Recently, Ericsson sued Apple for infringement over 41 Ericsson patents including
4G/LTE standard essential patents (SEPs) related to Apple's iPhones and iPads. Ericsson said Apple owes it patent royalties for
using its wireless technologies in the iPhone and iPad, but Apple refused its
fair and reasonable licensing offer.
Notwithstanding the recent administrative and judicial
blocking against exploiting SEPs for injunction,
several courts ruled that SEPs are still eligible for monetary relief for
infringement. In Microsoft Co.,
v. Motorola, Inc., No. 2:10-cv-01823-JLR (W.D. WA), the court provided basic
guidelines for assessing FRAND royalty for SEPs.
The guidelines are based on the Georgia-Pacific analysis of
the reasonable royalty (Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F.
Supp. 1116, 1120 (S.D.N.Y. 1970)) modified for taking into account SSOs’
primary goals for adopting FRAND commitments. The key modification to the Georgia-Pacific factors leads
to the reasoning that a royalty in a patent pool for the specific SEPs at
issue or comparable licensing transactions as a candidate for the royalty
established through negotiation under FRAND commitments. Thus, the royalty
rate in the recently formed LTE patent pool may provide expected FRAND
licensing revenue.
Another court’s guidelines for assessing FRAND royalty
for SEPs can be found in In re INNOVATIO IP VENTURES, LLC, No. 1:11-cv-09308
(N.D. Ill. 2013), Dkt. No. 975. The INNOVATIO
IP VENTURES court calculated
FRAND royalty (cap) of WiFi SEPs as (average profit margin to the contribution
of patentee’s SEPs) x (net profit of relating products) x (pro rata share of
patentee’s SEPs to the total number of WiFi SEPs providing similar contribution
to the profit). Similar calculation can also lead to the FRAND royalty (cap)
for 4G LTE smartphone SEPs.
To evaluate Apple’s 4G LTE smartphone SEPs licensing
royalty owed to Ericsson, Ericsson’s IPR share in 4G LTE SEPs is researched.
Recent TechIPm, LLC’s research for 4G LTE standard related patent in the US reviles Ericsson’s 4G LTE smartphone SEPs’ IPR share is around 7% (for details about
analysis method, please refer to 4G LTE
Patents for Standard Innovativeness Ranking: http://techipm-innovationfrontline.blogspot.com/2015/01/4g-lte-patents-for-standard_8.html).
Then, based on various market research data as of 4Q 2014,
the net profit of Apple from smartphone sales per year in the US market is calculated as roughly $10 B. Finally, if the average profit margin to the
contribution of the 4G LTE SEPs of 3% (smallest scalable product base) is assumed,
the licensing royalty of Ericsson that can have from Apple is expected to be around $200
M per year.
For more information, please contact Alex Lee at
alexglee@techipm.com .
©2015 TechIPm, LLC All Rights Reserved
http://www.techipm.com/
©2015 TechIPm, LLC All Rights Reserved
http://www.techipm.com/
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LTE Essential Patent Candidates Data is the TechIPm's product based on LTE patents research for US market leader among LTE UE (cellular phones, smart phones, PDAs, mobile PCs, etc.) and base station (eNB) product manufactures.
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