Licensing Rates in the Telecommunications Industry

Over the years we've reported on a number of licensing deals in the telecommunications industry. I've just been reading a highly interesting article by Eric Stasik of the Avvika company based in Stockholm. Erik has done a wonderful job in collecting together publicly available data on licensing rates for the proposed LTE standard. He's gathered a tremendous amount of information.

One of the fascinating points made by Eric is that compared to the earlier mobile telecommunications standards, the number of "essential patents" and also the number of individual patent holders has increased for the forthcoming LTE standard. Eric goes onto note that many of the smaller patent holders have more interest in obtaining royalty revenues than the larger "more established" players. He concludes that the putative licensing pools being organised by the likes of Sisvel, Via Licensing and MPEG-LA could well benefit by engaging with the smaller players to encourage them to join.

The article is published in the Licensing Executive Society International Les Nouvelles journal, September 2010, pages 114-119.

Technorati Tags:
Standards, Telecommunications, MPEG-LA, Via Licensing

Differential calculus: the AG opines in STIM v Kanal 5 and TV 4

The Opinion of the Advocate General in Case C-52/07 Kanal 5 and TV 4 v STIM (not yet available in English) makes fascinating reading. It addresses a reference from Sweden to the European Court of Justice for a preliminary ruling on the circumstances in which different forms of royalty calculation levied by a copyright collecting society may be viewed as abusive exercises of the performing rights in its portfolio. A note on this case appears on the IPKat weblog, which credits Franck Latrémolière (Reckon) as its source.

On average, once the Advocate General has given an Opinion it takes some 5-6 months for the Court to rule. That would suggest that we should have some guidance from the court next Spring.

Valuing Patents

German Patent Attorney Malte Köllner has written an interesting piece in February/March's Intellectual Asset Management Magazine entitled "The Journey is the Reward" (page 59). Malte - who also co-founded the Triangle Venture Capital Group - is a member of the Geramn Standard's Institute's committee working on a standard for patent valuation (see previous posting here).

Malte points out that much of the thinking and work done on patent valuation to date has been by those with accounting backgrounds who have merely considered the economic aspects in valuing the patents - the technical and legal aspects have often been ignored. He's quite correct in pointing out that there is no such a thing as a "perfect patent" and that there is always a risk that the patent will be revoked (for reasons like prior art not discovered by the patent office, lack of enablement, lack of entitlement, etc).

One problem that he fails to mention in his article is the source of the data on which much patent valuation is based. The licence rates usually come from the information contained in company accounts filed with the US SEC or from publicised damages awards. Particularly in court cases, the validity of the patents has often been challenged and their strength upheld (even if in an amended manner). In a sense there is little or no "risk" element in the value of the royalty rate. Once the validity of the patent has been challenged once, then the chances that it will be later revoked are much smaller.

On the other hand the validity of most patents has never been challenged. There is a much higher risk that, for example, the patent office has found no relevant prior art which means that the scope of patent protection is much narrower than that granted by the patent office. The royalty rates derived from damage awards or licensing negotiations for such patents need to be discounted - the question is to what extent.