LTE Patent Pools Taking Shape
Three separate companies are steadily recruiting intellectual property holders into patent pools for LTE (Long-Term Evolution) technology, initiatives intended to get more manufacturers building gear for the fast network.
Patent pools are groups of patent holders that agree to licensing terms. Ideally, a big patent pool allows vendors to buy one license that covers most essential parts of a given technology. This is quicker, more transparent and more predictable than making individual deals, proponents say. Pools are used for video standards such as MPEG-4 but were not adopted widely in 3G (third-generation) mobile technology, the predecessor to LTE.
Typically, 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 -- are vying to form a pool that represents a critical mass of LTE patents.
Sisvel, an Italian company that also operates a patent pool for MPEG audio technology, this week claimed it had brought together 32 significant LTE patent holders, the largest number of any of the three patent-pool companies. "With the kind of scale that we're talking about here ... the pool could really be close to a one-stop shop," said Sean Corey, IP counsel for Sisvel US.
Meanwhile, MPEG LA says about 15 companies are working with its pool program, but added that they include some of the major players in terms of patents and market share. "There's a critical mass there," said Bill Geary, vice president of business development at MPEG LA. Via Licensing says 24 patent holders were actively discussing licensing terms and conditions at its last meeting of stakeholders, he said.
Formation of the pools is still 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. After kicking it off in January, the company could get its patent pool running in as little as 12 months, said John Ehler, Via Licensing's director of wireless programs. MPEG LA has been working on its own pool for about two years and hopes to have it in operation next year, Geary said. Sisvel's Corey said it takes between 18 months and two years to get a program going.
All three companies want to have the biggest pool, 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 said. It could also attract a broader range of companies, such as consumer electronics makers and embedded device manufacturers, to the fast networks.
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, Syputa said. If the commercial marketplace advances too far, too much intellectual property may become locked up in one-on-one licensing agreements between companies, he said. This happened with 3G, but with LTE, patent holders still have time to do it right, he said.
At least one important LTE patent holder, Ericsson, has said it will only sign bilateral license deals. Having three pool efforts in progress seems to complicate matters where just a single sanctioned one might be preferable, Syputa said. But even three pools would be preferable to a series of individual agreements, he said.
WiMax, the other major 4G technology alongside LTE, brought about a change in how patent licensing is handled, Syputa said. A single organization, the Open Patent Alliance (OPA), has brought together major vendors including Intel and Cisco Systems and is adding more intellectual property holders, he said.
"Their picture with OPA is pretty straightforward," he said. Though a few companies are still licensing outside OPA, the pool makes the cost of WiMax licensing more reasonable, he said.
In LTE, having competing pools may help to bring in more pool participants but could also lead to a fractured landscape of different licenses that vendors need to get, Syputa said.
Another factor that may complicate the licensing of patents for LTE is the diversity of patent holders, companies and analysts said. In a report announced Tuesday, research company Informa Telecoms & Media said new players such as Huawei Technologies, Samsung and LG are playing a bigger role in LTE after owning little of the intellectual property in 3G.
Qualcomm, Nokia and Ericsson dominate 3G technology, but the field is deeper in LTE, Informa said. The company estimated Interdigital owns 21 percent of the global LTE patent portfolio and Qualcomm holds 19 percent. Huawei, China's biggest telecommunications vendor, is in third place with 9 percent, followed by Samsung with 8 percent and Nokia, LG and Ericsson each having 7 percent, Informa said. Less concentrated intellectual property should lead to lower licensing costs, Informa concluded.
That development also makes patent pooling more important in order to simplify licensing, said MPEG LA's Geary. At the same time, it complicates the process of creating a pool, he said.
"Instead of just having a handful of telecom companies having the main (intellectual property rights), you have lots of other companies with patents," Geary said.