Firms Aim to Spur Use by Limiting Royalty Payments
Six big technology companies are spearheading a plan to jointly license patents that cover the wireless technology called WiMAX hoping to limit royalty rates that could deter customers from using it.
The participants are Cisco Systems Inc., Intel Corp., Samsung Electronics Co., Sprint Nextel Corp., Alcatel-Lucentand Clearwire Corp., according to people familiar with the situation and a document outlining the group's plans.
They have scheduled a conference call Monday to announce an organization, the Open Patent Alliance, to gather rights to WiMAX-related patents and license them to makers of computers, networking devices and other products, these people said.
WiMAX is a long-range cousin of a wireless technology called Wi-Fi that comes with many laptop computers. Intel, which heavily promoted Wi-Fi, has been pushing to make WiMAX another built-in feature of portable PCs. Sprint and Clearwire plan to build a nationwide WiMAX - network, while Samsung, Cisco and Alcatel-Lucent are expected to make WiMAX equipment.
But hardware makers could be spooked if patent royalties are too high or the potential costs are uncertain. WiMAX backers cite the case ofthird-generation cellular networks; companies such as Qualcomm Inc., Nokia Corp. and Telefon AB L.M. Ericsson separately charge patent royalties for 3G products.
Some industry analysts say cellphone makers face cumulative royalties of more than 25% of the price of handsets, unless they have their own patents to help in negotiating lower rates. One person familiar with the thinking of the WiMAX alliance said it hopes to license WiMAX patents at "much lower" rates than those in the cellular industry.
Such patent pools aren't a new idea. A group called MPEG LA, for example, offers standard royalty rates for licensing patents associated with video compression. Patent pools are "tremendously important," said David Balto, a Washington, D.C., lawyer who handles patent and antitrust issues.
But the WiMAX alliance, which was reported by Computerworld Friday, faces several challenges. One is a competing standard-knpwn as LTE, for long-range evolution-that shares a common technical foundation with WiMAX and is expected to be preferred by many cellular carriers.
And some prominent holders of patents related to WiMAX and LTE-including Motorola Inc. and Qualcomm-haven't joined the patent pool and could continue to make their own claims for royalty payments.
Until they explain their licensing plans, some uncertainty for equipment makers will remain despite the existence of the new patent pool, said Mike Thelander, an analyst with Signal Research Group, in an email.
A Qualcomm spokeswoman said the company wouldn't join the WiMAX alliance. Though patent pools are a valid approach, "Qualcomm has consistently preferred to negotiate license agreements bilaterally," she wrote in an email. Qualcomm has already licensed patents covering technologies used in WiMAX to nine companies, she added.
A Motorola spokeswoman said, "We continue to evaluate the merits and risks associated with every proposal that we hear about, and we continue to make our own suggestions for improvements."
While some LTE backers are also pushing for a patent pool, Mr. Thelander predicted that WiMax and LTE royalties ultimately may be quite similar. But Larry Goldstein, a patent lawyer who wrote a book on patent pools, said the WiMax group could reduce the number of licensing deals to be negotiated even if some patent holders don't join. "It can cut down on the onerous negotiations and cut down on the overall royalty rate," he said.
By: Don Clark
Wall Street Journal; June 9, 2008
