Thursday 13 January 2011

Shadow boxing the LTE Patents

#alttext#There's a tremendous amount of shadow boxing going on in the telecommunications patent space relating to ownership of patents essential to the operation of the LTE standard. The :Rethink Wireless website reports that "chinese vendors are determined to increase their share of patents as well as equipment sales at the 4G stage" and that the Chinese telecommunications company ZTE is claiming to own "7% of the essential patents in LTE" which is apparently only "just behind" compatriot Huawei and Ericsson.

Looking through the patent databases what struck this author is that many of the so-called "essential patents" have not yet been actually granted. So whilst ZTE may be claiming that they have actually 7% of all granted patents, it probably means that they have 7% of the filed patent applications potentially relevant to the LTE standards. The value of the patents can really only be determined when they have been granted - and experience shows that many of them will not be granted. Ultimately the test of a decent patent grant is whether the patent will actually stand up in litigation. And the German litigation relating to IP.COM's portfolio as well as InterDigital's UK and US litigation shows that may patents may either be held to be not valid or the granted claims do not actually read onto the standard. What struck this author when looking through the ZTE's patent portfolio is that many of the documents are rather short and contain sometimes the barest of details about the invention. It's only a first impression - but it will be interesting to see how many of the documents actually withstand the challenges of litigation. Compare that to the substantially longer disclosures of Nokia, Ericsson and others and it may well be that these companies longer experience of drafting patent specifications for litigation will be crucial.#alttext#

Rethink Wireless correctly goes on to point out that the important issue for LTE vendors and buyers is not who owns a patent, but how much the proprietor (patent applicant) will charge other vendors and buyers for the right to use the patents. Attempts are being made to set up one-stop shops or patent pools, but there are at least three competing operators. Some holder of relevant IP rights, most notably Qualcomm have been reluctant to join such pools and apparently intend to stick with the bilateral licensing agreements. These generally favour the largest patent owners who own significant IP rights and operate a system of cross-licensing with balancing payments.

The main interest is the rise of newer companies like ZTE and Huawei which to date have had very little IP rights, for example for the GSM or UMTS networks. ZTE's analysis suggests that InterDigital is the leading holder of essential patents in LTE, with its Patent Holdings arm controlling 13% and its Technology unit 11%. Next comes Qualcomm with 13%, Nokia and Samsung on 9% each, Ericsson and Huawei on 8%, ZTE at 7%. LG, with 6%, and NTT DoCoMo with 5%, bring up the rear, while the remaining 11% is held by 'others'. Whatever the basis for the establishment of the list - patent applications or granted patent - it certainly indicates the stronger weighting towards IP holders coming from Asia than for earlier telecommunications standards.

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