Tuesday, July 19, 2022

Sisvel announces WiFi 6 pool with patents from Huawei, Philips, MediaTek, others--and outlines framework for incentivizing early conclusion of license agreements

Earlier today, patent pool administrator Sisvel effectively made two announcements in one press release:

  • a WiFi 6 (IEEE 802.11ax) standard-essential patent (SEP) pool, whose initial members are Huawei, Philips, MediaTek, SK Telecom, and Wilus; and

  • a new "structured payment plan" named Licensing Incentive Framework for Technologies (acronym: LIFT) that is designed to incentivize the early conclusion of license agreements.

Both initiatives address certain industry needs, so let's have a quick first look.

WiFi 6 pool

Huawei owns one of the two most important WiFi 6 SEP portfolios. The only other patent holder to have a similar position is Qualcomm. But Huawei is also a major implementer, as is Philips. Those two companies are now the first licensees of the newly-formed pool.

The license terms are simple and transparent: for most WiFi products, the Standard Rate is $0.60 per unit, and those who are licensees in good standing (full compliance with obligations), it goes down to $0.50 per unit. Enterprise access points are the only product category for which the rates are higher (simply multiply either of the rates I just mentioned by a factor of six).

Huawei is known to take rather balanced positions on SEP licensing terms, as it is both a large SEP holder as well as a high-volume implementer (though its presence in Western markets has been affected by geopolitical circumstances). When Huawei is involved with a pool, there is a justified presumption that it's probably neither a devaluation-oriented pool nor one optimized only for licensors' purposes.

In retrospect it now makes a lot of sense that Sisvel president Mattia Fogliacco was one of the panelists at last month's Huawei corporate event in Shenzhen. That participation is now reciprocated in the form of a quote in today's press release from Alan Fan, the head of Huawei's IPR Department, who expects the new pool to "increase transparency of patent licensing and reduce licensing disputes in the field."

WiFi 6 SEPs are a much smaller business opportunities than cellular SEPs, but volumes are high: a typical use case for a patent pool, as pools are all about leveraging transactional efficiencies.

Licensing Incentive Framework for Technologies (LIFT)

When I read about LIFT today, I instantly remembered something an Audi executive (who may have retired since) had said at a Munich conference on automotive patent licensing last year. He said it's better not to take a license in the beginning, as prices will only go down. In other words, hold-out amounted to intelligent infringement.

Patent pools often face the challenging of ensuring that those who sign up early don't regret their decision when they look at still-infringing competitors years later. For instance, Avanci must, as a matter of fairness, raise its 4G license fee on September 1. There still is a window of opportunity for the next six weeks enabling automakers to get the same deal as BMW got almost five years back.

The TL;DR version of the LIFT story is that early birds don't instantly pay the full license fee but a percentage thereof that depends on the pool's market penetration (ranging from 10% if less than 5% of the market is licensed to 100% if at least 55% of the market has taken a license)--and the difference doesn't work like a definitive discount but is deferred. This means that if the pool succeeds in signing up more licensees, the amount actually paid will be retroactively increased, though a depreciation formula will be applied.

This means that licensees won't have to worry too much about a scenario in which they'd be paying while others would be infringing. If that happened, they'd pay a lot less than otherwise. Obviously, only a pool administrator confident of its ability to reach a high market penetration is in a position to implement this royalty structure.

It's definitely an interesting and innovative approach that rewards lawful conduct and protects early licensees against scenarios in which others gain a potential competitive advantage from infringement.

For further detail, I'll just refer you to a 16-page PDF (step-by-step explanation). Let me also show you a video that explains the idea: