Royalty Rates And Licensing Strategies For Essential Patents On LTE (4G) Telecommunication Standards

Eric Stasik
Director, Avvika AB, Stockholm, Sweden

Long Term Evolution, or LTE, is the latest sequel to the successful GSM series of standards. A so-called fourth generation (4G) mobile communications technology, LTE is an upgrade to UMTS/WCDMA (3G) providing an enhanced radio interface and all-IP networking technology.

Like a sequel to a successful movie, LTE includes many elements of the original release and offers a few new twists. This is especially true when it comes to the matter of licensing essential IPRs for the LTE standard. Audiences can expect to see the same licensing challenges that first appeared in GSM (2G) and which re-appeared in UMTS (3G) starring again in LTE (4G).2 The plot is essentially the same: lots of essential patents and many different patent holders. The LTE sequel begins in much the same way as UMTS did—with an announcement of an industry initiative on the matter of essential IPRs. In LTE this scene took place in April 2008 where a group of leading telecommunication companies committed themselves to a framework for “establishing predictable and more transparent maximum aggregate costs for licensing [patents] that relate to 3GPP Long Term Evolution and Service Architecture Evolution (LTE/SAE) standards.” In particular, these companies stated “support” for “a reasonable maximum aggregate royalty for LTE essential IPR in handsets is a single-digit percentage of the sales price.”


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