Fixing the price or fixing the blame
By Timo Poropudas
(NOK objective is to gain concessions, on the premise anything received by Interdigital is better than nothing being offered- for both 2G and 3G. The definition of "reasonable and sustainable" in the below context is being construed by Interdigital as "unfair and unreasonable", using Ericy Sony/Ericy settlement as a basis for 2G, and NEC/Sharp/Matsushita as a benchmark for 3G.
NOK is trying not only to place a royalty cap on Interdigital's IPR contributions but redefine "fair and reasonable" in terms of a plurality of major EOM's benefiting themselves. It is highly debatable whether NOK's strong arm tactics will cap Interdigitals rates to their liking once the smoke clears.
Interdigital as a NON-MANUFACTURER will probably agree the industry will be best served if the manufacturers agree among themselves to cap the rates at, say 5%- and pay Interdigital FAIR VALUE by their own definition for their IPR contributions.)
Nokia made an interesting move Wednesday by advocating an industry-wide commitment that royalty rates for the 3G technology should not exceed five percent cumulatively. Under this proposal no manufacturer should pay more than five percent royalties covering all the essential WCDMA patents from all patent holders.
This sounds like a nice sentiment, but how could this work in practice? How can you divide up the intellectual property rights, i.e. the licen c e fees of any given WCDMA hardware or software? Who will determine the relative value of different patents needed in the production process? Are the large telecom vendors really so powerful that they can arbitrarily order how much each IPR is worth.
Nokia's press release also says: "With licensing arrangements already in place with several major companies, Nokia is continuing active discussions with a number of parties with the aim of reaching reasonable and sustainable l icense arrangements. Nokia's position and belief is that proposed five percent cumulative royalty level has been well received and supported by most major vendors and operators."
Well, this sounds like price fixing by the major telecom companies. It is hard to see how the price fixing could be legal even if you claim to be setting the prices low.
Dr. JT Bergqvist, Senior Vice President, Nokia Networks and brand new member of Nokia's executive board, s ays Nokia is thinking of the whole mobile communication industry when it is proposing the five percent royalty cap. Berqvist calls for healthy royalties with a cumulative maximum of five percent: "In our opinion, this is the level of royalties that encourages greater growth and innovation in the industry."
If setting the royalty cap is difficult and ultimately illegal, what is the point of Nokia's announcement? Maybe the idea is to point out the high IPRs of someone else.
The announcement also says. "Because the five percent cumulative royalty will make WCDMA technology very competitive also from the IPR point of view, it keeps the standard open for all contributing companies to join." This could very well be pointing to CDMA-2000 technology where American Qualcomm has clearly the determining role and most IPRs.
Nokia does not say who is charging high prices but it does list the main patent holders beside its e lf as Qualcomm, Ericsson, Motorola, and NTT DoCoMo.
It remains for media and analysts to dig up and compare licensing costs in different technologies and by different companies. Without this information the whole exercise remains rather pointless. It will be interesting to see who will provide the IPR cost calculations for the basis of comparison.
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