Manufacturers agree on W-CDMA royalties

Mobile manufacturers NTT DoCoMo Inc., Telefonaktiebolaget LM Ericsson, Nokia Corp. and Siemens AG have come to an agreement regarding intellectual property rights (IPR) and the assessment of royalty rates on the use of W-CDMA (wideband code division multiple access) technology, the companies announced.

The companies are seeking to keep royalty rates at a low, single digit figure of around 5 per cent, the companies said in a joint statement. Some 110 operators worldwide have already committed to W-CDMA standard, the companies said.

Referring to themselves as “the major IPR holders” of the W-CDMA technology, NTT DoCoMo, Ericsson, Nokia and Siemens said it is essential that the W-CDMA standard stays “an open and globally acceptable technology” with the cumulative royalty cost of W-CDMA being kept at a rate low enough to encourage “both greater growth and innovation in the industry.”

W-CDMA is seen as the version of CDMA that will prove to be the first step for allowing 3G (third generation) technology to rival mobile system GSM (global system for mobile communications) technology.

According to the group, other essential patent holders, Fujitsu Ltd., Matsushita Communication Industrial Co. Ltd. (best known for its Panasonic consumer brand), Mitsubishi Electric Corp., NEC Corp. and Sony Corp. have also expressed their willingness to cooperate with the arrangements for W-CDMA royalty rates. NTT DoCoMo, Ericsson, Nokia and Siemens have also discussed the proposals with the 3GPP (Third Generation Partnership Project), which developed the W-CDMA technology and coordinates royalties for the technology. The 3GPP is a collaboration agreement that was established in December 1998, and based in Sophia-Antipolis, France, to bring together a number of telecommunications standards bodies.

Qualcomm Inc., which has a number of its own W-CDMA patents and has long-standing licensing deals with a number of manufacturers, said that it supported the aims of the agreement between NTT DoCoMo, Ericsson, Nokia and Siemens. “We welcome the agreement because we are keen to see W-CDMA deployed in Europe,” said Qualcomm U.K. spokesperson Richard Tinkler on Friday, though he added, “We won’t be joining the group.”

Qualcomm, which depends on licensing intellectual property for the majority of its revenue, has not assessed what percentage of W-CDMA patents it holds within the industry, Tinkler said.

In September, director general of 3G3P (3G Patent Platform Partnership), Brian Kearsey, expressed concern that too many companies were claiming to own too many patents essential to building next-generation W-CDMA handsets, base stations and radio network controllers in the hopes of generating large future profits. The 3G3P is a Chaveny, France, company established by the mobile phone industry to provide an evaluation service for W-CDMA patents.The 3G3P called for a royalty cap at 5 per cent of the sales value of a product, a stance that NTT DoCoMo, Ericsson, Nokia and Siemens now appear to support.

The group believes that based on current conditions, the cumulative royalties will be even lower for W-CDMA than GSM, citing for example, “recent developments in China” that indicate the cumulative royalty rate remains “even under our earlier targeted cumulative 5 per cent level.”

Whereas W-CDMA is being adopted as the standard in Europe and large parts of Asia, another standard, CDMA2000 is being adopted by CDMA operators in North America and parts of Asia. Most of the essential patents to CDMA2000 are owned by Qualcomm, which is said to be keeping royalties at about 5 per cent to 6 per cent.

NTT DoCoMo, Ericsson, Nokia and Siemens also weighed in on the issue of CDMA2000 royalties and appeared to take a swipe at Qualcomm. The group asserted that they too “own a significant number of the essential patents applicable to the CDMA2000 standard” and vowed “these patents will be licensed at fair and reasonable terms.”

While W-CDMA royalties rates are coordinated by the 3GPP, CDMA2000 goes through a separate body, the 3GPP2 (Third Generation Partnership Project 2), whose members include NEC, Sony, Qualcomm and Motorola Inc.

In an e-mail response to questions, 3GPP2 declined to comment on the NTT DoCoMo, Ericsson, Nokia and Siemens agreement. Representatives from 3GPP and 3G3P could not immediately be reached for comment.