Clear as mud
James Tulloch, james.tulloch@informa.com
Mobile Communications International
Issue 97, 02 December 2002
The murky world of 3G IPR continues to baffle as WCDMA luminaries band together and the 3G Patent Platform gets the all clear.
Imagine if you had written a Christmas song; 'Jingle Bell Rock' say. It would be great, cashing in on your copyright, year after year. But what if, as you started recording, the guitarist claimed rights too, and the drummer, and the sound engineer. Would the song ever make it to vinyl?
Many are asking a similar question of WCDMA. OK, 3G is marginally more complex than 'Jingle Bell Rock', but the principle holds true.
According to research from Nokia, some 40 companies claim to have more than 700 "essential patents" for WCDMA. No body verifies who owns which patents or how they are licensed. Add up the various boasts of major players about their IPR share in WCDMA and it comes to about 130 per cent. Samsung reportedly preferred to focus on CDMA1X two years ago because of this nightmarish complexity and lack of transparency.
In May, Nokia proposed a five per cent cap on WCDMA royalties, saying it wanted to clear up the ambiguity, reduce the cost to market, and spur WCDMA growth. The industry gave a collective shrug, Qualcomm flatly accusing Nokia of a "self-serving" attempt to limit its own royalty out-payments. Ericsson told MCI that the market should decide the price of patents.
By November, some players had changed their minds. NTT DoCoMo, Ericsson and Siemens joined Nokia in a "mutual understanding" to support "modest single-digit royalty rates" for WCDMA. The five per cent mark was mentioned, but rather obliquely, although participants are reluctant to be precise.
Qualcomm remains aloof, claiming that its IPR deals are done, and done at "low single figures." Everyone is still keeping their cards close to their chest in the strategic game for IPR advantage.
But why the change of heart? Perhaps it is because, six months later, 3G is still going nowhere fast and remains prohibitively expensive. Consider a recent study by consultancy Portelligent: "The discrepancy in complexity and cost between WCDMA and cdma2000 handsets (could) further erode hopes of creating profitable subscription plans," it concluded. Portelligent estimated manufacturing cost for the Samsung SPH-X4200 CDMA1X handset as $127, but $280 for the Panasonic P2101V Foma terminal. WCDMA proponents have got to get costs down somehow. IPR royalty caps may be one way to appeal to cellcos' bottom line.
WCDMA IPR holders, and equipment suppliers, are jittery about the future 3G decisions of players like China Mobile and China Unicom. Take Nokia executive Yrjo Neuvo's statement that the initiative makes WCDMA "safe to invest in for operators, manufacturers and application developers." Was it unsafe before? If so, why?
Perhaps Neuvo was aware of lingering resentment at being burned by GSM heavyweights like Nokia in the past. In 1998 the International Telecoms Standards User Group complained to the EC that the GSM IPR regime was prohibitively expensive, time-consuming and favourable to the big players with broad patent portfolios. In other words, an effective barrier to market.
A repeat performance would not go down well in China (or elsewhere), where licensing costs have become a major issue, particularly for local manufacturers mandated by the government to take a greater market share.
If the initiative was designed to smooth the way for WCDMA in China, however, it was not enough to prevent the Chinese authorities from delaying the launch of 3G licences in early December.
The Nokia-Ericsson-Siemens-DoCoMo group may have had other considerations, too. A week after their announcement, the 3G Patent Platform Partnership (3G3P) gained antitrust clearance from the US Department of Justice (after a three year legal battle) and the European Commission - the Japanese Fair Trade Commission cleared it in June.
The body is mandated to create a licensing platform that will encompass decisions on whether a technology is "essential" to 3G, certification, identifying patent requirements and a global licensing programme. It identifies "over 100 companies" owning essential 3G patents compared to Nokia's 40, an indication of the (deliberate?) confusion that reigns. Brian Kearsey, President of the 3G3P, warns that "without a new approach...many products and systems that might be possible will be barred or will become simply cost ineffective."
The question must be how the "the major IP holders" in the above group will work in tandem with the 3G3P, which published its platform specifications on November 22nd. The "mutual understanding", so vague when it came to details, could be seen as a means for some big players to continue to set the agenda for 3G IPR licensing, particularly when it comes to royalties, rather than surrender any initiative to another body. On this reading, little has changed from the GSM paradigm except that 3G IPR is even more complicated. Those most likely to benefit are the large players with deep pockets and an army of lawyers.
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