Apple, Ericsson come to blows over 'reasonable' patent licensing terms

After two years of failed negotiations, Apple (NASDAQ: AAPL) and Ericsson (NASDAQ: ERIC) are taking their patent-licensing disagreement to the courtroom--at the heart of the argument is the amount of money Apple believes it should pay to Ericsson to use Ericsson's technology in its iPhones and iPads.

News of this latest legal battle between two of the wireless industry's biggest players again underscores the continued importance of patent-licensing agreements. Such agreements have grown into an essential part of the development of wireless technology--allowing one company to build off the innovations of another--but often lead to disagreements over how much licensees should pay to inventors.

Although the companies haven't disclosed the financial details of their disagreement, Apple argues that the royalties it pays to Ericsson should be based on the value of the chips inside its devices, not the value of the devices themselves. Ericsson, on the other hand, is arguing that Apple's royalty payments should be based on the "end prices of entire LTE devices," as the Wall Street Journal notes.

Apple inked a licensing agreement with Ericsson in 2008 for its iPhones and iPads, an agreement that ended two years ago. The companies attempted to reach a new agreement but, based on the lawsuits they have now filed against each other, the issue likely will be decided by lawyers instead.

"We've always been willing to pay a fair price to secure the rights to standards essential patents covering technology in our products," an Apple spokeswoman said, according to the WSJ. "Unfortunately, we have not been able to agree with Ericsson on a fair rate for their patents so, as a last resort, we are asking the courts for help."

"We believe it is reasonable to get fair compensation from companies benefiting from the development we have made over the course of the last 30 years," said Kasim Alfalahi, chief intellectual property officer at Ericsson, in a statement. He said he hopes to reach a "mutually beneficial" agreement with Apple.

Of course, the disagreement between Apple and Ericsson is just the latest of many patent-licensing disputes that have stretched from one end of the wireless industry to the other. Indeed, Ericsson reached a patent-licensing settlement with smartphone maker Samsung early last year after a protracted legal battle with that company.

Other notable, ongoing patent-licensing battles include Apple's fight against Samsung and Qualcomm's dispute with Chinese handset makers. However, more recent headlines on the topic have focused on settlements, potentially signaling a maturation in the space: For example, Google in November settled patent litigation with a consortium of companies backed by Apple, Microsoft and other tech giants, according to a court filing. Financial terms of the settlement were not disclosed. And also in November Google and LG Electronics struck a patent cross-licensing deal similar to one Google announced in January with LG's larger rival, Samsung Electronics.

Ericsson's disagreement with Apple comes a few years after Ericsson reorganized its business structure partially in order to put its patents into a separate division that would focus on licensing. The company specifically said the move was to "focus on further monetizing its IPR assets." As part of the move, Ericsson said Alfalahi would report directly to CEO Hans Vestberg.

For more:
- see this Reuters article
- see this Total Telecom article
- see this Wall Street Journal article

Related Articles:
Google settles patent litigation with Apple-backed Rockstar consortium
Google, LG ink patent-licensing deal
Samsung paid Microsoft $1B last year in patent royalties related to Android

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