So what is a Patent pool?
Patent pool is a pool of all the patents related to certain technology and licensing based on an economic model, like a percentage of the selling cost of a product, etc. Patent pools have come to the forefront of LTE deployment and 4G rollouts, and have threatened to disrupt the way technology is deployed. One of the first salvos for patent infringement was fired by Adaptix, an OFDMA-vendor with a suite of WiMAX-based equipment that helps WiMAX carriers support mobile VoIP on Clearwire in 2008. Patent pools are managed by specialized companies that don’t own intellectual property themselves. They set up licensing programs, collect license fees and distribute the proceeds to member companies. In the case of LTE, three of these — Sisvel, Via Licensing and MPEG LA – have formed pools that represent a critical mass of LTE patents.
Formations of the pools are at an early stage, with none of them yet operating and no patent holders publicly announcing their affiliations. But while all three say they are months away from operation, Via claims it has the most aggressive program.
Based in San Francisco, as wholly owned subsidiary of Dolby Laboratories
Built the framework with 14 LTE patent owners from eight countries (China, USA, Germany, France, Finland, Japan, Korea and Netherlands).
Based in Italy, a player in the consumer electronics industry holds patents relating to the MPEG Audio standard (Layers 1, 2, and 3).
Brought together 32 different LTE Patent holders from North America, China, Japan, Korea & Europe.
Has the largest pool of LTE patents
Denver based company supporting multiple domains including wireless.
Has an LTE pool with 12 patent owners.
Advantages & disadvantages
The primary gain from a patent pool would be to make it easy for vendors large and small to license everything they need. In this way, patent pooling should help to accelerate adoption of LTE, the patent-pool promoters say. It could also attract a broader range of companies, such as consumer electronics makers and embedded device manufacturers, to the fast networks. This would drive the adaptation of LTE for services like M2M, connected home, Smartgrid (with security fixes) etc. How would this help the man on the Main Street? It would drive the cost of chipsets cheaper, drive more competition among operators in terms of pricing, handsets and the whole ecosystem.
Patent pools are likely to have a bigger impact on embedded devices than on smartphones, according to Robert Syputa, an analyst at research company Maravedis. The market for machine-to-machine radio devices such as smart electrical meters is more price-sensitive than for mobile data products that consumers use, he said. Easier licensing may also draw in a wider range of vendors of such products, he said.
It’s important to get pools organized early in the adoption cycle of a technology. If the commercial marketplace advances too far, too much intellectual property may become locked up in one-on-one licensing agreements between companies. This happened with 3G, riving mass adaptation down meanwhile patent holders still have time to do it right for LTE. At least one important LTE patent holder, Ericsson, has said it will only sign bilateral license deals.
The general rationale for creating a patent pool is as follows:
Lower prices: The high cost of patented products, when marketed by a monopoly, is a barrier to providing access for all.
Innovation: Patents on essential inventions may restrict innovation and adaptation of technology and devices to fit the needs of patients such as different formulations, combinations, dosages and medicine forms.
Enhanced capacity to manage legal issues: The multitude of patents, potential claims of infringement, variance of national laws, complexity of international treaties and national patent laws, and complicated rules for the export of essential medical technologies under compulsory licenses present barriers for expanded use. The patent pool would have the expertise and capacity to manage these issues, on behalf of vendors, patent owners and manufacturers.
Economies of scale: A patent pool that licenses patents in several countries can ensure that manufacturers operate at efficient economies of scale.
The fundamental idea behind a patent pool for essential technologies is to facilitate competition by providing much more efficient and effective mechanisms for the voluntary or compulsory licensing of patents for manufacturers.
Despite all these advantages it is to been seen how the pool works this time around, no real hard evidence exists to showcase these advantages. Due to competitive positions it is sometimes not to a firm’s advantage to subscribe to the pool, eg. Ericsson. Patent pools have also been shown to fail, where the motivation is to cap royalties. This also brings to show that the largest number of patents is held by outsiders of the 3GPP pool.
Total of 1238 LTE patents, issued and published applications in the US as of May 1 2010, are analyzed to find essential patent candidates for LTE RAN (PHY & Radio Protocols) standards. LTE PHY (physical layer) standards are described in 3GPP specifications TS36.211, TS36.212, and TS36.213. LTE radio protocols standards are described in 3GPP specifications TS36.321, TS36.322, TS36.323, and TS36.331.
Mutual Agreement, reciprocity & NPE
Some market leaders like Qualcomm, Ericsson, Nortel, etc. prefer bilateral agreements for patent licensing and have not expressed their IPR positions. Qualcomm and its GSM technology counterpart InterDigital together control 40% of the LTE patent pool, with 19% and 21% of total patents, respectively, says Informa. Most LTE supporters want the royalty bill to be a one percentage of the sale price in an LTE handset, but IPR owners appear to be pushing it closer to 5% – similar to Qualcomm’s IPR tab.
Ericsson, the world’s largest wireless infrastructure manufacturer, claims to have 25 percent of the essential patents to Long Term Evolution (LTE) networks, making the vendor the single largest IPR hold in LTE. Most of the huge IPR holders in W-CDMA – Qualcomm, Nokia, Ericsson and InterDigital – are also claiming a big share of the LTE patent base. Nortel is said to be sitting on more than 3000 patents on OFDMA, MIMO and other key attributes of LTE.
NPE (non-practicing entity) patents held by either individuals or organizations have been much maligned by the pejorative – ‘Patent Troll’, but by definition is the owner of a particular patent and is looking to enforce their rights. Who can be a NPE? Either one of the failed entrants to the market, like a startup which went bust, or a patent investor company like Intellectual Ventures LLC, based in Kirkland, WA. Statistics have pointed out that around 16% of all patent litigations have been done by NPE and $7 Billion have been successfully litigated by NPE’s. Patent holdings like Wi-LAN, InterDigital, NTP, Mosaid, CSIRO, Intellectual Ventures, etc. help out individual patent owners to file for patents, and help in litigation. But offensive play by these NPEs using debatable tactics has increased the licensing fees, litigation and has increasingly become roadblocks for growth.
A Recent analysis
The mobile battlefield: lawsuits in progress or completed over mobile patents. Some suits have been settled. Source: The Guardian and New York Times
Microsoft is launching legal action against Motorola over its line of Android-based smartphones, claiming the manufacturer infringes a number of its patents. Microsoft, the world’s largest software company, claims that Motorola infringes nine of its patents in mobile phones running Google’s Android operating system; specifically, email, contacts and calendar synchronization, scheduling meetings and notifying applications of changes in signal and battery strength.
The increasingly-popular Android software is also at the heart of a legal battle between Oracle and Google, while Nokia is embroiled in a long-running legal battle against Apple, and Apple is separately suing manufacturer HTC. Manufacturers have become quick off the mark in launching legal action against rivals, owing to a dynamic smartphone market across continents.
In a recent interview with the Wall Street Journal, Microsoft chief executive Steve Ballmer suggested it was misleading to label Google’s Android software as “free” in contrast to software produced by other companies, saying: “Android has a patent fee. It’s not like Android’s free. You do have to license patents.”
He also revealed that HTC is paying a per-handset fee to Microsoft over patents.
The diagram above shows that is, or has been, suing who in the mobile industry: notably, Nokia is the most active litigator, with 6 companies targeted, compared to 2 incoming writs (from Apple and Qualcomm).
By contrast Microsoft looks like a newcomer – having only served 2 writs. Google, intriguingly, only has 1 writ on its doorstep, from Oracle – but that pertains to Android. And so do all the lawsuits from Microsoft.
With that in mind, here’s what Horacio Gutierrez, Microsoft’s deputy general counsel in charge of intellectual property, said in a blog post about the Motorola suit: “As we all know, smartphones have become an integral part of people’s daily lives and are used for a variety of tasks beyond making phone calls; from watching video and listening to music to staying in touch with family and friends.
“The Microsoft innovations at issue in this case help make smartphones ‘smart.’ Indeed, our patents relate to key features that users have come to expect from every smartphone. […] That Microsoft has important patents in this area should not surprise anyone – we’ve spent over 30 years developing cutting-edge computer software.”
Motorola said it would “vigorously defend itself” when challenged with patent infringement cases, while Google said it was disappointed to see Microsoft taking legal action over its mobile operating system. “While we are not a party to this lawsuit, we stand behind the Android platform and the partners who have helped us to develop it,” the company said