Vendors Balk at LTE Patent Pool Proposal

While operators are eager for the creation of a patent pool for Long Term Evolution (LTE), several of the industry's largest wireless vendors and intellectual property rights holders aren't so keen.

The most recent call for an LTE patent pool came from the board of the Next Generation Mobile Networks (NGMN) Ltd. Alliance at the end of August. The operator group issued a statement recommending that "all stakeholders in the mobile industry with an interest in developing an effective LTE patent pool accelerate its creation to avoid further delays within LTE licensing."

The NGMN board comprises representatives from AT&T Inc. (NYSE: T), China Mobile Communications Corp. , Deutsche Telekom AG (NYSE: DT), NTT DoCoMo Inc. (NYSE: DCM), Orange (NYSE: FTE)'s Orange, SK Telecom (Nasdaq: SKM), Telecom Italia (TIM) , Telefónica SA (NYSE: TEF) and Vodafone Group plc (NYSE: VOD) -- so it's a group with some clout.

But despite the size and influence of the operators behind the push for an LTE patent pool and the sense of urgency conveyed in the NGMN board's recommendation, several large manufacturers are less than enthusiastic about the idea.

Light Reading Mobile asked a few vendors -- namely, Ericsson AB (Nasdaq: ERIC), Nokia Corp. (NYSE: NOK) and Qualcomm Inc. (Nasdaq: QCOM) -- about their position on LTE patent pools, and here's what they said:

  • "Given that Qualcomm is already licensing its LTE patents in bilateral agreements and followed a similar model with respect to 3G licensing, we do not intend to participate in an LTE patent pool," said Daniel Hermele, director IPR and licensing at Qualcomm Europe. "Other LTE patent owners may decide that it is in their best business interests to join a patent pool, but this should be their voluntary choice and not one imposed on them."

  • "For multimode mobile phones, we don't think a pool will resolve the needs of our licensees in that market, but a pool could be considered for other types of products," said an Ericsson spokesman in an emailed response to questions. "We don't think it's too late for LTE patent pools, since those who stand the most to benefit from them would likely be new entrants on the market, who will enter in the time to come."

  • "Patent pools have been explored in core wireless technologies for more than a decade with limited success," said a Nokia spokesman, via email. "Nokia has been actively engaged in direct licensing of our industry leading wireless portfolio, including LTE."

Only Qualcomm said it does not intend to join an LTE patent pool -- which is consistent with vendor's position on such setups -- but the comments from Ericsson and Nokia don't exactly convey enthusiasm for the idea. (See Patent Group Tackles 4G Sans Qualcomm.)

Part of the reason why a patent pool for LTE has struggled to come together -- the NGMN group has been working on this for at least two years -- is that the positions of all the different holders of IP for the wireless standard are too varied, so they cannot reach consensus regarding a pool, according to Florian Mueller, consultant and FOSS Patents blogger. (See LTE Group Seeks Patent Pool Info.)

"The interests are too disparate and divergent for those wireless standards to create a one-stop shop kind of pool," says Mueller. "The strategic interests of operators and IPR holders are increasingly at odds in many areas and that's reflected in [LTE patent pool efforts]."

But the operator-led NGMN group wants to see a patent pool for LTE technology set up as soon as possible, stressing that it would give "licensees a safe and efficient way to secure the necessary licenses and have reasonable, as well as predictable, IPR costs."

According to Heavy Reading Senior Analyst Gabriel Brown, a patent pool would be good for the industry at large.

"[But] some players believe their patents are worth more than they would receive from a pooling arrangement and are holding out for more," says Brown. "This is unfortunate because it means overall IPR costs escalate and it discourages innovation, especially from smaller companies or those without a strong patent position."

The reluctance, and in some cases refusal, of some large vendors to join an LTE patent pool may not scupper the plans to create one. But it's not likely that such a patent pool will have as many of the industry players involved as some operators would like.

— Michelle Donegan, European Editor, Light Reading Mobile

^Eagle^ 12/5/2012 | 4:53:25 PM
re: Vendors Balk at LTE Patent Pool Proposal

it is clear why carriers would want a patent pool.  They would get to roll out LTE with minimal risk and at the same time be able to drive prices down for technology from holders of IPR in LTE.

Carriers would be getting something for nothing.  

Carriers have invested relatively little in the R&D costs of developing this technology.  The R&D to develop chip sets, tower equipment, RAN network equipment, backhaul technologies, core processing and signalling technologies... the R&D for nearly all of this has been invested in and funded by systems, subsystems and chip OEM's.  

Carriers have been getting a ride enjoying large profits for years while at the same time have largely gutted their R&D budgets.  And of course back at the turn of the century caused many of the problems in networking today with the spin outs of their own internal equipment divisions.  

They pushed out costs onto the systems OEM's and caused an unbalanced eco system with carriers enjoying most of the profits and OEM manufacturers having to absorb most of the R&D expenses.

Now, the systems players have all invested heavily into R&D and IPR for LTE.  Some by internal R&D work, some by acquisition of other big players (i.e., the buy out of wireless assets from Nortel by other players.. there are other examples.... Nokia merger with Siemens comms.. etc.).  Those invested systems houses want to capture a return on their IPR investments.

a patent pool would drive down the overall value of such IPR and make it relatively easier for carriers to play off one supplier against another to further drive down prices for equipment.  Further hurting systems players and handset makers, while enriching the carriers.  Carriers being rewarded for not investing and developing IPR while OEMs are penalized for the investments and see further depression in selling prices to carriers.

while a patent pool sure would acclerate roll outs, and would be good for carriers, it would be horrible for OEM's who invest in R&D and horrible for ongoing innovation.

And how would those stock holders who forked out billions to buy patents from Nortel, Motorola and others feel if the value of their patents were to drop by say.... 50%... or more?

Carriers need to invest.  And carriers need to share the wealth and work to create a healthy ecosystem for innovation.  All the profit cannot go to the carriers while systems OEM's starve for margins and cash flow.  We have seen the desctruction of many systems houses due to such imbalances.



Gabriel Brown 12/5/2012 | 4:53:21 PM
re: Vendors Balk at LTE Patent Pool Proposal

Some good points. Much to agree with.

Patents are needed to protect inventors and encourage investment in R&D.

Most operators recognise that -- I don't think that's in dispute. The NGMN kind of has to make a call for a patent pool even though it's aware this is not realistic.

Some reform of the system would be welcome, thou. It's just hard to say what would better and what would be acceptable to the those with entrenched positions.

paolo.franzoi 12/5/2012 | 4:53:20 PM
re: Vendors Balk at LTE Patent Pool Proposal


Just to add to sailboat's comments....it trickles down further to the Chip Developers, Software Stack folks, and the entire eco-system.  Look at Broadcom's model for R&D and tell me that it does not resemble Cisco 10 years ago.

Remember when Systems Startups were formed with the idea of becoming Cisco divisions?  Same idea with Broadcom.

What this does in the long term is to continue to restrict R&D in new technologies.  If you are not going to pay any premium at all, why take the R&D risk - you might as well build the old ADC business.  Heck for a long time ADC was making higher margins on connectors than the systems companies were making.

What will happen in the long term is that new product investment will dry up - outside of a couple of firms (let's say Alcatel and Huawei).  Think of them as Airbus and Boeing.  There will be some firms who do the Bombadier business.  But basically innovation slows to a crawl.



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