Sorting out the IPR mess

In a move widely seen as being prompted by major mobile operators, the European Telecommunications Standards Institute (ETSI) is to address the issue of payment for intellectual property rights (IPR). The plan is to restrict IPR for patents essential for the next version of the 3GPP-based radio standard - the Long-Term Evolution (LTE).
IPR has been a thorny area ever since the development of GSM, indeed some disputes over GSM IPR are still in the courts. The problem became more acute with the move to 3G where dozens of companies are claiming to have essential IPR. The ETSI proposal for LTE IPR is to get all relevant patent-holders to sign up to a pre-agreed cumulative cap of approximately 5% for royalties on the cost of all LTE equipment.
ETSI is also considering an ex-ante approach to declaring relevant patents, which is designed to eliminate the possibility of any new royalty claims pertaining to LTE equipment being lodged in the future, a situation which has escalated the actual cost of buying and licensing technology for existing W-CDMA equipment.
'ETSI is now acting to address the current situation in which IPRs are widely seen as being unfair, unreasonable and discriminatory,' says Gavin Patterson, principal analyst at Informa Telecoms & Media.
'By adopting either an ex-ante approach, capping royalties or both of these proposals, we will see a more clearly defined cost structure for those buying and licensing LTE technology in the future.'
In a classic understatement Patterson goes on to say that it is unlikely that all vendors will agree to IPR capping but goes on to say,  'Nevertheless, by removing CDMA from the LTE standard it also removes perhaps the most vocal opponent to royalty capping and proportionality - Qualcomm.'
Hardly a year goes by without an acrimonious IPR dispute. The most recent was at the end of last year when Ericsson, Nokia, Texas Instruments, Broadcom, NEC and Panasonic all complained individually to the European Commission claiming that Qualcomm was behaving uncompetitively in respect of the licensing of essential patents for
W-CDMA. Their argument was that as Qualcomm did not contribute as much to the development of W-CDMA as it did to CDMA and cdma2000 so it should not charge the same royalty rates. Apart from a prompt denial of the charges, Qualcomm's response was to file a claim against Nokia in a US court. The EC is expected to rule on the complaints shortly.
The ETSI move comes as concerns mount at the potential levels of future IPR payments, particularly for W-CDMA. 'Estimates for cumulative royalties for W-CDMA are between 25% and 30% and the mobile industry could spend $80-100 billion on W-CDMA IP royalty payments up to 2017,' says Patterson. 
TelecomsEurope sought comment from the leading vendors on the ETSI proposals but few were prepared to comment, although Qualcomm issued the following statement. 'Even the operators are not fully aligned on this proposal, and what is being reported is based upon some initial proposals put forth by a vocal few.  The process is still in its infancy and we expect that, once the operators and others analyze and understand the full impact of those 'cap' proposals that have been advanced, they will come to understand that such proposals are not in the best interests of the industry or even the operators themselves.'
Nokia issued a lengthy statement supporting the principles of fair, reasonable and nondiscriminatory licensing in ETSI's IPR policy but said the interpretation of what this means should be clarified.


The Nokia proposed solution, 'minimum change optimal impact,' is based on the principles of 'aggregated reasonable terms' and 'proportionality'.
In addition, 'a clear mechanism for improving the transparency of ownership of relevant IPR is needed to implement the principle of proportionality in practice.' The statement went on to say that with a clarified interpretation, the industry can continue to rely on bilateral licensing. Given the amount of potential profit, and the ire which any discussion of IPR seems to arouse, this one will undoubtedly run and run.