Last year, patent pool firm Sisvel was on a roll in terms of settling infringement actions and, generally, striking license deals with major implementers. This year, Sisvel is primarily making news with new pool initiatives. In the summer, Sisvel launched a WiFi 6 pool, the most notable contributor to which was Huawei, and a formula for the computation of license fees that encourages early adoption called Licensing Incentive Framework for Technologies (LIFT).
Just this morning by European time, Sisvel announced "the launch of its Cellular IoT (C-IoT) Patent Pool consisting of 20 patent owners."
The initial licensors are a large and diverse group:
mobile telecommunications pioneer and infrastructure maker Ericsson is particularly powerful (and on the winning track against Apple in Mannheim, as I reported yesterday);
like Ericsson, Datang builds mobile networks;
network operators like KDDI, NTT DoCoMo, Orange, and Telefónica;
ETRI and Langbo are examples of renowned research institutes;
non-practicing entities (NPEs) like the Unwired Planet/Optis Wireless/Optis Cellular group; and
MediaTek and Sony Group Corporation (through its subsidiary Altair Semiconductor) supply chipsets to (not only, but also) IoT implementers, which makes them particularly interesting contributors to a pool that licenses at the end-product level: they obviously understand the IoT supply chain and have determined that licensing at the end-product level is workable, at least when patent pools provide transactional efficiencies.
The standards covered are LTE-M and Narrowband IoT (NB-IoT)--the same two standards with respect to which Huawei granted a license to chipmaker Nordic Semiconductor in the spring. A simplified way to explain the typical fields of use for those standards is that LTE-M has the benefit of being compatible with existing LTE network infrastructure, while NB-IoT requires hardware capable of DSSS modulation. On the bottom line, LTE-M is more powerful than NB-IoT, a fact that is also reflected by the respective royalty rates: for any NB-IoT product, the rate is $0.66 per unit for LTE-M, a distinction is made between asset trackers ($1.33 per unit) and smart meters ($2 per unit).
The relevant applications are characterized by low power usage--they may even come with batteries that last ten years--because they transmit small amounts of data and only sporadically, such as once per day or week, or maybe just on an "as needed" basis. Another characteristic is that data must travel over longer distances than the ones that could be cost-effectively covered with a WiFi network. For instance, if cattle needs to be tracked on a large farm, one would have to set up a huge number of WiFi access points, each of which would need access to the power grid. In that case, it makes a lot more sense to use the 4G cellular standard and transmit data via existing base stations.
There are many small companies, especially startups, that serve those needs with highly specialized (vertical) products. Bilateral licensing between dozens of standard-essential patent (SEP) holders and a large and growing number of mostly rather small companies would come with relatively high transaction costs. That's precisely the pattern that favors the creation and operation of patent pools: instead of countless one-to-one deals, pools enable many-to-many transactions.
As I already noted above when discussing the initial group of licensors, it is very meaningful that companies like MediaTek and Sony have concluded that a pool licensing at the end-product level (as opposed to the component level) is the way to go. While Ericsson is a far bigger cellular patent holder than Sony and MediaTek, it has a long-standing policy of licensing only at the end-product level, so no surprise there. When a consensus is built around a licensing structure and the parties who agree to it have such a diversity of perspectives on the IoT business, and even chipmakers participate, it suggests to me that the market may very well able to work out IoT SEP licensing.
When LG joined the Avanci automotive SEP pool earlier this year, the fact that LG is a supplier to the automotive industry made its accession particularly interesting. And now that we're appproaching the end of the year, there isn't even room for debate: the Avanci model (through which Sisvel actually licenses its own patents to car makers) has been universally accepted. Even a tireless tire maker named Continental has given up opposing that which the market has accepted to do. What LG is to Avanci (a licensor situated higher up in the relevant supply chiain), MediaTek and Sony (because of Altair) are to Sisvel's narrowband cellular IoT patent pool--and from Day One.
Today's announcement further reduces to absurdity the way in which Apple and its notorious astroturfers try to leverage the question of IoT SEP licensing only to devalue SEPs in general, particularly with a view to smartphones. At this stage, we are not seeing widespread IoT patent litigation; in fact, one would be hard-pressed to find even one lawsuit targeting an IoT startup. This is not the time for regulatory intervention as market dynamics may take care of the problem. As I'll discuss further below, this new pool is about boosting adoption.
There is a major difference between this pool and most other SEP pools (such as Avanci, which I just mentioned): this is an emerging market. Car makers had adopted 4G when Avanci started; it took years to solve the licensing question, but the demand was there, except that some though that hold-out would be profitable. Sisvel's president, Mattia Fogliacco, is quoted in today's press release as follows:
"The IoT market has been in development for about a decade, however only now we see clear early signs of widespread roll-out. The LTE-M and NB-IoT technologies are an obvious pick to connect products and services, and with this pool, available already in an early phase of technology adoption, we will remove a lot of questions and concerns by giving easy, transparent and reasonable access to the patents that the creators of the technology hold." (emphases added)
So this is a pool that is even more about market development at this stage than just monetization, though the latter could--all going well--reach a very interesting scale over the years. In the same vein, the pool's program manager, Sven Törringer, said:
"[W]e are convinced that the offer we bring to the market will not only reduce friction and concerns, but rather boost the interest in the adoption of the LTE-M and NB-IoT standards in IoT products, allowing for swift investments in this sense."
Sisvel's press release mentions competing standards: "LoRaWAN, Sigfox, WiFi, MIOTY, Bluetooth, various mesh network technologies, etc, and combinations thereof." When implementers choose between standards, patent licensing plays a major role in addition to technical considerations. This new pool needs design wins (decisions by implementers to use those standards) while many other pools are all about courtroom wins from the get-go (if the relevant standards are already in widespread use and rampant infringement needs to be remedied).
Of course, as we've seen in such contexts as automotive (where Avanci is now a one-stop shop) and video codec patents (where things worked out better in the beginning than they have more recently), standards typically benefit from a single pool bringing everyone together. I'll keep an eye on who else will join this one.
