Carriers Plunge Into an LTE Patent Pool

Seven wireless operators, two equipment vendors and one satellite TV provider are joining forces to create the first Long Term Evolution (LTE) patent pool in hopes of staying out of the courtrooms for issues related to 4G intellectual property.

The patent pool, managed by Dolby Laboratories Inc. (NYSE: DLB)'s subsidiary Via Licensing Corp. , includes AT&T Inc. (NYSE: T), Clearwire LLC (Nasdaq: CLWR), HP Inc. (NYSE: HPQ), DirecTV Group Inc. (NYSE: DTV) subsidiary DTVG Licensing, KDDI Corp. , NTT DoCoMo Inc. (NYSE: DCM), SK Telecom (Nasdaq: SKM), Telecom Italia (TIM) , Telefónica SA (NYSE: TEF) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).

By sharing their LTE standard essential patents, which include any inventions that are required to implement LTE, the companies can ensure they are paid licensing fees for their patents and can also reduce the threat of litigation.

Via Licensing President Roger Ross says the pool will also give handset makers predictability in terms of what their bill of materials will be. Another benefit of the pool is that carriers won't have to enter into 10 or more bilateral agreements with patent holders, because they will be able to sign just one deal with the group. In doing so, the companies can keep licensing costs down and increase the availability of LTE devices in the market.

Via Licensing announced the pool on Wednesday morning, but it's been over two years in the making. In fact, many thought it would never happen at all. One of the biggest roadblocks to past attempts at building a patent pool for LTE has been a lack of interest from equipment vendors like Qualcomm Inc. (Nasdaq: QCOM). They'd rather do their own bilateral deals, as well as hold on to their ability to use their patents in litigation. (See Vendors Balk at LTE Patent Pool Proposal and LTE Patent Pool: No Diving! .)

So what makes this LTE patent pool different? Ross says the biggest thing is that it is already 10 companies deep. It's by no means a comprehensive list, and it does lack participation from the big equipment vendors, but it's a positive step. Ross says the group is open to all owners of LTE essential patents and it plans to sign up more participants before the end of the quarter.

Having the support of 10 companies is no guarantee of success. But Ross says that Via's launch comes at just the right time. LTE is still a new technology, and there aren't millions of LTE devices already shipped that would require licensing. He says it will be more affordable for vendors to join the patent pool now before LTE devices are widely available. (See Patent Group Tackles 4G Sans Qualcomm.)

Via, itself, doesn't own any patents, and its independent status should help keep the harmony in the group too. Ross admits that there were some carriers who demanded more to license their patents, and Via did its best to accommodate everyone involved.

The pool is also coming out when patent litigation in the mobile industry has never been higher. The most high-profile example comes from Samsung Corp. 's courtroom battle with Apple Inc. (Nasdaq: AAPL) in the U.S. Following Samsung's huge loss, it reportedly threatened to retaliate with a suit against Apple for its use of LTE in the iPhone 5. Samsung is a big LTE patent holder, so such a lawsuit could potentially block sales of Apple's 4G smartphone. Ross says this is the kind of issue Via is hoping to help the industry avoid in the future. (See Apple vs. Samsung: LTE & the Damage Done and Jury: Apple Guilty, But Samsung Much Guiltier.)

"Every dollar they are not spending on litigation, is a dollar spent on innovation," he says. "This patent pool will have a direct and noticeable impact on the handset market."

— Sarah Reedy, Senior Reporter, Light Reading Mobile