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Apple, Ericsson square off over 5G patents

Ericsson wants up to $5 for every iPhone Apple sells. But according to Apple, it now holds 'a share of declared 5G patent families that is comparable to Ericsson's share.'

Mike Dano

January 3, 2022

5 Min Read
Apple, Ericsson square off over 5G patents

Two of the biggest players in the 5G industry appear to be sliding inexorably into a potentially significant courtroom clash over the value of their respective patents. On one side is iPhone maker Apple, which is working to reduce the amount of money it pays in 5G patent-licensing fees (though it now commands a $3 trillion market cap). And on the other side is 5G equipment maker Ericsson, which is working to get up to $5 from every iPhone that Apple sells.

And though it's still early days, one industry observer believes that, ultimately, Ericsson is the one to watch here. "The overall circumstances suggest to me that Ericsson is going to win this, and the only leverage Apple has is 'hold-out,'" wrote Florian Mueller, an intellectual property expert who maintains the Foss Patents website.

The latest dust-up between Apple and Ericsson stretches back to 2015, when the companies inked a patent-license agreement covering 2G, 3G and 4G technologies. At the time, Ericsson said its patent-related income would rise by up to $590 million that year due to the agreement.

But that seven-year agreement likely has expired. And despite negotiations between Ericsson and Apple that started more than a year ago, the companies haven't managed to reach a new patent-licensing agreement that also covers 5G.

New situations, new negotiations

That's perhaps not a surprise. For example, Apple in 2019 acquired Intel's smartphone modem business as well as Intel's patents for "existing and future" wireless technology. Apple said it now holds 17,000 wireless technology patents as a result.

Importantly, shortly after Apple acquired Intel's patents, the company published a new statement on its website regarding the fair, reasonable and non-discriminatory (FRAND) licensing of standard essential patents (SEPs). In that statement, Apple warned against unnamed companies that "use the power conferred by standardization to eliminate competition through selective patent licensing or discriminatory and excessive royalties."

Apple also argued that patent owners should clearly outline the value of their patents, and should make each patent available for licensing either individually or in a bundle. And patent royalty rates "should be proportional among SEP licensors and comparable among SEP licensees," the company said.

Ericsson, however, appears to have taken a slightly different approach. In 2017, the company publicly published its 5G royalty rate: $2.50 to $5 per phone. "By disclosing our reasonable royalty rate at this early stage, we want to increase transparency and predictability, stimulate widespread adoption of the standard ... and maintain a healthy ecosystem for the industry," wrote Ericsson's Gustav Brismark in an announcement at the time.

According to a recent Apple filing, that's the rate Ericsson is sticking with. "Ericsson is willing to continue to offer Apple our publicly announced 5G multimode rate of $5 per phone (with a $1 early signing discount) a rate which we will continue to honor assuming we execute a license relatively quickly," Apple wrote of Ericsson's latest proposal.

Figure 1: Ericsson wants up to $5 for every iPhone Apple sells. (Source: Apple) Ericsson wants up to $5 for every iPhone Apple sells.
(Source: Apple)

But Apple doesn't appear interested in that rate. "Since the parties' 2015 agreement, Ericsson's overall share of declared cellular SEPs has decreased by approximately 25% while Apple's share has increased by approximately 500%," Apple argued. "Today, Apple holds a share of declared 5G patent families that is comparable to Ericsson's share. Given these facts, under any cross license between Ericsson and Apple, Apple's net payments to Ericsson should decrease as compared to under the 2015 license."

Enter the lawyers

The two companies appear poised to take the issue to court. Ericsson fired the first shot in October when the company filed a complaint against Apple in the US District Court for the Eastern District of Texas. Ericsson asked the court to issue a declaratory ruling that it is prepared to offer Apple SEPs on FRAND terms.

In December, Apple fired back with its own lawsuit, asking the court to declare that Ericsson breached its FRAND obligations. Apple also argued that some of Ericsson's 5G patents are not essential.

Importantly, according to Mueller of Foss Patents, Ericsson has a number of factors going for it. Most importantly, the company last year won a similar case against HTC that set 4G patent-licensing rates at a minimum of $1 per phone and a maximum of $4 per phone.

"In the greater scheme of things, this is yet another milestone for cellular SEP holders, some of whom are going to look at Ericsson's win and feel that their rates are too low," Mueller wrote of Ericsson's victory over HTC.

Finally, it's worth noting that Ericsson and Apple aren't the only two companies entering 2022 with looming legal battles over patents. InterDigital – a wireless technology company that routinely files patent-licensing lawsuits – late last month took aim at China's Oppo over 5G patents. Oppo has grown into one of the biggest smartphone vendors in the world.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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