Apple wants to slice the licensing fees it pays each time it sells an iPhone. The company is suing wireless equipment giant Ericsson, which holds many patents for 3G and 4G technologies. Apple says Ericsson is demanding excessive royalty fees, and that its wireless technology does not qualify as “standards essential” intellectual property. Ericsson maintains that its technology is absolutely essential to the iPhone’s success.
“Every Apple smartphone and tablet relies on technology from Ericsson,” the Swedish company said in statement. “During the past two years of negotiations, the two companies have not been able to reach an agreement on licensing terms for Ericsson’s patents that enable Apple’s mobile devices to connect with the world and power many of their applications.”
Ericsson has countered Apple’s lawsuit by filing a complaint of its own in Texas, the site of the company’s North American headquarters. Ericsson wants the Texas court to rule on whether its fees comply with FRAND (fair, reasonable, and non-discriminatory) principles.
Patent holders typically agree to license their patents within the FRAND framework when those patents are deemed by a standards body to be essential to a wireless standard, meaning the mobile devices cannot operate on wireless networks without using the patented technologies. Ericsson says it offered Apple a license based on FRAND terms before Apple’s previous licensing agreement with Ericsson expired.
Apple declined that offer, and now says it does not need to pay based on FRAND terms since the technology is not essential. The company is asking the court for permission to calculate licensing fees based on the price of the chips that use Ericsson’s technology, not on the price of the smartphone.
Apple is taking a calculated risk by challenging Ericsson in court. In late 2013 Ericsson ended a protracted patent battle with Apple’s archrival Samsung, coming away with a settlement that added more than $500 million to the Swedish company’s net income that year. Ericsson called that victory a validation of FRAND licensing principles, and that may be one reason Apple is arguing that some of Ericsson’s LTE patents should not fall within the FRAND framework.
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