Intellectual property and 5G: 2019’s culture clash

Telecoms.com periodically invites third parties to share their views on the industry’s most pressing issues. In this piece Pio Suh, Managing Director of IPCom, looks at intellectual property law in the context of the 5G era.

2018’s Unwired Planet v Huawei Court of Appeal judgment in the UK highlighted the complexity of patent licensing, and demonstrated the need for flexibility, transparency and a level playing field when it comes to negotiating intellectual property (IP) licenses in the telecoms and technology sectors.

It signified what we’ve predicted – and hoped for – for some time: a turning of the tables, and a re-balancing of the power traditionally held by some multinational corporations. Rather than the complexity, cost and time of Unwired Planet having to negotiate multiple patent licenses for every patent bearing country, for example, the case confirmed that setting worldwide licence rates is FRAND (fair, reasonable and non-discriminatory). No matter their financial standing, power has also traditionally lain in the hands of the licensee. This party often has the upper hand in licensing negotiations, as they are able to either refuse to take a licence or stall the development of negotiations; known as ‘hold up’. Licensing IP in a FRAND manner, however, allows a licensor to confer the benefit of their technology on an implementer while being efficiently and fairly reward for their R&D efforts and IP.

This year, 5G mobile technology will be the catalyst for a range of innovations, which will have far reaching impacts across a broad range of sectors, including automotive, healthcare and manufacturing. Fair recognition of 5G R&D and innovation is going to be crucial in the success of the new mobile technology, and businesses will need to understand the complexities in IP licensing, to ensure their innovations are rewarded.

FRAND and the re-balance of power

It’s a given that negotiations and decisions regarding IP licensing should be dictated by FRAND terms. Relying upon appropriate comparable benchmarks will facilitate open, amicable negotiations; and, in many cases, it will encourage dialogue, offers and counter-offers, avoiding the need for litigation.

However, we may have been too optimistic, too soon. The ongoing battle between Apple and Qualcomm demonstrates how expensive, and convoluted IP licensing can be. The latest in the saga? Qualcomm has successfully sued Apple for infringement of patents. This has resulted in both China and Germany banning Apple from selling some models of the iPhone. However, the ban does not extend to resellers, meaning these models are still available, at least for the time being. The immediate impact on Apple will be negligible, both in terms of sales in these regions and public perception – if I can still buy an Apple handset, will go the thinking, then surely the brand can’t have done wrong?

We’ll be keeping a close eye on how this rather complex situation develops through 2019 – and we shouldn’t be the only ones. It’s no longer solely technology companies – such as Apple, Qualcomm and Huawei– which need to understand the lay of the IP licensing land. The gradual arrival of 5G has welcomed many new sectors into the communications and technology industry, all of which will need to get smart on IP.

5G and the new culture clash

While earlier communications standards focussed primarily on connecting mobile devices to the internet and to each other, 5G is about unlocking significant opportunities in vertical sectors. Automotive, healthcare, mining, agriculture, manufacturing – it’s these industries where the more compelling business cases lie, and which are driving the development of technologies.

This has been great for these sectors while business cases were purely hypothetical. However, 2019 will see innovations come to fruition, and with them the issues and complexity of how to license crucial components of connected products. Major car manufacturers will need to consider every chipset, function and feature of their connected car; researching, negotiating and obtaining necessary patent licenses.

We’ll therefore witness a major culture clash in 2019, in which vertical sectors hoping to capitalise on 5G and the IoT will suddenly have to become technical experts and, as a result, know their stuff about IP. Failure to successfully navigate the IP landscape and ‘dance the FRAND dance’ could stifle progress and result in litigation.

An education in IP

Many of the vertical sectors now entering the IoT field are behind some of the most innovative ideas which, when realised, could bring huge socio-economic benefits. Think of the rapidly-growing market for connected wearables in the healthcare industry, for instance, or the productivity and efficiency gains promised by connected fleets of vehicles.

