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Optical/IP

Nokia Throws Its Cap Into the Ring

Nokia Corp. yesterday made a highly unusual call for the major W-CDMA patent holders to put a cap on the royalties they charge for intellectual property rights (IPR) relating to the technology.

The Finnish phone giant says keeping IPR rates low will help the market for third-generation (3G) technology grow. However, the move already looks like it might do more harm than good, by dragging the industry into another eye-gouging battle over patents.

Nokia says it wants the major W-CDMA patent holders -- Ericcson AB, Motorola Inc., NTT DoCoMo, Qualcomm Inc., and Nokia itself -- to ensure that total IP licensing costs make up no more than five percent of the sale price of handsets or networking equipment.

San Diego-based Qualcomm has the most to lose from any change in IPR rates: Unlike the other patent holders, it makes its money from licensing the technology, rather than making handsets or network equipment. The company gave an extremely huffy response to Nokia's call for a fixed IPR rate.

"Qualcomm will not agree to any such arbitrary cumulative limit on royalties," says Christine Trimble, director of corporate public relations at the company. "Qualcomm has already licensed its essential W-CDMA intellectual property to over 50 companies and sees no reason or justification for modifying those agreements."

Qualcomm also takes umbrage at what it clearly sees as a suggestion by Nokia that its current IPR rates are too high and thus holding back the development of W-CDMA. "Qualcomm's rates are fair and reasonable and not an impediment to the deployment of 3G," says Trimble. "Nokia's proposal appears to be very self-serving by primarily benefiting the equipment manufacturers rather than the companies that have developed the technology and hold intellectual property."

It is hard to quantify exactly what any company charges for its intellectual property in this market. It is not a detail they generally care to reveal. However, the perception in the industry has always been that Qualcomm charges high rates for CDMA IP.

Wideband code-division multiple access (W-CDMA) is one of the cornerstones of third-generation (3G) technology. This air-interface technology is designed to deliver data transfer speeds of up to 2 Mbit/s and has been adopted across Europe, by some U.S. carriers, and in parts of Asia. Qualcomm has also developed its own CDMA 2000 upgrade path to 3G, which is being implemented by some carriers in North America, South America, and parts of Asia, notably China.

The last major patent battle in the industry was between Ericsson and Qualcomm. It started in 1996 and was not resolved until 1999, when Ericsson agreed to buy Qualcomm's wireless infrastructure business. That disagreement also involved the use of CDMA in a 3G context. Prior to settling with Qualcomm, Ericsson had been a GSM-only shop. That legal spat was widely regarded as having held back the development of then-nascent 3G technology. So, in spite of Nokia's claims that it wants to encourage the development of the W-CDMA market by cutting the costs, history suggests that its call for an IPR cap will have just the opposite effect.

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com
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