Patent pools seen as necessary to drive LTE cost certainty
The cost of Long Term Evolution (LTE) technology, the standard preferred by the public-safety community for a nationwide mobile broadband network, will be heavily influenced by the price of intellectual property rights licensing, but a slew of entities are working to create patent pools designed to bring more predictable costs to the LTE world.
Last summer, patent pool companies Sisvel, Via Licensing and MPEG LA called on companies claiming to hold patents essential to LTE to contact them so they can evaluate the claims and create a patent program. Those efforts are beginning to heat up in what may shortly become a war of press releases as to who has the most momentum.
This week Sisvel announced that more than 20 companies are participating in what it calls its “facilitation process” to create an LTE patent pool. The first meeting was held on Tuesday in Frankfurt, Germany. Meanwhile, MPEG LA said it held its first meeting of essential patent owners in Tokyo, Japan last September. At the meeting, 12 patent owners discussed the structure and terms of a patent pool for licensing patents. Finally, Via Licensing said in an interview that it will issue a release soon indicating its progress.
“We’ve spent a lot of time going out there and talking to some 30 odd companies and building relationships and momentum. We’re confident that what we are doing is going to be successful,” said Jason Johnson, vice president of marketing and business development with Via Licensing, which is already running a patent pool for WiMAX and 802.11n standards.
The question is: Can a patent pool work in an industry whose licensing regime has been dominated so long by bilateral agreements? John Ehler, director of wireless programs with Via Licensing, believes so. While there will be companies — first and foremost, Qualcomm — that will refuse to be a part of any patent pools, there are plenty of other entities willing to participate.
“A patent pool under a single pricing scheme creates a reference point for the marketplace,” Ehler said. “When people look at what is fair — which is oftentimes in court — the fact that you have a well-attended, highly contributed patent pool helps identify what is fair.”
The ecosystem of LTE is drastically different than the 3G world, which is dominated by bilateral 3G licensing deals. The vision for LTE is a number of ecosystems, including operators, PC makers and consumer electronics vendors, coming together. Intellectual property rights licensing in the PC and consumer electronics worlds are typically done through a patent pool. Moreover, OFDM/OFDMA technology, the foundation of LTE, dates many decades back in various industries, including the television industry. As such, companies outside of the mobile industry also claim patents.
Pushing down LTE’s royalty rates is critical. It’s not unusual for royalties to account for 30% of the cost of today’s smartphones due to royalties paid for cameras, video cameras and other various applications.
“When people ask whether a patent pool can be successful, I say it has to be,” Johnson said. “You can’t have a dozen-plus companies out there trying to extract 1%, 2% and even 3%. The mathematics don’t work out.”
It’s not clear what the magic number of patents would be to create a fair and reasonable pricing environment. Ehler said the effort does require the momentum of a significant number of players with a significant number of patents. “We have big players right now,” he said.
And ultimately, “everyone knows there will be one pool,” Johnson said. “It doesn’t make sense to have two. By the end of 2010 we will probably see some cooperation or movement toward combining these efforts.”
What do you think? Tell us in the comment box below.