Many parties in vertical sectors will be dealing with situations they’ve never experienced before and will require guidance, education, and a clear-cut route to licensing and lawfully using IP. In order to encourage innovation and allow for these ideas to come to be developed, it’s important that all stakeholders work together to decipher and determine new rules around IP licensing and management. This will involve education, new partnerships and the exchange of knowledge. FRAND must continue to underpin these, and help to create a just, amicable business environment for all, and a fertile ground for 5G.

 

Pio Suh IPComAn attorney and member of the German Bar since 2006, Pio has over a decade of legal experience specialising in intellectual property rights and communication technologies. He has worked in-house for a number of multinational Fortune 500 companies – including Qualcomm, Oracle and Philips – to implement patent enforcement strategies on a global scale. Since July 2018 he is assigned as the new Managing Director of IPCom.

Qualcomm’s business model hangs in the balance as FTC case concludes

The US Federal Trade Commission accused Qualcomm of abusing a monopoly two years ago. Now a judge is set to decide if it was right to do so.

The original accusations coincided almost exactly with the commencement of hostilities between Qualcomm and Apple, with the latter saying the former was getting away with overcharging for its mobile chips thanks to having a monopoly in that market. The FTC case pretty much echoed that claim, with accusations of FRAND patent abuse thrown in for good measure.

It apparently takes a couple of years for this sort of thing to play out and the respective parties delivered their closing arguments recently. The FTC doesn’t seem to have made a formal announcement on the matter but credit to Cnet which has actually done some old fashioned reporting and sent someone into the court room.

Here’s the Cnet report from 15 Jan, which covers the FTC side of the case. The core of it seems to be that forcing companies who want to buy its chips to also take out patent licenses is wrong. It also claims that this process prevents other chip makers coming into the market and thus harms competition. Unsurprisingly a couple of Apple execs turned up to support the FTC case.

Among the FTC’s closing arguments is the warning that, if Qualcomm isn’t stopped, it will abuse the 5G market as it has previous once. But Apple’s own shift from Qualcomm to Intel chips would appear to contradict that assumption, as does Huawei’s recent launch of a 5G modem. These are also unhelpful in its bid to claim Qualcomm has a monopoly.

“The FTC hasn’t come close to meeting its burden of proof in this case,” said Qualcomm General Counsel Don Rosenberg in a press announcement. “All real-world evidence presented at trial showed how Qualcomm’s years of R&D and innovation fostered competition, and growth for the entire mobile economy to the benefit of consumers around the world.

“Our licensing rates – which were set long before we had a chip business, and revalidated time and again – fairly and accurately reflect the value of our patent portfolio. Qualcomm’s technology has been the foundation of a thriving, competitive industry.”

Now Judge Lucy Koh, who’s a veteran of this sort of thing, needs to weigh up all the evidence and arguments, and make a call one way or the other. The stakes are pretty high for Qualcomm as a decision against it would effectively be a decision against a big part of its business model. Expect Qualcomm’s share price react strongly either way when the decision is announced, which Koh warned might take a while.

China issues injunctions against most Apple iPhone models – that was quick

The week after the US arranged the arrest of a Huawei exec China has granted Qualcomm an injunction prohibiting the sales of most Apple smartphones in the country. Coincidence?

Qualcomm and Apple have been at war for months over what the former charges the latter to use its technology in its devices. Apple wants to pay less and Qualcomm would rather it didn’t. A proxy war has ensued in which various regulators suddenly got hold of a bunch of dirt on Qualcomm and Apple has found itself accused of playing fast and loose with intellectual property.

They have both landed telling blows but the most recent round went to Qualcomm, with the Fuzhou Intermediate People’s Court in China granting its request for two preliminary injunctions against four Chinese subsidiaries of Apple to stop them selling importing and selling the following iPhone models: 6S, 6S Plus, 7, 7 Plus, 8, 8 Plus and X. In other words all of them bar the most recent ones, which apparently don’t use the offending patents.

“We deeply value our relationships with customers, rarely resorting to the courts for assistance, but we also have an abiding belief in the need to protect intellectual property rights,” said Don Rosenberg, Qualcomm General Counsel. “Apple continues to benefit from our intellectual property while refusing to compensate us. These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio.”

