Gustino de Sanctis- Sisvel- LTE Patent Pools

Key Elements for a Successful LTE Patent Pool

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Giustino de Sanctis

Amsterdam, May 18, 2010

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SISVELA BRIEF INTRODUCTION

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Sisvel: a Brief Introduction

• Founded in 1982 to spin-off a significant portfolio of television

patents developed by Indesit, Sisvel is a dynamic and full service patent management company.

• Today Sisvel is a truly independent company, but it has deep

roots in the industry.

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• Sisvel is one of the oldest and, with a team of nearly 80

professionals, one of the largest administrators of IP Rights.

• Sisvel is headquartered in Europe, but operates as a multinational company with subsidiaries and offices on three

continents.

• Sisvel has its own research laboratories and engineering team.

Sisvel’s Global Presence

SISVEL S.P.A.

Turin, Italy

SISVEL Japan

Tokyo, JapanSISVEL Germany GmbH

Stuttgart, Germany

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SISVEL (Hong Kong) Ltd.

Hong Kong

SISVEL US, Inc.

Audio MPEG, Inc.

Alexandria, VA

Edico, Srl

Rome, Italy SISVEL Technology, Srl

Turin, Italy

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Current Programs:

MPEG AUDIO

Licensing Programs

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Programs under Development:

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PATENT POOLSBASICS AND BENEFITS

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Patent Pools: Basics

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• A “Patent Pool” is a portfolio of patents essential to the same

standardized technology but owned by different parties.

• The purpose of the pool is to facilitate licensing essential patents.

• Patent pools are pro-competitive:

– provide more certainty and predictability to those who are

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– provide more certainty and predictability to those who are

interested in adopting the standard and creates a leveled playing field;

– reduce aggregate royalties by establishing a single royalty rate for the participating companies patents;

– reduce transaction and administrative costs for both patent owners

and licensees;

– promote FRAND licensing terms and conditions.

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A PATENT POOL FOR LTEKEY ELEMENTS

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Sisvel LTE/SAE Patent Pool Facilitation

• 32 Partecipating Companies – from Europe, US, China,

Japan, and Korea, including major telecommunications

companies (both network operators and equipment

vendors), consumer electronics and integrated circuit

manufacturers, and research institutes

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manufacturers, and research institutes

• Last Facilitation Meeting

– 21 - 22 April, 2010 in Hong Kong

• Next Facilitation Meeting

– 15 – 16 June, 2010 in Washington DC

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34%

4%

Sisvel Facilitation

Not in any Facilitation

Unknown

Sisvel LTE/SAE Patent Pool Facilitation

• 32 companies – from Europe, US,

China, Japan and Korea, including

telecom companies (both network

operators and equipment vendors),

consumer electronics and IC

manufacturers, and research institutes

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• Based on declarations of essentiality

to standardization bodies such as ETSI

and TTA, these 32 POs hold over 60% of the intellectual property relevant to

LTE

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62%

Last Facilitation meeting:21 - 22 April, 2010: Hong Kong

Next Facilitation meeting:15 – 16 June, 2010: Washington

• A well-balanced, customized pool is much more likely to

achieve these goals than one based on a “cookie cutter”

approach

• A successful pool needs to attract both large and small Licensors

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Key factors for Building a Successful LTE Patent Pool (1 of 2)

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• A successful pool needs to attract both large and small Licensors

to reach Critical mass (in terms of participation and patent

coverage) and offer all Licensees a compelling licensing solution

• To attract Licensors a pool:

– Be attractive for all Licensors

– Adopt a simplified and transparent process

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• To achieve wide acceptance among Licensees, a pool should:

– Non-discriminatory licensing by a truly independentadministrator acting globally include enforcement and

compliance mechanisms to give Licensees confidence that all

market participants are treated equally

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Key factors for Building a Successful LTE Patent Pool (1 of 2)

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market participants are treated equally

– Include administrative tools that enhance efficiency and

make the reporting and payment process easy

– Offer a license with a royalty that is reflective of what is

offered:

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Value based proposition

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A PATENT POOL FOR LTEROYALTY RATE

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LTE: What Level of Royalties?

• A first step to address royalty stacking was taken by NGMN by the introduction of the "Trusted Third Party IPR Process” (TTP)

• The results are not publicly available, but some have Declared Maximum Rates (as % of handset selling price)

• The aggregated value of only 10 parties is already a 2-digit figure and there could be as many as 50 parties holding essential LTE patents.

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essential LTE patents.

Nokia 1,50% * ALU 2,00%

NSN 0,80% Nortel 1,00%

Ericsson 1,50% Huawei 1,50%

Qualcomm 3,25% ZTE 1,00%

Motorola 2,25% Vodafone 0,00%

* 2% for multistandard

14This chart reports for some companies the “maximum” LTE desired royalty rates that have been publically declared by those companies.

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LTE Royalty LevelNo Patent Pool – Possible Scenario

Based on Public Declaration and Sisvel’s Assumption% of handset selling price

cumulative

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2.00% 1.50% 1.50%2.25%

1.50% 1.00% 0.80%

3.25%

0.00%1.00%

% of handset selling price

++

This chart reports for some companies the “maximum” LTE desired royalty rates that have been publically declared by those companies.

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Royalty Leveltwo patent pools and outside patent owners

cumulative

% of handset selling price

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cumulative

% of handset selling price

++

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Royalty Levelone patent pool and outside patent owners

% of handset selling price

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cumulative

% of handset selling price

++

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Royalty LevelIdeal scenario

% of handset selling price

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% of handset selling price

=

The Challenge of Setting Royalty RatesParticipation and Royalty Rates

The chicken and the egg problem: what comes first?

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ROYALTY RATES

PATENT OWNERS

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The Challenge of Setting Royalty RatesTwo Methods

Traditional Method

Royalty Comes First

Participation Method

Patent Owners Come First

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Royalty Comes First Patent Owners Come First

• Royalty rate is decided by the

group

• Participants decide whether to

join after royalty is set

• Participation negotiated with

all members

• Pool royalty rate set as a result

of the above negotiations

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Aggregated Rate vs. Patents/POs

Pool

Royalty Rate

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Number of Patent Owners21

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Pool

Outside of Pool

Aggregated Rate vs. Patents/POsRoyalty Rate

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Number of Patent Owners22

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Pool

Outside of Pool

Aggregate

Aggregated Rate vs. Patents/POsRoyalty Rate

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Number of Patent Owners23

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Pool

Outside of Pool

Aggregate

Aggregated Rate vs. Patents/POsRoyalty Rate

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Number of Patent Owners24

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Pool

Aggregated Rate vs. Patents/POsRoyalty Rate

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Pool

Outside of Pool

Aggregate

Number of Patent Owners25

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Thank You

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