gets Approval from Chinese Regulators

• By Gladys Rama
• April 08, 2014

Microsoft's $7 billion acquisition of Nokia's device business has cleared its last major regulatory hurdle.

In a blog post Tuesday, David Howard, deputy general counsel at Microsoft, announced that antitrust watchdogs in the Chinese Ministry of Commerce (MOFCOM) have approved the deal, which involves the sale of Nokia's devices and services arm to Microsoft, as well as the ability for Microsoft to license Nokia's patents and mapping services.

"We are very pleased with this important decision, a critical step forward in allowing us to close the transaction with Nokia," Howard said, noting that with MOFCOM's approval, the deal has now passed regulatory muster in 16 markets. The U.S. Department of Justice and the European Commission gave their approvals in December.

The acquisition, announced last September, was initially expected to close in the first quarter of 2014, but is now set to be finalized sometime this month. The delay was attributed to regulators in China, who initiated an investigation of the deal in response to complaints from Google and smartphone makers such as Samsung, ZTE and Huawei. The companies were concerned that the deal would lead to an increase in the price of licensing Nokia's patents, according to reports.

In his blog, Howard indicated that Microsoft has been working with MOFCOM for several months to reach an agreement over the company's patent licensing practices. Specifically, MOFCOM was seeking to ensure that Microsoft would not change its patent licensing practices once the Nokia deal was finalized.

"There was an important principle with which MOFCOM approached these discussions from the beginning: any commitments should be focused on how our future conduct might change after we own the Nokia Devices and Services business, and should not impact our licenses signed in the past or historical practices," Howard wrote. "It has never been our intent to change our practices after we acquire the Nokia business, so while we disagreed with the premise that our incentives might change in the future, we were happy to discuss commitments on this basis." 

MOFCOM and Microsoft have agreed on a set of conditions for MOFCOM to approve the Nokia acquisition. Among those conditions, Microsoft promises to continue to license its standard-essential patents under fair, reasonable and non-discriminatory (FRAND) terms.

Microsoft also promises to "make available non-exclusive licenses under its existing patent licensing program for Android smartphones." MOFCOM has determined that Microsoft owns roughly 200 patent families that are required to make Android smartphones.

These conditions, which Microsoft must hold to for eight years, "effectively [adopt] Microsoft's current patent licensing practices," Howard said.

For its part, Nokia said in a statement that while its own patent licensing practices have been closely scrutinized by antitrust regulators, none has raised objections: "No authority has challenged Nokia's compliance with its FRAND undertakings related to standard-essential patents...or requested that Nokia make changes to its licensing program or royalty terms."

Though China was the last major holdout in approving the Microsoft-Nokia deal, Nokia is still embroiled in several tax disputes in India. However, Nokia has repeatedly said that those disputes will not have any bearing on the outcome of the acquisition.