Mobile phone patent wars

August 01, 2011

Typically an innovative company has two types of patents- those they are willing to licence and those they are not willing to license.

Examples of patents that companies are willing to license are patents that are essential for an International Standard and that they have agreed to license in exchange for the patented technology being incorporated into the standard. Some of these licenses are without a royalty (e.g.Bluetooth) and others allow a FRAND (fair reasonable and non-discriminatory) royalty (e.g. 3GPP). Examples of patents that companies are unwilling to license include those that protect technology that valuably differentiates a product or service in the marketplace from the competition. Patent litigation typically starts when the patent owner becomes sufficiently aggrieved. He may be a willing licensee who can’t obtain enough benefit from an infringer through license negotiation or he may be an unwilling licensee trying to maintain differentiation in the marketplace. At present in the mobile telephone marketplace there is a perfect storm brewing. The incumbent heavy-weights Nokia, Qualcomm, Ericsson, etc have significant patent portfolios. As a consequence of their involvement in the research and development activities that produced the mobile telephone infrastructure they are rich in essential patents. They expect new entrants into the marketplace such as Apple and Google to pay the dues owed for the previous R&D. When those due are not forthcoming litigation eventually follows. "The basic principle in the mobile industry is that those companies who contribute in technology development to establish standards create intellectual property, which others then need to compensate for," said Ilkka Rahnasto, Vice President, Legal & Intellectual Property at Nokia. "Apple is also expected to follow this principle. By refusing to agree appropriate terms for Nokia's intellectual property, Apple is attempting to get a free ride on the back of Nokia's innovation." This statement started Nokia’s unprecedented patent litigation against Apple. Nokia sued Apple using 37 different patents spread across three US jurisdictions, the UK, Germany, and the Netherlands. Apple responded with their own suit against Nokia involving 13 patents. This particular battle is over as Apple and Nokia have concluded a cross-licence with a balance of payments from Apple to Nokia. Meanwhile Google and Microsoft have developed operating systems that are optimized for smartphones but they don’t have strong portfolios of essential telecommunications patents. However, the patent portfolio of bankrupt Nortel Networks which includes essential patents has been offered for auction. Google reportedly made an initial bid of $900 million for the 6000 patents. However, it has recently been reported that Apple, EMC, Ericsson, Microsoft, Research In Motion and Sony together paid US$4.5 billion for the portfolio. Google is now looking very exposed, so expect further litigation. Please contact Paul Higgin for more details [email protected].

Swindell & Pearson has been helping businesses and individuals protect and defend their ideas, innovations and brands for over 130 years. With its head office in Derby, the firm also has offices in Stoke, Wolverhampton, Stafford, Sheffield and Burton. To find out how Swindell & Pearson can help you with any intellectual property requirements please get in touch via [email protected] or by telephone on 01332 367 051.