Too many companies are claiming to own patents that are essential to building next-generation Wideband Code Division Multiple Access (W-CDMA) handsets, base stations and radio network controllers, said Brian Kearsey, director general of 3G Patent Platform Partnership (3G3P).
3G3P was established by the mobile phone industry to provide an evaluation service for W-CDMA patents, the main 3G standard in Europe.
Problems are compounded the fact that no industry-wide agreement exists on pricing or use of patents. This is complicating the process of establishing royalty agreements between intellectual property owners and companies hoping to enter the W-CDMA market, said Kearsey.
"These developments could seriously hinder the viability of the 3G market if an approach isn't found," he added.
With so many patent holders staking their claims, royalty payments could account for up to 20% of a handset, he warned. 3G3P hopes to cap royalties at 5% of the sales value of a product.
In the early days of developing GSM, only a limited number of vendors felt the technology was viable and consequently only a small number of players acquired essential intellectual property, according to Kearsey. But after the success of GSM - the most widely used mobile standard in the world - many more vendors have shown an interest in 3G.
Around 100 companies, mostly manufacturers but also some operators, claim to own patents critical to building W-CDMA systems, compared to around 20 companies that own essential patents for GSM, Kearsey said.
3G3P has developed an approach to evaluate, certify and licence essential patents for 3G systems based on an online licensing administrator. The platform will operate commercially within the UK-registered company, 3G Patents.
By minimising intellectual property costs and reducing exposure to infringement litigation, 3G3P hopes to make the 3G business case more attractive, according to Kearsey. This is important, especially as many companies are now taking "a serious look at their 3G commitments", he said.
Because 3G3P was defined by a large number of competing suppliers and operators, the planned code of conduct for evaluating, certifying and licensing essential patents needs the approval of the major competition authorities, including the US Department of Justice, the European Commission and the Japanese Fair Trade Commission.
The Japanese approved the platform in December 2000. Decisions from the other groups are pending.