Last chance for LTE IPR?

As the pace quickens on the roll-out of LTE it appears that, like technologies before it, LTE’s Essential patent landscape will present complex challenges.
Since the mid-1990s, PA has been helping its clients by bringing clarity to the Essential patent positions in GSM,UMTS, LTE and other wireless standards. We have been evaluating patents which are claimed to be Essential to various standards as well as helping our clients locate new Essential patents.

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PA’s evaluation of the declarations made to ETSI suggests that the quality of
declarations is higher than that for 3GPP-FDD (WCDMA). For this early standard,
in PA’s opinion, only 37% of patents declared as potentially Essential to WCDMA actually were. Companies still appear to be over-declaring against the standards – inflating and complicating the landscape.

So why do some companies ‘over declare’ early, while others delay in making
declarations? Is it in their interest to declare early or late?

Declarations may be made more slowly for LTE than for WCDMA as ETSI has encouraged its members to make higher quality declarations – this takes time, and requires more analysis.

There is also a more strategic game to be played with declarations. Companies may not declare too early so that they can watch what others are doing and use their actions to direct their own strategies. A case in point is the decision over LTE patent pools.

Protecting the value: What the future holds for LTE

The decision to form or join a patent pool will depend on the overall size of the Essential patent landscape, the individual contribution of pool members, the relative value of patents and the acceptable aggregate royalty level that the industry can afford while sustaining the technology’s attractiveness. These elements contribute to a complex decision that directly impacts strategy:

Identification of the patents

Evaluating and identifying the Essential patents and disregarding the others, in a moving landscape, is a huge task in itself. It is not core business for many companies. It may be sensible to appoint an external party to assist with this activity rather than distract internal engineering effort.

Valuation of Essential patents

Historically, all Essential patents have been viewed as having the same ‘value’ although there is a question which has been raised for several years as to whether this proportionality approach should remain. Even those advocating proportionality are likely to try to argue that patents asserted against them are of low quality as a negotiating tactic. Licensors should pre-empt this challenge by understanding the strengths of their portfolio.

Determination of Royalty Model

Linked to the previous points, the challenge for pool administrators is to define a model of rewarding the pool contributors, and thus make joining the pool attractive to gain critical mass, while not diluting the license fee split received by pool members. The attractiveness of a pool depends on the relative strengths of an individual’s portfolio compared to the overall landscape and proportion in the pool.  It may also depend on how many non-Essential patents an organisation has. Since joining a pool may mean a licensor can no longer bundle Essential and non-Essential patents together it is critical that the pool does not adversely affect the licensor’s overall position.

Author: Graham Bell,  PA Consulting Group

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