The patents themselves seem relatively trivial and concern the user interface rather than core Qualcomm stuff like modems. They ‘enable consumers to adjust and reformat the size and appearance of photographs, and to manage applications using a touch screen when viewing, navigating and dismissing applications on their phones.’

Patent disputes are rarely about the significance of patents themselves, which are usually used as pawns in a greater battle of wills. You do have to wonder, however, since Apple seems to be able to cope just fine without them and UI software is a core strength, why it didn’t just develop its own way of doing that stuff in-house.

Apple will, of course, appeal, and the WSJ was the lucky recipient of a generic quote from one of its spokespeople. “Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” it went.

What is not known is how much encouragement the Chinese state gave to the Fuzhou Intermediate People’s Court to find against one of the US’s greatest business champions. It was generally assumed that the arrest of Huawei’s CFO would result in repercussions and the timing of this decision is intriguing.

It’s especially ironic that Qualcomm has been used as a vector for the latest offensive in the great Sino-American trade war since it’s widely suspected that China blocked Qualcomm’s acquisition of NXP in retaliation for the US intervening on the proposed acquisition of Qualcomm by Broadcom. It could all just be a coincidence, of course, but anything involving the US and China seems likely to be at the very least tainted by politics.

Inside Ericsson

Ericsson invited me to hang out with them in Stockholm for a couple of days so I did and here’s what I got up to.

Towards the end of Ericsson’s Q1 quarterly earnings call, Head of Marketing Helena Norrman and I indulged in a spot of light banter, during which she reflected on how nice Stockholm is at that time of year. I responded that I haven’t been there for ages because Ericsson doesn’t seem to do press trips anymore, at which point Norrman called my bluff and invited me over. Before long the excellent Minako Nakatsuma Olofzon had sorted everything out and off I went.

The last time I was in Stockholm was for an Ericsson analyst day and the trip was so brief I didn’t really get to see much of the place. This time I decided to stay for three nights so I wouldn’t be in a hurry. I can definitely recommend the Haymarket by Scandic, which is a converted art deco department store in the Norrmalm district, which seems to be where a lot of the cool kids hang out. If you don’t believe me, check out the bar (which isn’t cheap).

Ericsson tour bar

My first meeting was with Helena, who have me the top line on Ericsson’s current situation, strategy, etc. The long and short of it is that Ericsson was spread too thin by the time the Hans Vestberg era came to an end. In its desperation to compensate for declining revenues in its core markets Ericsson had got carried away with diversification and entered into too many ill-advised deals.

New CEO Börje Ekholm noted all this and decided the first thing that needed doing was some pretty serious pruning, in the form of disposing of some of Ericsson’s more peripheral and/or under-performing businesses and a headcount reduction of around 20%, including a fair few senior execs. The new streamlined company now focuses its efforts on four main silos: networks, managed services, digital services and emerging business (which seems to include ‘others’ like Red Bee).

I wasn’t able to bring a video crew with me for this visit so I decided to record some video on my Samsung Galaxy S7 phone, using a selfie stick/tripod and some clip-on microphones. This was a bit of an experiment and to say it was an unconditional success would be a definite overstatement, but hopefully it added some value. Here’s me chatting to Helena – you will notice this was recorded just as the football World Cup was started, so you get to the benefit of hindsight from which to judge our expectations.

We then went on a tour of the Ericsson Studio, which is a kind of permanent manifestation of Ericsson’s Mobile World Congress stand in so much as it features a bunch of demonstrations of Ericsson’s latest cleverness. My guide was Jon Gamble and my camera operator was Minako, so I’ll let this video clip, in which I get virtually knocked off my bike, speak for the Studio.

Back to the meeting room and a chat with Peter Laurin, the head of the aforementioned managed services silo. I hadn’t realised how active Ericsson is in the field maintenance of networks, it apparently manages the field forces of most of the UK operators. But it looks like it has been a bit too active, because this division has been losing money and part of the turnaround strategy has been to exit some ill-advised contracts. Here’s Peter to tell you more.

