Friday, February 15, 2013

Ericsson demands 1 eurocent per WiFi patent per device from Acer, much less than Google wants

Today I was in Mannheim for an IPCom v. HTC damages trial (I don't intend to blog about that one) and attended a subsequent (second) trial over one of three IEEE 802.11 (WiFi, or WLAN) standard-essential patent (SEP) lawsuits brought by Ericsson against Acer in the same wildly popular venue. There was one piece of information I picked up there that I'd like to share because it puts into perspective some of the out-of-this-world demands that companies like Motorola have made with respect to their SEPs.

Ericsson is prepared to extend a WiFi SEP license to Acer at a royalty rate of 50 eurocents ($0.66) per unit, covering Ericsson's portfolio of roughly 50 WiFi-related patent families. On a per-patent basis (1 eurocent, or $0.013, per patent per unit) Acer would even be willing to do a deal -- but at this stage it's willing to pay a royalty at this level only with respect to the three patents-in-suit, while Ericsson insists that Acer take a portfolio license including, for the most part, patents over which it hasn't sued yet. Judge Andreas Voss ("Voß" in German) did not take a definitive position on this but reminded counsel for Ericsson of the antitrust implications of tying (a behavior that seeks to leverage a position of strength in one area in order to force someone to do a package deal involving other elements as well).

I don't want to take a position here on whether Acer or Ericsson is right (or at least closer to being right). The only reason for which I wanted to mention Ericsson's demand is that Motorola, with an IEEE 802.11 declared-essential portfolio of a similar size, still defends its demand of a 2.25% royalty on the price of the relevant end product. Last year Microsoft submitted a couple of charts to the United States District Court for the Western District of Washington indicating an estimated annual royalty amount of $4 billion, and a rate of $4.48 per Xbox. The per-unit royalty Ericsson demands from Acer, whose notebook computers generally sell at higher prices than gaming consoles, is much closer to the FRAND royalty proposed by Microsoft in its post-trial brief ($0.03-$0.065) than to Motorola's position. What Ericsson demands is one thing, and what it ultimately gets is another. Acer apparently considers Ericsson's demand unacceptable, which is why litigation continues, for the time being at least. So a reasonably sophisticated player in this market doesn't even want to take a license at a $0.65 per-unit royalty rate for a 50-patent WiFi portfolio, but Google's Motorola Mobility claims that a hugely greater amount is "reasonable RAND".

The terms of FRAND license deals and offers are very difficult to find out about. Whenever real-world license agreements show up on court dockets, their financial terms are typically redacted out. When license agreements are discussed in court, the general public must usually leave the room. Ericsson and Acer's positions aren't the equivalent of a license agreement, but Ericsson's demand certainly indicates at which rate the Swedish telecommunications equipment giant would do a deal any day of the week, so it's a useful data point.

SEP owners will always argue about whether their patents are more valuable than other patents declared essential to the same standard. But it's hard to imagine that the average Motorola WiFi SEP is many times more valuable than the average Ericsson WiFi SEP. At least I'm not aware of any reason for which this should be the case.

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents and Google+.

Share with other professionals via LinkedIn: