A 5G patent pool would be great, but probably won’t happen

A 5G patent pool would be great, but it will be very difficult to achieve, according to a top patent lawyer.

One thing that NGMN, the body that sees itself as leading on operators’ requirements on 5G, would like to see happen differently in 5G compared to 4G is the patent licensing regime.

The operators involved would like to see 5G act as an enabling technology for other industries, and avoid being seen as too expensive. Rules that might be appropriate for the handset industry could hamstring the IoT market, for example.

The organisation has said that it would like to improve Standard Essential patent declarations “in order to improve transparency and limit abusive patent declarations related to 5G standards”. It would also like to see independent assessment prior to licensing, and that it would like to “explore and establish” a patent pool framework. The attraction of a patent pool is that developers don’t have to “chase” IPRs, or see themselves being mugged by undeclared IPRs.

It’s early days, though, with NGMN just starting to talk to industry to develop plans for a 5G IPR ecosystem.

So what does a patent attorney make of these ambitions? Could the industry really organise itself to simplify IPRs, thereby fostering a lower cost of innovation and development? We spoke to patent lawyer Denis Keseris, Partner at Withers & Rogers where he heads up its Electronics, Computing & Physics group.

First off, has the existing patent regime proved fit for purpose for LTE, and does it need changing in any case? In two words, yes and no.

I don’t think patents are slowing innovation

We hear a massive amount about the mobile wars with patents but that is only the tip of the iceberg. The number of transactions which have gone well on the patent licensing far exceeds any of the headline litigations. We think, “Oh my God, the patent system is broken.” It’s not: for every one which is litigated there are hundreds that are being licensed effectively. The current system is getting a bad rap.

The other misunderstanding is that people seem to think [the patent process] is tying things up in such a way that the mobile industry is slowing down in terms of innovation. All you have to do is ask people what mobile phone they had 5 years ago, it will be different to the one that they have today. There’s a lot of innovation and a lot of change in this industry, I don’t think patents are slowing innovation.

So given this view of the current regime, would a patent pool work in this kind of market, and how would it benefit 5G?

PART A: (Patent Pool Primer)
When you put a patent in a pool, that comes with a certain amount of responsibility. You can’t use that patent against any of the other members in the pool. It also simplifies the distribution of licenses. Instead of having to go to 100 different sources and patent owners you can go to a single source, be charged a flat licensing fee for the entire standard and you’ll be protected; nobody who owns patents in that pool will come after you.

The funds are redistributed based on the agreement in the patent pool. How that happens is, dates are set and with each milestone the amount of money you get from the pool decreases as the standard gets more refined. The guys who were there at the start of the standard get a bigger cut, and as we move towards revisions of the standards where we’re really talking about minor refinements, the people who are coming up with intellectual property there and submitting it get a smaller cut.

(PART B: 5G benefits)
It could be beneficial to 5G. One of the keys to a successful patent pool is getting a bunch of really big players at the start. Getting three or four really major players who who pretty much own all the intellectual property from the start who say “we’re going to create a standard”.

That is easier to do when you are working in a vacuum, where interoperability is not an issue. On something like 5G, first off, it has to be interoperable with the 4G system, it has to be able to use all of the current infrastructure (or at least a large proportion), it has to comply with local telecommunications legislation.

Because there is so much up for grabs, it may be that the big guys just compete and let ETSI continue to be the steward and evolve into 5G in a piecemeal fashion, which is pretty much what happened between 3G, 4G.

Doing it that way does not have the benefits of the patent pool because you’re signing up to ETSI’s  FRAND agreement and most companies have different versions of FRAND.  They see FRAND as different and there’s no worldwide definition – although some companies are trying to push for that.

With a patent pool, its almost like an amnesty – give us your patent, we’ll give you a cut of the royalty rates which we charge everyone but you will no longer be able to use it against anybody who we charge a royalty to.

In my opinion it is likely that 5G is going to grow very much in the same way that 4G grew

From a licensing perspective, from a litigation perspective, i.e. simplifying licensing and trying to avoid litigation, it [a pool] would be fantastic. But because we’re not starting from a clean-slate, we’re building on from 4G and we need to think about interoperability and telecommunications legislation worldwide, its a lot more complicated. The types of circumstances where patent pools worked really well is Blu-Ray and Bluetooth, where you’re coming up with a new solution out of thin air. In my opinion it will be much more complicated to do that in 5G. It doesn’t mean there is no way of doing it though – it may be that Samsung and Nokia and Ericsson and ZTE and Huawei etc. will convene some time and say “let’s save ourselves a lot of time on patent attorneys and let’s try to get a pool off the ground”. They certainly have the clout to do that.

In my opinion it is likely that 5G is going to grow very much in the same way that 4G grew, not going back to the drawing board with a patent pool  to design a whole new system. It will be more – let’s add this functionality, lets add that functionality and at some point let’s call it 5G.

NGMN has also recommended independent quality declarations of patents before licensing. Could you talk us through how this might be handled?

For 4G or 3G, you don’t actually figure out whether the patent is necessarily standard essential until you go to litigation. You declare the patent to be standard essential, you sign the FRAND agreement, but that’s it – there’s not much investigation into whether it is essential. In a patent pool, you [have] an independent expert saying “this is essential” or its not. (I was the independent assessor for Blu-Ray’s pool)

The reason that people are pushing for that is, if you look at a lot of the patent wars going on in the mobile space, the ones being claimed to be standard essential, few of them actually are. After litigation it turns out they’re either standard essential and not infringed or not standard essential. One of the big pushes in the patents world is we’d like to have some independent verification of essentiality.

Separately, but while we have you… there is a theory that Nokia’s decision to purchase Alcatel-Lucent was driven by the French company’s 5G patents, do you think that is likely?

I work for Bell Labs. I can tell you that they have a phenomenal portfolio of patents. They say that the Nortel portfolio sold for something like $4.5 billion, and that’s what was left of the portfolio after the company had been ripped apart! Alcatel-Lucent would have a portfolio that is much larger than currently. Absolutely, that could have driven that purchase.

Companies all over the world are waking up, partly because of this Nortel acquisition. That was the first time in the history of the world that people really took notice of the acquisition of a [patent] portfolio. Nortel didn’t even have to go under, they could have just decided to become a patent-licensing company . They could have taken that portfolio, or whatever was left of it, and basically do what Nokia has done – become a patent licensing entity. There was absolutely no reason for that company to go under.

Whereas 5 years ago, patents were not even on the balance sheet of tech companies, people now are really realising that patents could be the most valuable asset that a company has. In fact much more valuable in the case of Nortel: 10,000 times more valuable than all of its assets put together.