IAM was first to report (paywalled) on an announcement I've now found on Nordic Semiconductor's website, according to which Huawei has extended to Nordic Semiconductor a component-level license to Huawei's standard-essential patents (SEPs) on what both companies consider fair, reasonably, and non-discriminatory (FRAND) terms. As a result, Nordic's customers are covered ("automatically licensed and protected" according to the announcement).
Just last week, the breadth and depth of Huawei's patent portfolio was on full display at a corporate event with distinguished guest speakers. Huawei clearly positioned itself not only as an innovation powerhouse but also as a company with a very balanced perspective, knowing the perspective of licensors as well as what it's like when the shoe is on the other foot.
In today's Huawei-Nordic announcement, the first sentence of the first quote is instructive:
"'Huawei owns a leading portfolio of LPWA SEPs for LTE-M and NB-IoT, a subset of the 4G standard, which creates great value for IoT,' says Huawei’s Head of European IPR Department, Zhang Xiaowu."
LPWA means low-power wide area cellular technology. They're not talking about baseband chips for smartphones or telematics control units (TCUs) built into cars. Note in the quote above that this is merely "a subset of the 4G standard." Obviously the royalty rates are lower in such scenarios, though the announcement doesn't state any specific amounts. It would be discriminatory to apply equal terms to unequal conditions, meaning that products making use of only a subset of a cellular standard--and making limited use even of that subset, such as by sending only small quantities of data--had to pay the same license fees as, for example, Apple.
About five months ago, Nordic announced another SEP-related agreement with Nokia. This makes Nordic a bit of a pioneer--perhaps even thought leader--in its market segment. While the terms of either deal weren't disclosed other than what one can deduce from the announcements, it's clear that Nordic's agreements with Huawei and Nokia couldn't structurally be more different:
The headline of the announcement on Nordic's website specifically talks about "component-level licensing." Nordic itself is the licensee; its customers are indirect beneficiaries. There is no indication of any need on the part of Nordic's customers to reach out to Huawei in order to obtain those benefits.
The Nokia deal essentially makes Nordic an intermediary that obtained from Nokia an offer that Nordic's customers can elect to take. If they don't take it, they have to seek a bilateral license, and if they did neither, they'd obviously expose themselves to potential infringement litigation.
So there's a diversity of licensing models, and Nordic's two publicly-known deals with major cellular SEP holders are heterogeneous. That's why I'm not buying the part of their headline where they call this "a big step towards industry-wide component-level licensing." The accurate way to assess the situation is that some SEP holders--here, Huawei--are prepared to grant component-level SEP licenses, but others--such as Nokia--are not. The announcement notes that "Huawei and Nordic were able to conclude the agreement through a transparent and amicable discussion within a short period of time." If anyone ever were to claim that Nordic was an unwilling licensee, or that Huawei wasn't a constructive licensor, this would be one of the transactions they could point to as an example of their willingness to make things work. That said, Nordic has validated not only one licensing model--but two different ones. It has a clear preference for the one it announced today, but the Nokia deal is and remains in full force and effect. If they persuaded Nokia to switch from end-product licensing to component-level licensing, then they would be in a stronger position to claim that the industry was going in that direction.
Where I definitely agree with Marianne Frydenlund--Nordic's senior vice president Legal & Compliance--is that "[l]icensing in cellular IoT is a comparably new practice in the industry, calling for flexible solutions." Flexibility, of course, is never a one-way street.
Talking about flexibility, the aforementioned two models--Huawei/Nordic and Nokia/Nordic--are not the only ones. For example, last year Huawei announced a license agreement with a Volkswagen supplier (in that case, about all of Huawei's 4G SEPs, not just a subset of the standard) under which the supplier is licensed, but specifically with respect to Volkswagen cars--while Nordic today announced that all of its customers, not just one, are licensed.
Then there are license agreements that involve "have-made" rights. That is a way for end-product makers to provide a certain degree of legal protection to their suppliers. While patent exhaustion works in the other direction, a similar effect can be achieved contractually.
I'm a pluralist: if it works, it works.
The IoT licensing landscape is in its infancy--but, as we see, it's evolving pretty fast. That's why now is not the time for massive regulatory or legislative intervention. It's all too easy to see that some (particularly Apple and its traditional allies, as well as Continental, which prefers litigation that is going nowhere, and combative speeches at conferences, over pragmatic licensing-focused solutions) would like to use IoT for a pretext to urge governments to put a thumb on the scales of SEP licensing. The U.S. government ultimately decided not to support those organizations' SEP devaluation campaign.
In light of today's announcement, I recommend the following:
Policy-makers and regulators should give the market a breathing space to work things out. There is progress, and as Conti's own submission to the EU Commission notes, there's virtually no SEP infringement litigation at this stage targeting IoT end products. "If it ain't broke, don't fix it." IAM's Joff Wild wrote on LinkedIn this morning (in the specific context of this license agreement) that "others in [Nordic's] position may well be able to secure similarly interesting opportunities, without any threat of litigation hanging over negotiations. That, in turn, may be something that European regulators could reflect on as they ponder the future of SEP licensing on the continent."
Licensors should keep it that way and refrain from litigation unless they really encounter an intolerably unwilling licensee. Otherwise there could be unintended consequences, such as regulatory action or legislative measures.
Implementers should follow the example of Nordic's agreements with Nokia and Huawei, and act constructively. SEP holders can't wait forever to get paid: they need licensing income to finance the next innovations.
Today's announcement is a very important one, and hopefully the IoT industry won't have to wait another five months until the next one of this kind.
Share with other professionals via LinkedIn:
