Ericsson Sues Apple Over Licensing Fees

14 January 2015

Swedish multinational communications gear vendor Ericsson has filed a patent complaint against Apple Inc. over global licensing fees related to Apple’s smartphones and tablets.

The suit, filed in the U.S. District Court for the Eastern District of Texas, follows two years of negotiations where the two companies have not been able to reach an agreement involving the licensing of Ericsson’s patents for use in Apple’s mobile devices, according to Ericsson. The move is a response to Apple’s own lawsuit, filed in the U.S. District Court of the Northern District of California, to determine that it does not infringe upon a small subset of Ericsson’s patents.

Ericsson disagrees that Apple does not infringe and is seeking independent assessment on whether or not its global licensing patents comply with Apple’s product’s use, the company said.

“Our goal is to reach a mutually beneficial resolution with Apple,” said Kasim Alfalahi, chief intellectual property officer at Ericsson, in a statement. Alfalahi added that Apple has been a partner for years and they hope to continue the partnership as the global sharing of technology “has created the success of the mobile industry” as well as “allowed new entrants to quickly build successful businesses.”

Ericsson claims the global license between the two companies for mobile technology has expired and Apple declined to take a new license.

Wayne Lam, senior analyst for telecommunications at IHS Technology, said the issue at hand is that Ericsson holds a large number of essential patents for Long-Term Evolution (LTE) and has long sought to price licensing cost based on a percentage of overall device sales. With Apple being the OEM that has the highest average selling price (ASP), it is at a disadvantage by using this licensing cost calculation method, Lam said.

“At last check [Apple’s] ASP is at the $600 mark while the rest of the industry is at most at $300,” Lam said. “Therefore, a 3 percent licensing cost would affect Apple more in absolute values than another OEM with much lower ASP. Also, Apple’s entire iPhone line is currently 100 percent LTE capable meaning that they are paying at the highest patents load for LTE, WCDMA and other essential patents.”

Lam added that Apple will obviously want to pay less or the same as other OEMs and will seek to re-work the royalty load calculation to a percentage of the chipset cost as opposed to a percentage of overall device cost. This makes sense, Lam said, because most OEMs want to attach licensing cost at the chipset level and not the end product.

“I believe that this major disagreement will be played out proximately as we move forward this year,” he said.

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Related links:

IHS Telecommunications

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