On March 3rd, Swedish telecommunications company Ericsson (NASDAQ:ERIC) publicly announced its fair, reasonable and non-discriminatory (FRAND) terms and conditions for the licensing of standard essential patents (SEPs) for 5th Generation New Radio (5G/NR) as standardized by the 3rd Generation Partnership Project (3GPP). The decision to announce these terms publicly may be an indication that Ericsson is looking to avoid the fate of other mobile wireless chip makers, which have come under fire in recent months for their own licensing practices.
As Ericsson notes in its press release announcing the FRAND terms, the telecom firm wants to ensure that its licensing framework operates with a good deal of transparency and establishes predictable licensing terms. The framework establishes a maximum royalty of $5 per 5G/NR multimode compliant handset which practices the technology covered by Ericsson’s SEP portfolio. Ericsson is also offering rates as low as $2.5 per 5G/NR handset to license the SEPs for the sale of handsets in market segments which have low average sales prices for the handsets. “Ericsson’s reference framework reflects the value that its standard essential patented inventions will confer on 5G/NR multimode handsets, as well as its long-standing commitment to reasonable aggregate royalties and proportional compensation for innovators,” Ericsson’s press release reads.
As Bloomberg notes in its coverage of Ericsson’s FRAND licensing announcement, the decision to publicly release this information is unusual as many licensees of SEPs are unaware of what rivals may be paying for access to the same technology, despite any assurance of FRAND obligations keeping costs in check. Ericsson could have been encouraged to take this path in an effort to avoid the growing legal battle which is facing American mobile chip developer Qualcomm Inc. (NASDAQ:QCOM). In January, Qualcomm faced legal actions filed separately by the Federal Trade Commission (FTC) as well as American consumer electronics designer Apple Inc. (NASDAQ:AAPL) targeting what they felt were unfair licensing practices employed by Qualcomm. Those actions follow a $853 million fine levied against Qualcomm by the South Korean Fair Trade Commission last December for improper negotiation tactics in patent licensing activities. In February 2015, Qualcomm was hit with a $975 million fine from Chinese antitrust authorities over similar charges.
In late February, Ericsson was one of more than 20 telecom companies across the globe which announced collective support for the acceleration of the 5G/NR standardization schedule planned by 3GPP. It’s expected that implementation of the 5G/NR standard in wireless mobile products will achieve multi-gigabit per second data rates at lower latency rates than currently experienced on mobile networks, enabling the high data transmission rates that will be required by virtual reality and augmented reality technologies.