NEC and NextWave join European giants to create LTE licensing framework
Published: Tuesday 15 April, 2008
The success of any technology platform in the 4G world was always going to be decided partly by its IPR policies, given the heavy burden that patent royalties have placed on the cost structures of GSM, CDMA and UMTS equipment makers. WiMAX has made much of its claims to be free of the IPR burden of other wireless networks, with Intel and Samsung, the primary patent holders, seeking to establish a ‘reasonable and non-discriminatory’ precedent via the WiMAX Forum, more akin to the practises of Wi-Fi than 3G. The two companies have also proposed a patent pool scheme for LTE and other emerging OFDM-based systems, but this effort is likely to be overshadowed – rather like many areas where WiMAX has blazed a trail – by the traditional cellular equipment giants and their LTE agenda. A group of these vendors announced on Monday that they had agreed a licensing framework for LTE that should ensure patent disputes or excessive charges do not throw roadblocks in the path of the rapidly accelerating LTE juggernaut, as well as seeking to establish new rules for the new generation of wireless.
The new rules will be unwelcome, though hardly surprising, to Qualcomm, one of the greatest – and certainly the most controversial – beneficiary of 3G royalties, thanks to its iron grip on CDMA-related patents and its insistence on following its own licensing rules. The group defining the new framework is led by some of the companies that have been most opposed to Qualcomm’s methods, and most keen to reduce the royalty burden, especially as handsets come under such intense price pressure. The leaders are Nokia, Alcatel-Lucent, Ericsson, Sony Ericsson, Nokia Siemens, NEC and NextWave, which have mutually agreed to limit the royalty fees they charge one another for LTE technologies, in order to speed time to market and reduce costs and potential disputes.
"Today's announcement is a step toward establishing more predictable and transparent licensing costs in a manner that enables faster adoption of new technologies," said Ilkka Rahnasto, head of Nokia's intellectual property rights, in a statement.
The initiative is also possibly a way to ensure that the traditional mobile vendors retain control of the licensing process, rather than ceding this to the Next Generation Mobile Networks (NGMN), a body which last month set up a 4G patent pool. Though many of the cellular vendors are part of this organization, it is heavily operator-driven, and the pool itself was the work of Intel and Samsung, which are seen as the main lights behind LTE challenger WiMAX, and as bringing the practises of the open IP world into the cellular market, where even in 4G, major patent holders will expect their IPR to be more lucrative than it would be in the PC industry. A key effect of the pool, according to Stuart Carlaw, research director at ABI, would be to make licensing more transparent by combining it with NGMN reporting. This would “create a situation where there will be an evident divide between the patent pool rates reported, and royalty rates reported from the rest. This will expose Qualcomm's position to the public gaze” – and not just Qualcomm’s, since key metrics like the average cumulative royalty rate in cellular technologies have always been closely guarded secrets by all parties. "The key concepts here revolve around the independent reporting of royalty rates to the NGMN and also the ability of a patent pool to report en masse," said Carlaw.
It is important, then, that the new vendor-led system also comes with an element of transparency, or it will just be another pricing club. So far, the details remain vague. The official statement makes the usual noises – “the framework is based on the prevalent industry principle of fair, reasonable and non-discriminatory (FRAND) licensing terms for essential patents. This means that the companies agree, subject to reciprocity, to reasonable, maximum aggregate royalty rates based on the value added by the technology in the end product and to flexible licensing arrangements according to the licensors’ proportional share of all standard essential IPR for the relevant product category.”
This is the basis of 3G licensing too, but the LTE group does support the idea long promoted by Nokia and Ericsson, that the maximum aggregate royalty level for LTE essential IPR in handsets should be a single digital percentage of the sale price (in 3G, Nokia was angling for under 5%). For notebooks with embedded LTE, the companies support a single-digit dollar amount as the maximum aggregate royalty level.
Among the quotes trotted out by the senior executives of the founding companies, that from Stephan Scholz, CTO of Nokia Siemens, summed up the key issue: “Mobile broadband implementation using technologies with a predictable, transparent maximum aggregate costs for licensing intellectual property rights will drive global adoption and foster social and economical growth,” he said.
It is not very clear yet how the essential IPR in LTE will be divided between the various contributors, but the new group will be looking to get nearly all these parties to sign up – and ideally it will also look to work with the NGMN patent pool, which would have the good side-effect of creating a possible bridge to WiMAX IPR, should these platforms come closer together (the NGMN system is designed to cover all OFDM-based mobile broadband systems). Companies like Nortel and Motorola are known to have significant patents in LTE, and Nokia’s band will need to attract these north Americans to its European-dominated party. Of course, the test case will be Qualcomm – how much IPR it holds in LTE, and whether it will be prepared to play the Nokia game this time. There are many reasons why it may – to appease its legal opponents and soften the attitude of judges in the US and Europe, and potentially at the European Commission; to throw down an olive branch to Nokia that might, in time, help smooth the path for a sales contract; to signify a radical change in the structure and model of the Qualcomm business, which is already seeing the balance shift further from royalties to chips, and whose chip business now looks well positioned to withstand even a possible spin-off of the licensing arm.
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