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Who's Really Sitting on an LTE Goldmine?

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan

At this early stage in the development of Long Term Evolution (LTE), it is not yet known who holds key patents for the next-generation mobile technology. But this hasn't stopped some companies from making claims about their share of the LTE intellectual property rights (IPR) pie.

Patents matter greatly to LTE vendors because there is potentially a lot of gold in those IPR hills that can be mined for lucrative licensing revenues.

Nortel Networks Ltd. is hoping to make something from its LTE-related IPR, for example, as it reportedly seeks bids of $1 billion for its patent portfolio. The bankrupt Canadian firm has patents for OFDMA (Orthogonal Frequency-Division Multiple Access) and MIMO (multiple input, multiple output), which are both used in LTE. The company reportedly is also mulling an option to keep these assets and generate revenue from licensing the IPR. (See Rumor: Nortel Seeks Bids for Its Patents, Nortel's LTE Patent Goldmine, Nortel Hangs On to Its LTE Smarts, The LTE Scraps From Nortel's Table, and RIM CEO Calls Nortel LTE Patents a 'National Treasure'.)

Other vendors are already projecting how much essential IPR they will have for LTE, even though it is not clear yet who really owns the essential patents.

Ericsson AB (Nasdaq: ERIC), for one, says that it will have a 25 percent share of essential patents for LTE. This share would put the Swedish vendor in the top IPR position in the industry, according to Gustav Brismark, VP of patent strategy and portfolio management at Ericsson.

Brismark acknowledges, however, that Ericsson's projection is only an estimate. He reckons the margin of error on this estimate is "a couple of percent up or down, and a maximum of 5 percent." So, Ericsson's share of essential IPR could be as low as 20 percent or as high as 30 percent.

And Ericsson is not alone in making claims about its LTE IPR position. Nokia Corp. (NYSE: NOK) believes it will have 20 to 30 percent of "all LTE standards-essential IPR," according to a statement on the company's Website. And Huawei Technologies Co. Ltd. believes it will have 15 to 20 percent of essential IPR for the LTE standard.

“With the exception of one or two highly specialized consulting firms, clear visibility of what the essential patents are going to be, and what their share of them is likely to be, tends to be confined to the largest industry players," says Patrick Donegan, senior analyst at Heavy Reading. "They have the depth and breadth of technical and legal expertise across the standards that enable them to have a reasonably accurate view of what the essential patents will be.

"However, even in the case of the biggest players, there is inevitably still a margin of error in their assumptions, some of it driven by wishful thinking, some by genuine differences in interpretation of the standard and how systems will actually be implemented in practice."

The key word here is "essential," which refers to any patented technology that a company has to have to make standards-compliant LTE equipment, whether it's a device, base station, or core network gear. The essential IPR is what really counts, because this is what the patent holders will be able to license to other companies.

One of the reasons there is still uncertainty around LTE patent ownership is because not all of the patents for LTE have been issued yet, so "it's impossible to know whether an issued patent is essential or not," according to Ericsson's Brismark. "We'll have a much more clear picture a couple of years down the road."

Brismark explains that just 17 percent of the declared patents on the European Telecommunications Standards Institute (ETSI) IPR database have been granted by patent authorities. That leaves 83 percent of the patents declared that have not even been issued to companies.

Some of the essential LTE patents are already known, because Ericsson announced in June last year that it has started licensing its LTE IPR. (See Ericsson Licenses LTE IPR.)

But it will be another two years or so before the industry has a complete picture of LTE IPR ownership and companies will be able to put an accurate value on their assets.

— Michelle Donegan, European Editor, Light Reading Mobile

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Michelle Donegan
Michelle Donegan,
User Rank: Light Beer
12/5/2012 | 4:34:44 PM
re: Who's Really Sitting on an LTE Goldmine?

Ericsson's Brismark said he couldn't comment on whether Ericsson was interested in bidding for Nortel's IPR.

Ericsson has snapped up so much of Nortel's wireless assets, it must be one of the companies eyeing the IPR assets.

But doesn't the uncertainty around who has essential LTE patents raise some questions about what the value of Nortel's LTE IPR really is? I'm sure there are technical, legal, and financial brains hard at work on this. How would a bidder know what it's getting?

User Rank: Light Beer
12/5/2012 | 4:34:41 PM
re: Who's Really Sitting on an LTE Goldmine?

The story I heard from the 3G/UMTS  IPR negotiations was that they basically put the patents in piles and then each player got revenue from the hight of his pile. Sounds a bit simple, but then again it's an impossible feat to fairly distribute the license fees. You can't pick out  individual patents from such a complex system anyway. Not even in 10 years will it be possible to fairly value these patents, but now it has to be done in advance.

I suppose Ericsson got IRUs for the Nortel patents as part of the takeover? That would make them less interested, I guess.

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