Betting on the 4G patent pool

Patents are a fact of life in the technology sector, but they're also a major source of fear and loathing. Witness the current dithering over patents for 3G and so-called 4G technology.

Much of the dithering has been directed at Qualcomm, which has had numerous high-profile legal clashes with rivals like Broadcom and Nokia over W-CDMA patents, while manufacturers and operators in Korea, Japan, India, China and even the US have expressed annoyance with Qualcomm for years over its exorbitant royalty rates. In the current Qualcomm/Nokia case in the US, Nokia stated in court documents that it has paid Qualcomm $1 billion for access to its full patent portfolio over a 15-year period.

It's not all Qualcomm's fault, though. ETSI's patent policy for W-CDMA technologies has been criticized for being too opaque to set a fair benchmark for royalty rates - one result of which is that W-CDMA's standard cumulative royalty rates for consumer devices is almost 9.5% - compared to just 5% for other handsets.

Now with a complicated web of 4G technologies gearing up for action, many wireless players would just as soon avoid a similar IPR war for 4G. The proposed solution: patent pools, an idea dating back to as far back as 1856, with the goal of streamlining the ability of pool members to cross-license patents and, ideally, mitigate patent disputes before they end up in the courts.

Clearing the patent thicket

In March, Next Generation Mobile Networks (NGMN), an operator group formed to influence future mobile broadband standards, set up a 4G patent pool at the behest of Intel and Samsung, which want to set up a 'reasonable and non-discriminatory' IPR process for Wimax, LTE and other OFDM-based technologies. Cellular equipment vendors Alcatel-Lucent, Ericsson, NEC, NextWave Wireless, Nokia, Nokia Siemens Networks and Sony Ericsson responded a month later with a framework for establishing 'predictable and more transparent maximum aggregate costs for licensing intellectual property rights' for LTE.

The big question, as always, is whether a pooling system will help streamline 4G innovations. Some analysts believe the 4G patent pool could indeed get costs under control and pressure Qualcomm into abandoning its 'my way or the highway' IPR policy.

But some industry pundits say that the real problem is the patent system itself, as hundreds of companies working on similar technologies are granted patents that overlap to the point where many shouldn't have been granted in the first place. The resulting 'patent thicket', critics say, has plagued the development of everything from nanotechnology to VoIP, hindering innovation as companies trying to get into the industry spend more time sorting out who owns what IPR - and paying through the nose for it - than they do developing products. Under these conditions, patent pools arguably exacerbate the problem by encouraging companies to throw more unnecessary patents in the mix in the hopes of cashing in on their slice of the royalty pie.

I tend to side with the patent thicket critics on this. The current patent system has become ridiculously complex and is in desperate need of reform and simplification. Too many companies are being granted too many patents, and too many are using them as legal leverage to raise capital or settle scores.