My final interview of the day was with Håkan Andersson, Head of Technology Strategy, who took me through the current technological environment and what Ericsson’s strategy is for capitalising on it. As you would expect it’s all about the 5G and Andersson gave me a pretty deep dive, so before filming the clip below I had the temerity to muck about with his slide deck in order to distil it down to what I thought was the most interesting stuff. Thanks for putting up with my control freakery Håkan.

In the evening I had the pleasure of hanging out with Helena, Minako and Head of Corporate Comms Peter Olofsson. We jumped on a boat and went out to the first of a group of small islands known as the Archipelago, to have dinner in a restaurant with great views and an even better selection of aquavit called Fjäderholmarnas Krog & Magasin. Here we are on said boat having a cheeky beer to get things going – I had to help Minako with hers – followed by a cool view of Gamla Stan (the old town) from our returning boat.

Ericsson tour boat beers

Ericsson tour old town

The next day I met up with Peter Olofsson again to check out a really interesting exhibit that’s hidden away from the rest of the world in a back room of the police museum. The company was created by Lars Magnus Ericsson back in 1878 to bring telephones to the Swedes. Somehow they managed to preserve his original boardroom and transport it to darkest Östermalm, where now only people who know the secret Ericsson password get to see it. It’s like stepping into a time machine and a great reminder of the dizzying progress the telecoms industry has made over the past century or so.

Ericsson tour boardroom

A cab ride back to Ericsson Towers in Kista led to a chat with Matilda George, who runs Ericsson Garage. While this isn’t another piece of ill-advised diversification it is symbolic of need to not stand still either. The Garage is essentially an in-house incubator where Matilda and her colleagues get a free rein to hang out with startups, support them and maybe even get involved for the long term. It was especially pleased to see the array of bean bags, primary colours and foosball tables that everyone knows are essential to fostering a startup environment.

Ericsson tour garage

Following a spot of lunch in the impressively large and well-stocked Ericsson canteen I met with Mikael Halén, Director of Government and Industry Relations. I decided not to keep filming because I wasn’t sure how the experiment was going, but Mikael filled me in on how companies like Ericsson interact with governments and regulators as trusted technology advisers.

We walked through the pros and cons of the three main 5G spectrum bands, with 700 MHz being used mainly for coverage, mmWave for capacity and 3.5 GHz having a more general purpose role in dense environments. A big issue is spectrum harmonization, especially in the 3.5 GHz band, with big contiguous chunks of it needed to deliver the best capacity outcomes. In that context we also discussed the pros and cons of spectrum being licensed and concluded spectrum availability is one of the biggest factors affecting the speed of 5G rollout.

Next I met Gustav Brismark, Chief Intellectual Property Officer, who was carrying a patent the length of an entire hardback book that covered 5G NR. This seems to be a pretty big deal for Ericsson and, which takes pride in being the biggest contributor to mobile standards. We chatted about the standardization process and the need for FRAND licensing, to ensure major contributors to standards are not able to hold the rest of the industry to ransom.

My final meeting was with Thomas Norén, head of 5G Commercialization, who took me through some of the business cases for 5G. The grid in the photo below organises for key features of 5G according to how easy they are to both sell and deploy, with enhanced mobile broadband easy on both counts and critical machine type communications conversely tricky.

Ericsson tour Noren

Thomas was keen to emphasise some of the technological advantages the reckons Ericsson has over its competitors, with the ability to easily upgrade its latest kit to 5G uppermost among the competitive trump cards in its deck. I asked if that’s why Nokia CEO Rajeev Suri decided to brief against exactly such a feature and let’s just say Thomas made his disagreement perfectly clear.

I didn’t get to meet Börje Ekholm on that trip as he was off flying around the world doing all kinds of important CEO stuff like signing deals and hatching plans, presumably. More recently, however, a few telecoms hacks got to share a beer with him in London, which was fun. I couldn’t resist dangling the Nokia FUD carrot to him too and he diplomatically side-stepped the issue by noting they must be doing something right if their competitors publicly brief against them. You can hear more about those drinks on this podcast and here’s a photo of me hanging out with the main man.

