BY CAROLINE GABRIEL, RESEARCH DIRECTOR
Ericsson has turned up the pressure on Apple, suing it in three European markets and claiming that the iDevice maker expects special treatment when it comes to licensing fees for standards-essential patents (SEP). Apple currently has no licence for its antagonist's technologies, since their former deal expired early this year.
The escalation of the dispute will bring back bad memories of Apple's last major battle over SEP, with Nokia, which ended in a settlement that was favorable to the Finnish company. That indicated that, while Apple has had some successes in patent infringement actions against Android players, notably Samsung, those have related to non-standardized elements such as displays, user interfaces and device design. When it comes to the technologies inherent in cellular communications, the traditional vendors still hold the upper hand, even in the newer LTE platform.
Apple aims to tip that balance of power in its own direction, a goal which lies behind its aggressive litigation over recent years - if achieved it would significantly reduce the company's costs and increase its overall influence. In complaints made against Ericsson in a California court in January, Apple argued that the price of modern electronic devices is driven by the technologies in which it has power - the operating system, touchscreen interface and so on - which are unique to each design, not by standards-based elements, notably the modem. It said Ericsson "seeks to exploit its patents to take the value of these cutting-edge Apple innovations".
The Swedish giant, one of the biggest holders of SEP assets in the mobile world, has filed suit in Germany, the Netherlands and the UK. It claims it wants Apple to license its technologies on the same Frand (fair, reasonable and non-discriminatory) terms as everyone else, but that the US firm has refused to do so, since their previous contract expired in January.
Apple, in various counterclaims, has been alleging that Ericsson uses its dominant IPR position to demand "excessive" royalties, accusing the company of "abusive licensing practices". It is also disputing that some of the patents in question are essential to LTE standards at all. It has also passed on Ericsson's proposal to refer the argument over Frand terms to independent arbitration in Texas, an offer which has now expired, helping to spark the new actions.
It seems that the new European actions, as well as opening new fronts (and possibly bringing the European Commission into play in future) are specifically addressing Apple's claims that key Ericsson patents are not SEP.
Gustav Brismark, VP of patent strategy at Ericsson, said in an interview: "Our Frand terms [with Apple] are in line with the other some 100 licensees using our technology. Our policy is to be fair and treat everybody the same in the market. We simply demand a fair royalty."
Ericsson has taken the high moral ground with its offer to take not just this spat, but its entire Frand licensing framework, to arbitration, and so hope to obtain objective endorsement of its approach, at a time when many international regulatory and standards bodies are rethinking how Frand terms are defined. The European Commission, for instance, has been investigating the way that companies such as Samsung license their SEP, and whether this could be construed as giving the patent holders an unfair competitive advantage.
When the licensing deal for 2G and LTE patents expired early this year, Ericsson accused Apple of infringing on seven of its essential patents, while its opponent filed suit against Ericsson in California, denying any infringement and challenging the claims of being fundamental to LTE standards at all. However, Ericsson points out that the seven assets at issue in that case are a "small subset" of the total and "would not in any way resolve the wider dispute covering hundreds of patents". The fights cover 2G and LTE standards as well as non-standardized technologies related to cellular communications and wireless modems.
Further legal actions have followed from Ericsson, including the demand for arbitration, several infringement lawsuits in Texas, and complaints at the US ITC (International Trade Commission). The ITC hearings are scheduled for late 2015 or early 2016. Now Ericsson has broadened its attack to its home front with the European suits.
Though Ericsson is not commenting on the sums involved, Reuters calculates that, if the firm wins, Apple would owe between $240m and $725m a year, based on forecast levels of handset sales and royalties per phone. However, any settlement could be affected by broader industry debates about per-device charging - Qualcomm, in particular, is under pressure to shift to charging licensing fees based on the price of the chip, not the whole smartphone. Apple has been in the vanguard of that campaign, which is already influencing patent renewal deals across the industry, and is harnessing the same arguments against Ericsson. The Swedish firm continues to maintain that royalties should be based on "the end prices of entire LTE devices".
"Apple continues to profit from Ericsson's technology without having a valid licence in place," Kasim Alfalahi, Ericsson's chief intellectual property officer, said in a statement. "Our technology is used in many features and functionality of today's communication devices. We are confident the courts in Germany, the UK and the Netherlands will be able to help us resolve this matter in a fair manner."
Ericsson has one of the wireless industry's largest IPR portfolios, with more than 37,000 granted patents, and about the same number of pending applications worldwide. It says it has about 100 licensing deals, covering most wireless vendors and including major cross-licensing deals with rivals such as Nokia.
Apple refused to comment on the latest developments and just referred back to its statement in January, which said the firm had "always been willing to pay a fair price to secure rights", and that almost two years of negotiations had failed to result in a settlement, hence the need to resort to lawyers.