In December 2018, the German District Court of Munich granted Qualcomm an injunctive relief against Apple’s iPhone models 7 and 8, after it alleged the company violated its patents – and since then a US judge has handed down a similar ruling.
Apple took the models off its shelves in Germany, yet these remained widely available through third-party retailers. Many consumers were none the wiser to this, as the company managed to (initially) avoid bad PR by sending out its own press release confirming the availability of handsets. One point to Apple, null to Qualcomm, to the legal system and to innovators behind ideas the world over.
Apple versus Qualcomm illustrates the complexities of asserting intellectual property (IP) rights and maintaining good business relationships, and highlights how injunctive relief and the powers of the courts can be undermined. What can we learn from the fiasco? And how can all contributors to the telecoms and tech sector – be they huge multinationals or tiny startups – protect their ideas, access and use those of others, and support developments in the industry?
Putting a price on innovation
Using patented IP often cannot be avoided. Indeed, if companies didn’t leverage the ideas of those before them, it would be impossible for the telecoms and tech industry to progress and innovate anew.
Licensing of IP should be conducted on fair, reasonable and non-discriminatory (Frand) terms, with all parties involved cooperating and dancing the Frand dance. Again, this is important in terms of furthering innovation – to be included in ETSI standards, for example, the group requires its members to license their patents on Frand terms. This includes open negotiation between parties, with offers and counter-offers reviewed and made within a timescale, avoiding the possibility of potential licensees stalling (holding out).
Companies such as Apple and Qualcomm, which have been operating in the telecoms space for years, should know better. Yet the changing landscape of the comms industry – and its embrace of vertical sectors – does introduce complexities for newcomers wanting to take out a licence, or license their own IP.
5G: a land of opportunity – and complexity
Those companies which own IP related to 5G technology will be eagerly awaiting network deployments, when they can sit back and enjoy the royalties as they flooding in. Ericsson, for instance, will charge licensees $2.50-$.005 (£1.89-£3.76) per 5G handset, which was undercut by Nokia’s $3 flat rate.
Pio Suh, IP Com
But 5G isn’t all about handsets. In fact, it’s arguably mostly not about handsets. Instead, some of the most lucrative and interesting business cases are arising from vertical sectors such as automotive, utilities, manufacturing and agriculture. And herein lies the challenge.
Many businesses operating in these sectors will lack the knowledge of the IP landscape, and will therefore struggle to navigate the do’s and don’ts of patent licensing. Furthermore, royalty rates for 5G handsets are charged as a percentage of the total cost of each handset – how does this translate to these vertical sectors? Should licence fees be based on, for example, a $25 module integral to connectivity in a smart car, or on the $150,000 car itself? It’s clear which option the automotive manufacturer would pick.
5G is bringing about a culture clash – as new verticals open up and lines are blurring, companies are dealing with situations they’ve never been in before. Those looking to license or obtain a licence for a 5G technology should engage with partners in these early stages, playing by the rules, avoiding litigation further down the line, and paving the way for a profitable 5G roll-out.
The issue of IP licensing isn’t just coming to the fore for those in the tech industry – it’s also emerging in the public realm too, thanks to growing media coverage of legal cases. Consumer brands like Apple will have to deeply consider reputation management, while for component manufacturers like Qualcomm, it is relationship management which must be protected.
It’s this kind of complex interplay between Qualcomm, operators and retailers in the Apple case, which stopped the chipset designer from filing a preliminary injunction against those German shops that continued to sell iPhones.
In cases like this, it is possible to maintain reputation and relationships, while achieving fair recognition for innovation and ownership of IP. Qualcomm could, for instance, have leveraged a patent assertion company to enforce its patent rights, thereby avoiding bad blood with retailers. Importantly, this kind of approach would also shine the spotlight on the actions of the retailers and operators themselves.
Qualcomm versus Apple is a complex case of Goliath versus Goliath, and it raises a lot of interesting questions about how to successfully – and fairly – navigate IP licensing. 5G will complicate this further, and we’ll see a growing number of David versus Goliath clashes. Startups and small to medium sized enterprises will require advice and practical support to monetise their ideas, and established names in vertical sectors will need to work with others to understand how best to use these fairly and legally.