THE CONVENTIONAL WISDOM-promoted by the WiMAX Forum and confirmed to a degree by at least two independent market research firms-is that no one company owns a potentially disabling amount of intellectual property in WiMAX technology. The implication is that the road ahead for the technology is smoother than the rutted, four-wheel drive path that winds through the 3G wilderness.
With the current landscape crowded by 3G-related litigation, efforts are under way by industry groups to improve the transparency of IPR ownership to keep the road ahead well-paved and ensure that IPR-related potholes or roadkill don’t catch the nascent WiMAX industry off-guard.
That means, so the conventional wisdom goes, that no one company can prevent or unduly profit from WiMAX’s development by charging high licensing fees.
Two variables offer a caveat to this perspective:
Qualcomm Inc., the litigant and respondent in many 3G-related lawsuits and regulatory actions and one of the reasons many sought to improve the process of IPR in next-generation technologies, holds a significant amount of IPR in OFDM, including many applicable to WiMAX. It remains unclear if and how Qualcomm might assert those patents as the market develops.
Secondly, with WiMAX likely to enable further convergence between the wireless industry and computing and other industries, it remains unclear whether IPR surprises will be forthcoming from players outside wireless.
IPR consolidation
Even the widely dispersed nature of WiMAX IPR has been cited as a possible barrier to uptake, according to Robert Syputa, an analyst at Maravedis, which has studied the WiMAX IPR issue.
But market forces are likely to consolidate the number of players with significant IPR in the technology and, therefore, deal-making should be easier-though that says nothing about the possible level of royalties that vendors that need to license others’ IPR may shell out.
“IPR will tend to consolidate,” Syputa said. “In fact, it’s already consolidating in the hands of the chipmakers. The Intels, Broadcoms and Texas Instruments of this world will obtain licenses for WiMAX technology with IP rights that they’ll ‘pass through’ to their customers, which will reduce the number of deals necessary for device makers.”
In a research report earlier this year, Stuart Carlaw, analyst at ABI Research, struck a similar note. “One of the major factors that has kept average royalty rates very high in W-CDMA devices is the fact that 12 companies own 80% of the essential IP, with four of those owning nearly 60%,” Carlaw wrote. “In order to access essential patents, device vendors not among that top four are subject to cumulative royalty rates that can climb as high as 28.5%.”
Carlaw found that with the 4G royalty landscape more diverse, average royalty rates in 4G devices should be lower than 3G equivalents.
“License trading will be more commonplace, especially in the WiMAX environment, where over 350 companies own essential IP,” Carlaw concluded. “This diverse IP landscape will not be a product of litigation or regulation, but of pure market mechanisms. Companies have seen the benefit of a strong IP portfolio and are now plowing huge funds into research-and-development to capture patents.”
Carlaw also cautioned that, although many companies have pursued OFDM technology to “loosen Qualcomm’s hold on the market,” the San Diego-based company has succeeded in developing or purchasing significant OFDM IP.
Samsung’s prominence
“There could be a case of ‘out of the frying pan, into the fire’ regarding WiMAX,” Carlaw wrote, “where it is likely that Samsung will hold close to 30% of the essential IP, effectively replacing Qualcomm as the 800-pound gorilla in the market.”
The Next Generation Mobile Network group has spearheaded an effort by network operators and infrastructure vendors to determine the “essentiality” of WiMAX-related patents and have them declared upfront, in order to avoid the litigious landscape in 3G, Syputa said.
“The NGMN stands a good chance of accomplishing its mission,” said Syputa. “And Qualcomm recognizes, in light of recent court actions, that the reality has shifted and it has to go along with cooperative efforts.”
Syputa said he was referring to a recent court setback for Qualcomm in a federal court in Santa Ana, Calif., where the jury found in favor of Broadcom Corp. by declaring that Qualcomm had waived its right to charge for a certain patent on video compression because it had not properly presented that patent upfront during deliberations by standards bodies.
Further, according to the analyst, a recent Supreme Court ruling in favor of holders of “substantial” IPR should help reduce the number of nuisance lawsuits in WiMAX and other technologies.
“For WiMAX, in particular,” Syputa said, “I’m confident that IPR will be less of a problem-with the caveat that this converged technology could produce some surprises. That’s a common concern of all converged industries.”
Syputa predicted a trend towards what he called “systems level” technologies as the focus of IPR contention in a converged world, because they often are not included in industry standards and therefore lie outside “fair, reasonable and nondiscriminatory” licensing terms required of “essential” patents.
