Nokia licensing policy on Long Term Evolution and Service Architecture Evolution essential patents

Open standards provide an industry framework for effectively advancing the development and deployment of new technologies, and encouraging competition, which ultimately benefits consumers.

Today all products rely on intellectual property from a number of different companies. Therefore, how companies exchange their standards-related intellectual property is critical to delivering next generation technologies. Intellectual property rights (IPR) create an incentive for sharing industry standard technologies and enable viable product businesses with reasonable IPR costs. This is achieved by participants committing to license essential patents on fair, reasonable and non-discriminatory (FRAND) terms.

The hallmarks of FRAND licensing are, subject to reciprocity:

  • Commitment to allow any company to practice the standard, and a right to reasonable compensation to IPR owners
  • Reasonable maximum aggregate royalty rates based on the value-added by the technology in the end product
  • Flexible bilateral licensing negotiations, based on proportionality of licensor’s share of all standard essential IPR for the relevant product category.

Currently, the 3rd Generation Partnership Project (3GPP) is standardizing a next generation wireless technology called Long Term Evolution and Service Architecture Evolution which is together referred to as LTE. Nokia expects LTE technology to be increasingly incorporated into products such as laptop computers, consumer electronics devices such as cameras and navigation devices, and into smartphones.

Nokia encourages a healthy business environment around LTE technology and licensing terms for the standards-essential patents that reflect the value added by that technology in the licensed end product.

There has been considerable uncertainty in the industry regarding future IPR cost of LTE technology, and a strong wish to increase the predictability and transparency of IPR licensing costs. LTE standardization is a long process, and it is likely to take several years before there is reliable information about essential patent ownership in the industry. Therefore, any disclosed LTE royalty rates are only preliminary indications, and no meaningful conclusions can be drawn by adding together often unsubstantiated price requests. Nokia believes that the reasonable maximum aggregate royalty rate for LTE standards-essential IPR in an end-user device is a single digit percentage of the sales price, and that the market will drive the aggregate royalty rate for LTE technology to be in this range. Based on Nokia’s extensive experience of licensing standards-essential IPR, we see no reason to expect that the LTE IPR cost would be any higher.

Given the current state of uncertainty about ownership of LTE standards-essential IPR, the best way to increase transparency and predictability is to disclose principles for future licensing of LTE standards-essential IPR. Based on past experience, and the current level of technology investment, Nokia believes it will have 20-30 percent of all LTE standards-essential IPR. Subject to reciprocity, Nokia will license its LTE standards-essential IPR at prices that are consistent with the principle of proportionality and current best understanding of Nokia’s share of all LTE standards-essential IPR. Currently, we expect Nokia’s rate for devices that deploy LTE as the only wireless communication standard to be in a range of 1.5 percent from the sales price of an end-user device. However. a significant use of LTE is expected to be in connection with other wireless communication standards, such as GSM, UMTS and/or CDMA.  When multiple wireless standards are used in the same end product, Nokia will follow similar principles in setting the royalty rate for Nokia patents essential to other standards. To avoid unfavorable effects of royalty stacking, Nokia will not charge royalties higher than 2.0 percent from the sales price of an end-user device for IPR that is essential to wireless communication standards irrespective of the number of wireless standards deployed in such a device.

The Nokia licensing policy takes into account customary volume discounts that allow manufacturers of devices to benefit from lower rates for higher volumes. The licensing policy is based on reciprocity which means it is conditional upon the licensee agreeing to use the same main principles in its licensing to Nokia products.