4G issue comes to haunt Daimler.

As Mercedes-Benz prepares for the reveal of its new S-Class, the German automotive giant has lost an important court case in Germany.

One would expect the legal issue to perhaps involve one of the other German premium vehicle brands, but it does not. A Mannheim judge found of favour of Nokia, the once-dominant Finish mobile phone brand, which is now a shadow of its former self.

The legal issue surrounds Mercedes-Benz’s use of phone pairing and synching technology, which has become a critical customer feature in cars during the last decade. Nokia’s 4G technology is an enabler of phone-to-car functionality, yet it appears that the company was never duly compensated for it.

Nokia’s revenue from its technology and coding, instead of physical devices, amounts to R19bn a year. Part of that relatesto the automotive industry andthe Finns believe they are being underpaid.

The crux of the case appears to concern the issue of a broad licencing agreement, with a once-off fee, as opposed to a licence fee per vehicle built and sold with 4G technology.

"The finding is a major endorsement of the long-term engineering work by innovators at Nokia and the important principle that innovators should receive a fair reward,” said Jenni Lukander, president of Nokia Technologies. "We hope that Daimler will now accept its obligations and take a license on fair terms."

At worst, Mercedes-Benz risks the suspension of sales, with Nokia being able to prevent any car with its technology, from being sold – until it is paid the licencing fee. This would cause enormous disruption to the German and global automotive industry.

It is unlikely that Nokia will pursue the route of enforcing a sales embargo on Mercedes-Benz vehicles. In order to stop Merc's production, the Finnish technology company would require R145bn of collateral to escalate the legal issue, covering the risk of losing.

Mercedes-Benz has said it does not understand the legal issue and has already initiated a counteraction in another German court.

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