[Ip-health] WSJ: WiMAX Patent Pool Is Planned - Firms Aim to Spur Use by Limiting Royalty Payments

[Matt Price]

http://online.wsj.com/article_print/SB121297783001956285.html

WiMAX Patent Pool Is Planned
Firms Aim to Spur
Use by Limiting
Royalty Payments
By DON CLARK
June 9, 2008; Page B6

Six big technology companies are spearheading a plan to jointly
license patents that cover the wireless technology called WiMAX hoping
to limit royalty rates that could deter customers from using it.

The participants are Cisco Systems Inc., Intel Corp., Samsung
Electronics Co., Sprint Nextel Corp., Alcatel-Lucent and Clearwire
Corp., according to people familiar with the situation and a document
outlining the group's plans.

They have scheduled a conference call Monday to announce an
organization, the Open Patent Alliance, to gather rights to
WiMAX-related patents and license them to makers of computers,
networking devices and other products, these people said.

WiMAX is a long-range cousin of a wireless technology called Wi-Fi
that comes with many laptop computers. Intel, which heavily promoted
Wi-Fi, has been pushing to make WiMAX another built-in feature of
portable PCs. Sprint and Clearwire plan to build a nationwide WiMAX
network, while Samsung, Cisco and Alcatel-Lucent are expected to make
WiMAX equipment.

But hardware makers could be spooked if patent royalties are too high
or the potential costs are uncertain. WiMAX backers cite the case of
third-generation cellular networks; companies such as Qualcomm Inc.,
Nokia Corp. and Telefon AB L.M. Ericsson separately charge patent
royalties for 3G products.

Some industry analysts say cellphone makers face cumulative royalties
of more than 25% of the price of handsets, unless they have their own
patents to help in negotiating lower rates. One person familiar with
the thinking of the WiMAX alliance said it hopes to license WiMAX
patents at "much lower" rates than those in the cellular industry.

Such patent pools aren't a new idea. A group called MPEG LA, for
example, offers standard royalty rates for licensing patents
associated with video compression. Patent pools are "tremendously
important," said David Balto, a Washington, D.C., lawyer who handles
patent and antitrust issues.

But the WiMAX alliance, which was reported by Computerworld Friday,
faces several challenges. One is a competing standard -- known as LTE,
for long-range evolution -- that shares a common technical foundation
with WiMAX and is expected to be preferred by many cellular carriers.

And some prominent holders of patents related to WiMAX and LTE --
including Motorola Inc. and Qualcomm -- haven't joined the patent pool
and could continue to make their own claims for royalty payments.

Until they explain their licensing plans, some uncertainty for
equipment makers will remain despite the existence of the new patent
pool, said Mike Thelander, an analyst with Signals Research Group, in
an email.

A Qualcomm spokeswoman said the company wouldn't join the WiMAX
alliance. Though patent pools are a valid approach, "Qualcomm has
consistently preferred to negotiate license agreements bilaterally,"
she wrote in an email. Qualcomm has already licensed patents covering
technologies used in WiMAX to nine companies, she added.

A Motorola spokeswoman said, "We continue to evaluate the merits and
risks associated with every proposal that we hear about, and we
continue to make our own suggestions for improvements."

While some LTE backers are also pushing for a patent pool, Mr.
Thelander predicted that WiMax and LTE royalties ultimately may be
quite similar. But Larry Goldstein, a patent lawyer who wrote a book
on patent pools, said the WiMax group could reduce the number of
licensing deals to be negotiated even if some patent holders don't
join. "It can cut down on the onerous negotiations and cut down on the
overall royalty rate," he said.

Write to Don Clark at don.clark@wsj.com1