Nortel has been placing greater stress on its IPR assets in the past year or so, as its equipment business has come under pressure. The first sign of the importance to the company of its patent holdings in the future LTE standard was highlighted in March 2007 when it was reported as signing a four-year, $15 million licensing deal with Alcatel-Lucent for pre-LTE technologies and IPR (shortly after the French giant had purchased Nortel's UMTS activities). In this era of consolidation of equipment makers, vendors will look to apply their R&D results to a wider market through licensing to their traditional rivals.
Nortel believes it has contributed significantly to OFDMA-based standards including LTE. In 2006, it gained 3GPP approval for its HSOPA (High Speed OFDM Packet Access) technology, which combines OFDM and MIMO smart antennas, for inclusion in LTE, although it is not yet clear how the mixture of technical elements, and IPR, will work out in the final specs. The HSOPA project drew on many of the areas into which Nortel has ploughed R&D resources in recent years, particularly smart antenna arrays, OFDM and mesh networking. Nortel claimed that its HSOPA/LTE prototype demonstrated the potential to increase tenfold the number of users that could be served by an operator's network and to reduce the cost per megabyte to the operator to a potential one-twentieth of current UMTS costs.
Of course, the 1% of the company's new proposal is not quite as consistent as it may seem, since most licensing deals involve an element of cross-trading for other patents. In the footnote to its announcement, the company says: "Nortel will license its LTE standards essential patent claims for LTE handsets at a royalty rate of about 1% on the sale price, subject to specific terms to reciprocity, defensive suspension, and grant back to Nortel products, services and solutions, as well as other customary license terms and conditions."
Meanwhile Qualcomm, which tends to be blamed - and sometimes scapegoated - for the high IPR charges in UMTS (ignoring the fact they used to be even higher in GSM, where Qualcomm did not play), has been predictably negative about the Nokia-Ericsson LTE group. "This type of approach would have a negative impact on competition within the industry and consumer choice as it would restrict innovations," the company told RCRnews.
Caroline Gabriel is research director of Rethink Research Associates