"Qualcomm sticks to IPR guns as patent platform nears"
gii.co.jp
THE LAUNCH OF the 3G Patent Platform Partnership (3G3P), scheduled for
September this year, will proceed without the participation of Qualcomm, the U.S.
company that claims the majority of essential patents for cdma2000 – and now
wideband-CDMA as well. However, neither the 3G3P nor Qualcomm are overly
concerned about the situation , with both claiming they will prosper without the other.
Over the past seven months, the 3G3P has submitted proposals to the U.S.
Department of Justice, Japan’s Fair Trade Commission and the European Patents
Office for approval of its patent platform. The platform is designed to limit the royalties
due on essential patents for third generation infrastructure and equipment to a
cumulative cap of 5%. The platform covers four product categories: terminals;
infrastructure; test equipment and everything else.
The 3G3P has recommended a standard royalty rate of 0.1% for each essential patent.
If more than 50 essential patents are required for the manufacture of a terminal or base
station or test site, the standard rate is proportionately reduced to maintain the 5% cap.
Serge Raes, director of business development at the 3G3P, says the partnership wants
to reduce overall royalty payments because of the high cost required for infrastructure
investment – anything from US$4 billion to US$7 billion for a large European country,
depending on who you listen to. “The business case for 3G is not too good, and some
companies may doubt they can get a decent return on their investment. If royalties are
high, they may even review their decision to enter the 3G market,” says Raes.
The cumulative cap is, of course, anathema to Qualcomm, which aggressively defends
its IS95 patents and is dependent upon them for much of its revenue. Qualcomm will
say no more about its individual royalty agreements other than it charges low,
single-digit rates – although obviously much more than a cumulative 5%.
Lou Lupin, Qualcomm’s senior vice president-proprietary rights counsel, says the
company did participate in the startup phase of the 3G3P when it was still known as
the UMTS IPR Working Group. “But as it became more apparent where it was
headed – how the group would be organized and how patents would be evaluated –
our participation stopped,” said Lupin. He added that one of the main deterrents was
the 5% cap.
The 3G3P is a voluntary group that will act as a de facto patent pool. Members
(currently there are 19 full members, plus two associates) submit their patent claims,
and it is then up to the 3G3P to evaluate the claims and judge not only which are
essential, but which were registered first. Other patent holders can challenge the
decision but they must first join the partnership and have their patents evaluated. While
there is little point questioning Qualcomm’s dominance of IS95-based technologies,
there is great debate about whether it will, or should, receive the same royalty rates for
W-CDMA.
Raes does not believe that Qualcomm will be able to exist outside of the group. He
says that if the industry wants to regulate the number of patents held by a single entity,
and the revenues garnered from those patents, then it will not be affected by the stance
of a single company even one so stubborn as Qualcomm .
“Some companies claim they own the majority of essential patents, but these claims
must be treated with some reserve until those patents can be evaluated,” says Raes.
“Some companies have also brought political pressure to delay the introduction of the
patent platform as it would have an impact on their present royalty agreements,” he
added.
At the end of the day, Raes says that some W-CDMA manufacturers may be able to
bypass Qualcomm altogether if patents held by Ericsson, for example, are recognized
as essential within the 3G3P.
Not so, says Lupin. “The 3G3P will have no effect on us whatsoever. It is a voluntary
group, and we have so many bilateral agreements in place for W-CDMA that it would
make little difference anyway,” he said. Lupin says that Qualcomm’s claims on
W-CDMA are not substantially different from its claims on IS-95. “The important
one’s are all the same,” he says.
Only last week Qualcomm won rulings in both Japan and Europe that upheld claims on
its CDMA patents. The Japanese ruling was particularly interesting because it was in
response to opposition proceedings initiated last year by six companies, including
Nokia, Ericsson and NTT – the three power houses behind the development of
W-CDMA. The patent, entitled “Spread Spectrum Multiple Access Communication
System Using Satellite or Terrestrial Repeaters,” claims inventions that are essential to
all viable commercial CDMA standards, including W-CDMA and cdma2000.
Moreover, despite a well-documented slowdown in the South Korean market, which
generates about 20% of Qualcomm’s revenues from chipset sales and licensing, Lupin
says the company has already issued licenses for W-CDMA to all of the major South
Korean vendors. This backs up the claims of Irwin Jacobs, Qualcomm’s chairman,
that the company will receive the same royalties in South Korea, regardless of the
decision to use W-CDMA by the five incumbent IS95-based operators
Although, Jacobs admitted that there will be more competition in the market for
W-CDMA chipsets, he said the South Korean handset vendors had asked Qualcomm
to develop W-CDMA chipsets because of its experience with the underlying
technology.
However, Qualcomm did admit last week it would sell only 12-13 million chipsets in
the fourth quarter, compared with 15 million in the third quarter, following the South
Korean ban on handset subsidies which came into effect June 1. |
