Monday, March 17, 2014

Court document reveals discriminatory royalty demands by Ericsson for its wireless patents

Ericsson is increasingly becoming a patent troll (and privateer feeder) in the sense that it places the emphasis on patent monetization and apparently expects more growth in that business area than in its product business. The more I learn about its related activities, the less I like its practices.

What I do like, however, is that its conduct brings to light certain issues that are relevant and, unfortunately, not limited to Ericsson. Transparency, whether intended (when Ericsson explained why it collects royalties from device makers rather than chipset manufactures, i.e in order to charge more) or unintended (when bad behavior comes to light as a result of the two ongoing antitrust investigations in India or court proceedings), is always appreciated.

If the dispute between Ericsson and Samsung had not been settled before any ruling came down, we would likely have learned a lot. Both companies accused each of other of suddenly asking for far higher royalties than in the past. The details of this will remain sealed forever. But I have now obtained what I consider a smoking gun that lends credence to Samsung's allegations concerning Ericsson: a November 7, 2013 order by the High Court of Delhi at New Delhi, India, in a case in which a company named Saral Communications was fighting customs seizures of shipments that had apparently been requested by Ericsson on the basis of it wireless standard-essential patents (SEPs).

The order (published further below) states that in an email dated October 18, 2013, Ericsson offered a wireless SEP portfolio license to Saral on certain terms, but subsequently its counsel "submitted that this communication indicating the aforesaid rates of royalty had been issued by a mistake" and communicated the royalty rates known from the investigation by the Competition Commission of India of Micromax's complaint against Ericsson. Saral disputes that the email was a mistake, and I didn't just fall of a turnip truck either. Ericsson simply realized that it was out of compliance with its FRAND licensing commitment -- the "ND" in FRAND means "non-discriminatory", and demanding roughly twice the royalty rates from one company (Micromax) than from another (Saral) without the slightest indication of any justification would be grossly discriminatory misconduct. Here's a comparison of the two sets of terms:

Standard(s)Original OfferNew Demand
GPRS + GSM0.80%1.75%
EDGE + GPRS + GSM0.90%2.00%

Here's the court order:

13-11-07 Delhi High Court Saral Communications by Florian Mueller

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