We're likely to see an aggressive campaign begin as three patent pool providers, Via Licensing, Sisvel and MPEG LA, begin positioning themselves as the front-runner in the highly lucrative LTE market.
It's unusual to have three companies step up to form a patent pool. Usually when one makes the call, others back off. But there is a lot of money at stake. Unfortunately, it creates a difficult situation for licensors that have to invest the time and effort to figure out which patent pool will be successful.
John Ehler, director of wireless programs with Via Licensing, the first to announce a patent pool, said many of the same stakeholders have attended meetings of all three patent companies.
Last week Via Licensing announced 14 LTE patent owners from eight countries met in San Francisco to build the framework for the patent pool. The week before, Sisvel announced that more than 20 companies were participating in what it called its "facilitation process" to create a patent pool. In September, MPEG LA said it held its first meeting of essential patent owners in Tokyo, Japan. At the meeting, 12 patent owners discussed the structure and terms of a patent pool for licensing patents.
Of course the main question continues to be: Can a patent pool be successful when major stakeholders continue to favor bilateral agreements? Ehler says yes. While companies like Qualcomm, which is rumored to be seeking a 6 percent royalty on LTE licensing, will always refuse to be a part of a patent pool, there are plenty of other stakeholders willing to participate.
Moreover, the vision for LTE is vastly different from the 3G world, where a handful of companies hold most of the patents. LTE's vision involves a wider ecosystem, including operators, PC makers and other consumer electronics vendors. IP rights licensing for PC and consumer electronics is typically done through a patent pool. Moreover, OFDM/OFDMA technology patents are in the hands of a diverse number of companies.
The benefits of a patent pool for LTE will primarily be two-fold: to create a reference point for LTE technology in the marketplace and drive down the cost of LTE. The reference point will be critical when it comes to litigation and deciding what a fair rate is for a patent. "The fact that you have a well-attended, highly contributed patent pool helps identify what is fair," Ehler said.
In addition, the LTE market can't have dozens of players running around trying to extract even 1 percent, let alone 6 percent. "The mathematics don't work out," said Jason Johnson, vice president for marketing and business development with Via Licensing, which also has patent pools for WiMAX via the Open Patent Alliance and 802.11n.
Today, it's not unusual for royalties to account for 30 percent of a smartphone's cost because of intellectual property associated with camera and video camera technologies along with other features, Johnson said.
Another major question on the minds of those with an interest in LTE is whether there is a magic number of companies with LTE patents that would be needed to create a fair and reasonable pricing scheme. Ehler said that people in the industry are "still focused on the number of companies, but the two metrics that really matter are the quality of companies and the quality of the patent portfolio ... Is there a set of companies willing to litigate and enforce? The licensees believe there is a real merit in the program, and the enforcement is there."
In the end, Johnson said that everyone knows there will be one pool. "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."
Expect much of 2010 to be a war of announcements over which group has the most momentum. It's clear, however, that LTE licensees need to move the process along. Allen Nogee, analyst with In-Stat, recently declared that a non-established patent and royalty pool is one of LTE's "several glaring issues" that will result in a shift toward the technology on a "gradual and protracted" basis. --Lynnette