Ericsson tour Ekholm

Public relations has become a lot more streamlined over the past decade or two and visits like these are increasingly rare. The vast majority of what I write is derived from some single written source such as a press release, but it’s good to put a human face on the companies we cover from time to time and maybe even introduce a spot of nuance to my coverage.

Ericsson is a big company, humbled by its reversals of recent years. Everyone I met reflected that humility and I get the impression Swedes are generally quite understated. But at the same time there’s a lot of pride and ambition on show and I think they’re looking forward to a time when they can be a bit less humble. There are signs of recovery now and it would be cool to go back to Stockholm and check in with them in a year or two, if only to visit another island in the archipelago and have a bit more aquavit.

Ericsson tour aquavit

Amdocs and Openet settle baffling, endless patent dispute

After eight years of ensuring expensive holidays for their lawyers, rival telecoms software companies Amdocs and Openet have decided to call it a draw.

An extremely short announcement from Amdocs said “Amdocs and Openet today announced that they have settled a patent infringement dispute in the United States Federal District Court for the Eastern District of Virginia.  As part of the confidential settlement, Amdocs agreed to license certain patents to Openet.”

Back in 2010 youthful Light Reading hack Ray Le Maistre spoke to (then and still) Openet CEO Niall Norton in a bid to find out what Amdocs’ problem was. Norton, however, seemed to be as baffled as everyone else by this act of unilateral legal aggression and chose to conclude that it was merely a measure of how intimidated Amdocs was by the plucky Irish BSS upstart.

“[Amdocs] is a good company and a ferocious competitor,” said Norton at the time. “It’s good to know they’re thinking about us as much as we’re thinking about them. We’re open-minded about what might happen next. Our lawyers say this could take anything between three and 12 months to sort out.”

That’s what they always say Niall and then, before you know it, eight years have gone past and they’re the only ones with any cash. To be fair the case does seem to be especially arcane. A spot of light Googling revealed one case that was apparently resolved in 2016 and another that came to a conclusion a month or so ago. Both accounts seem like very effective cures for insomnia but we don’t feel any more enlightened about the merits and outcome of this litigatiathon as a result of enduring them.

In essence Amdocs accused Openet of infringing on some of its patents and the fact that Openet is now going to shell out some license fees would seem to vindicate it to some degree. But if we assume Amdocs’ intention was at the very least to force Openet to entirely abandon the technology in question, and maybe even to force it out of business, then the case seems to have been a failure.

Qualcomm sues Apple some more – yay

Qualcomm has managed to dig up some more patents it reckons arch-enemy Apple has infringed upon and decided to turn that into three new legal actions.

With Christmas coming and the year drawing to a close we wouldn’t be surprised if Qualcomm’s horde of lawyers was keen to demonstrate a late flurry of activity. Apple has presumably been suspected of these infringements for some time, this litigation-athon having kicked-off at the start of the year, but there’s no harm in keeping a few up your sleeve is there?

“Qualcomm has filed three new patent infringement complaints against Apple in the U.S. District Court, asserting a total of 16 additional patents that Apple is currently using in its iPhones,” said the Qualcomm announcement.

“Five of these patents are also included in a new complaint filed in the International Trade Commission. Like the patents we asserted at the ITC in July, all of the 16 patents are non-standards essential patents implemented outside of the modem. Apple continues to use each of these patents in its devices without paying for them.”

It doesn’t really matter what these specific patents refer to, but here they are for anyone who’s into that sort of thing: U.S. Patent No. 9,154,356, 9,473,336, 8,063,674, 7,693,002, 9,552,633, 8,971,861, 7,834,591, 8,768,865, 8,229,043, 8,447,132, 9,024,418, 8,683,362, 8,497,928, 8,665,239, 9,203,940 and 7,844,037. Some of them even refer to patents Qualcomm got from Palm back in the day. It’s not obvious why Qualcomm has seen fit to get three law suits for the price of one out of this but, frankly, who cares?

This could all just be a bit of legal tit-for-tat after Apple thought it would be funny to sue Qualcomm for infringing on its patents earlier this week. Next they’ll be saying Snapdragon is a flower, and Apple trees also have flowers, so that’s an infringement too.