3G : Patent disputes could further complicate 3G

If there’s one thing the young and troubled market for 3G (third-generation) mobile broadband services doesn’t need, it’s more uncertainty. But more of that is what the next-generation technology, already dogged by technical hiccups and financial woes, could soon face if issues over licensing IPR (intellectual property rights), or patents, aren’t resolved soon.

Too many companies are claiming to own too many patents essential to building next-generation W-CDMA (Wideband Code Division Multiple Access) handsets, base stations and radio network controllers, and hoping to cash in down the line, said Brian Kearsey, director general of 3G3P (3G Patent Platform Partnership), a Chaveny, France, company established by the mobile phone industry to provide an evaluation service for W-CDMA patents.

W-CDMA is the 3G standard supported by operators providing second-generation GSM (Global Service for Mobile Communications) services around the world.

IPR is less of an issue with CDMA2000, the standard being adopted by CDMA operators in the U.S. and parts of Asia, as most of the essential patents are owned by Qualcomm Inc. The San Diego company is said to be keeping royalties at about 5 per cent to 6 per cent.

The huge number of companies claiming essential W-CDMA patents, and the fact that no industrywide agreement exists on pricing or use of patents, greatly complicate the process of establishing royalty agreements between IPR owners and companies hoping to enter the W-CDMA market, according to Kearsey. “These developments could seriously hinder the viability of the 3G market if an approach isn’t found,” he said.

Some companies won’t be able to enter the market because of the prohibitive cost of acquiring intellectual property rights. This will result in fewer players competing, slowing the drive to reduce prices and create a mass-market, Kearsey warned.

The key issue “is controlling costs,” he said. With so many patent holders staking their claims, royalty payments could account for up to 20 per cent of a handset, he warned.

3G3P hopes to cap royalties at 5 per cent of the sales value of a product.

In the early days of developing GSM, only a limited number of vendors felt the technology was viable and consequently only a small number of players acquired essential IPR, according to Kearsey. But after the success of GSM-the most widely used mobile standard in the world-many more vendors have shown an interest in 3G.

Around 100 companies, consisting mostly of manufacturers but also some operators such as Tokyo-based NTT DoCoMo Inc., claim to own patents critical to building W-CDMA radio systems, compared to around 20 companies that own essential patents for GSM, Kearsey said.

3G3P has developed an approach to evaluate, certify and license essential patents for 3G systems based on an online licensing administrator. The platform will operate commercially within the U.K.-registered company, 3G Patents Ltd.

By minimizing IPR costs and reducing exposure to infringement litigation, 3G3P hopes to make the 3G business case more attractive, according to Kearsey. This is important, especially as many companies are now taking “a serious look at their 3G commitments,” he said.

Because 3G3P was defined by a large number of competing suppliers and operators, the planned code of conduct for evaluating, certifying and licensing essential patents needs the approval of the major competition authorities, including the U.S. Department of Justice, the European Commission and the Japanese Fair Trade Commission.

The Japanese approved the platform in December 2000. Decisions from the other groups are pending.