5G Patent Licensing Wars Begin: Nokia undercuts Ericsson and Qualcomm on royalties for 5G smartphones

On August 21st Nokia announced its patent-licensing rate for 5G smartphones at €3 (~$3.47) per smartphone. That rate appears to be less than what Qualcomm and Ericsson are charging for their own 5G patents.

“Nokia innovation combined with our commitment to open standardization has helped build the networks of today and lay the foundations for 5G/NR,” said Ilkka Rahnasto, head of patent business at Nokia. “This announcement is an important step in helping companies plan for the introduction of 5G/NR capable mobile phones, with the first commercial launches expected in 2019.”

For other categories of devices, Nokia said it will determine its licensing rates separately “and seeks to engage in constructive dialogue with relevant industry participants to define the licensing models best suited for those industries.”

Nokia’s announcement underscores what will be a major element in the growth of the 5G industry.  The companies that have contributed to the 3GPP relase 15 New Radio (NR) spec are all likely looking to cash in on patent-licensing agreements.  That’s even though 3GPP won’t submit it’s IMT 2020 RIT proposal to ITU-R WP 5D till July 2019!

Image result for pic of 5G patents illustration

Already some of the global wireless industry’s biggest players have outlined their patent-licensing positions on 5G, even though there won’t be a standard (ITU-R’s IMT 2020) for more than two years.

Qualcomm late last year said that it could charge smartphone manufacturers up to $16.25 in royalties for every 5G phone they sell. However, $16.25 per 5G phone is not necessarily the exact price that 5G handset makers would pay; the company said its rates would vary depending on exactly what kinds of technologies were included in the license, as well as what types of devices manufacturers would sell.  Furthermore, Qualcomm indicated in April the company will adjust its patent-licensing terms, which some analysts said could result in a reduction in licensing fees paid by some of Qualcomm’s bigger customers, like Samsung.  Last November, Qualcomm announced it would charge up to $16.25 in royalties for 5G smart phones.

Similarly, in March of last year, Ericsson said it would charge $5 per 5G phone, though Ericsson said it might reduce that rate to $2.50 per phone under “exceptional circumstances.”  The company states on its website:

5G standardization is supported by the patent and licensing process, and will boost performance between networks, devices and operators, creating new revenue streams with radical new business models and use cases. Progress on the 5G standardization front will also bring enormous opportunities to the way we use our devices to communicate with our surroundings, revolutionizing key industries globally, including: TV and media; manufacturing; healthcare; telecommunications; and transportation and infrastructure.

Monica Magnusson,  VP of IPR Policy at Ericsson recently wrote:  “5G will offer a $619 billion revenue opportunity by 2026 globally. The new possibilities and innovations that 5G will enable seem exciting but harnessing the potential business value and societal benefits from technological breakthroughs will require a commitment to making this technology accessible. That’s why consensus-based standards and fair patent licensing must be prioritised.”

Nokia, Qualcomm and Ericsson are all working to increase the revenues that they derive from patent licensing. During the Nokia’s second-quarter earnings conference call with analysts, Nokia’s CEO Rajeev Suri said that “We expect our current portfolio strength both to continue for many years to come and to give us considerable monetization opportunities. … We’ve always had clear and ambitious targets for new patent creation and we are constantly adding new patents to our portfolio while still maintaining a high-quality threshold.”

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