I wanted to revisit the statements made by Qualcomm and Nokia representatives at the Global Standards Leadership Conference about aggregate cellular license amounts. See my post Global Standards Leadership Conference - Part 3 (sepessentials.com) for additional details on what was said during the panel.
To set the stage, according to a report put out last year by IPLytics, one of the hosts of the conference, Qualcomm is ranked no. 2 (behind only Huawei) and Nokia no. 5 in the top ten 5G patent owners.[1] And for 4G SEPs, according to a different report, Qualcomm was ranked no. 3 (behind Huawei and Samsung) and Nokia no. 5.[2] According to Nokia, we “own a leading share of Standard Essential Patents (SEPs) in every generation of cellular standards with over 6,000 patent families declared as essential to 5G.”[3] In other words, they are two of the largest SEP holders for both 4G and 5G.
Both companies have active cellular SEP licensing programs. Qualcomm has concluded “over 200 5G licensing agreements.”[4] At the Global Standards Leadership Conference, Qualcomm claimed to be the world’s “most successful” cellular licensing entity. Nokia also claimed to be a very successful licensor with a “dedicated licensing programs for mobile devices, multimedia (including sub-programs for consumer electronics and video services), and IoT (including sub-programs for automotive and IoT devices). We currently have over 250 licensees, licensed through our patent licensing programs.”
They also both sell products that implement the cellular standard. Qualcomm for example is one of the largest cellular chipmakers (note that Qualcomm designs and sells chips but does not manufacture its own chips) in the world[5] and billed itself at the Global Standards Leadership conference as having the world’s “best mobility technology.” Nokia is one of the largest cellular base station makers.[6] “Nokia is both a major inventor and a licensee of other companies’ technologies.”[3]
You would expect that such entities, with active licensing programs and who are “licensees of other companies’ technologies,” would know the lay of the land when it came to aggregate SEP royalties. Nokia believes “in a fair licensing approach that strikes a balance between the needs of those who develop and contribute technologies to standards and those who implement them.”[3]
Given Qualcomm and Nokia’s emphasis on the importance of proactive patent licensing, you would imagine that both companies would have reached out to all of the other cellular SEP holders and concluded licenses with them before they implemented the standard into their own products. They certainly know what it takes to conclude a SEP licensing negotiation, and they obviously have a good idea of the other SEP holders because both participate in the development and adoption of the cellular standard (both are members of 3GPP and ETSI). Consequently, if any entity had licensed all of the SEPs in the standard and knew how much was the aggregate royalty amount to license all of the SEPs in the cellular standard,[7] you would expect it to be Nokia and Qualcomm.
So I posed the question to both Nokia and Qualcomm: how much does it cost, in the aggregate, to take FRAND licenses for all of the SEPs for the 4G or 5G standard? But here’s the thing: neither Nokia or Qualcomm knew. Both representatives hemmed and hawed until one of them finally piped up to say that the amount charged by Avanci is close to that amount. They said that Avanci publishes the rates to license “90%” of the SEPs for the 4G and 5G cellular standards.
Now, HP rightly called them out on this. As HP explained, even if HP accepted that the published Avanci rate is FRAND and is for 90% of the SEPs in the standard [although HP did not quite say so, he implied that he does not believe either statement to be true], HP still would not know how much was being charged for its products. Avanci only publishes rates for cars and some smart devices and not for laptops or the other connected products sold by HP.
So, let me repeat again. It is unreasonable to expect that passive (or other) implementers[8] would be able to figure out which of the overdeclared 350,000 5G patents are actually valid and essential and used in that implementer’s products and how much it is fair, reasonable and non-discriminatory to pay to license those valid and essential patents. After all, neither a large sophisticated company like HP, nor the world’s largest and most sophisticated cellular SEP licensors who have the world’s “best mobility technology” and are major “licensee[s] of other companies’ technologies” know how much it costs to license all of the SEPs in the cellular standard.
We need real transparency in licensing, and in royalty amounts. Surprisingly (at least to me), Qualcomm, Nokia and HP all agreed and said they would each be willing to share their licenses on a confidential basis. Nokia suggested that the right thing to do would be to share licenses with a trusted mediator who could then accurately inform potential licensees about the royalty amounts being paid by others. That is a great idea.
The hard part of course is finding that trusted mediator. This seems a perfect role to be taken on by the competence centre (“Centre”) under a modified version of the EU’s “Proposal for a Regulation of the European Parliament and of the Council on standard essential patents and amending Regulation (EU) 2017/1001.” The Centre could be tasked with collecting licenses confidentially, publishing current aggregate amounts being paid by licensees and the estimated percentages of SEPs covered by those amounts.
Given the current uncertainty of how much it costs, in the aggregate, to license cellular SEPs, and the willingness of some of the world’s largest SEP licensors to share their licenses with a trusted mediator, this task alone would be a good reason to set up the Centre. And the collection of this information could also help the Centre inform and determine an overall reasonable aggregate royalty and whether amounts requested by licensors in particular matters are FRAND.
[7] Of course, many large SEP holders cross-license each other at zero or comparatively low dollars (compared to the same license between a SEP holder and a non-SEP holding implementer). It is highly likely that neither Qualcomm nor Nokia actually pays much, if any, money to take licenses from the other cellular SEP holders.
[8] See my post The Cellular Multiverse (sepessentials.com) for the meaning of this.
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