Multi-venue patent fight between Apple and Ericsson is about stake in the mushrooming mobile web

14 January 2015. By Mike Swift.

At its essence, the patent litigation between Apple and Ericsson that broke out this week in federal courts in California and Texas is a battle over which companies should get the dividend from the mushrooming value of the mobile Internet — the makers of the devices that connect, or those that harnessed the electromagnetic waves that form the connection.

Apple’s launch of the iPhone in 2007 helped catalyze the massively valuable technology ecosystem that became the mobile web, prompting the first broadly successful online store to download mobile apps.

The iPhone ushered in a culture where a trip to cyberspace wasn’t merely a daily event — where being online became a constant state of being. Apple says Ericsson is a “traditional cellular company” trying to take advantage of the mushrooming value of the mobile web made possible by the iPhone and iPad.

Companies such as Ericsson, meanwhile, argue the iPhone’s success would never have been possible without the preceding decades of their expensive wireless research and development, which was initially aimed at voice cellular phones. The digital bits that once carried voices, they note, now increasingly carry data to the world’s legion of smartphones and computer tablets.

Saying Apple wants to operate under different rules than other companies in the wireless industry, Ericsson asked a federal court in Texas Wednesday to confirm it offered to Apple a global license for a portfolio of standard-essential 2G, 3G and 4G patents on fair, reasonable and non-discriminatory terms.

While other companies “have licensed Ericsson’s portfolio of patents on comparable global FRAND licensing terms,” Ericsson said in its complaint, “Apple seeks to parlay its commercial success into licensing rates that are much more favorable than those its competitors pay for a license to the same Ericsson patents.”

Apple had sued Ericsson in US District Court in the Northern District of California on Monday, asking for a declaratory judgment that the iPhone did not infringe Ericsson’s Long Term Evolution, or LTE patents, the newest generation of wireless broadband technology. If the court finds infringement, Apple wants the court to
set a FRAND rate for Ericsson’s LTE patents.

“Ericsson seeks to exploit its patents to take advantage of the value of these cutting-edge Apple innovations, which resulted from years of hard work by Apple engineers and designers and billions of dollars of Apple research and development — and have nothing to do with Ericsson’s patents,” the iPhone maker said in the
motion.

It’s unclear at this point whether the litigation between the companies will play out in Texas, California, or in both venues. Unlike the trial between Microsoft and Motorola Mobility in Seattle in 2012, where Microsoft asked the court to find that Motorola’s license offers violated the FRAND, Ericsson is asking a court to review its conduct and bless its actions toward Apple.

Tech companies embroiled in patent litigation typically let legal documents do the talking. Perhaps because of the value of what’s at stake in the twin cases, that was not the case Wednesday.

Ericsson’s chief intellectual property officer and senior vice president, Kasim Alfalahi, spoke extensively with MLex, saying that Apple was asking for a better deal than other companies such as HTC, LG Electronics and Samsung have received to license Ericsson’s standard-essential patents.

Apple also released a statement Wednesday, saying it has “deep respect” for intellectual property. “We’ve always been willing to pay a fair price to secure the rights to standards essential patents covering technology in our products. Unfortunately, we have not been able to agree with Ericsson on a fair rate for their patents so, as a last resort, we are asking the courts for help,” the company said in the written statement released by a spokeswoman.

Apple says it first licensed Ericsson’s patents in 2008, following the launch of the iPhone. Ericsson says that license has now expired. It pointed to the $5 billion it spends a year on R&D for wireless technology in the press statement it released announcing its suit against Apple.

Alfalahi said the two companies have been in license renewal negotiations for about two years. “The way we see it is that we’ve been trying to negotiate with Apple to get a new agreement in place for some time now,” he said. “We have offered rates that are according to FRAND principles.”

Alfalahi said Ericsson can’t offer a different license rate for the iPhone than it offers to other wireless competitors and still comply with FRAND.

“We have signed more than 100 agreements with all the major players in the industry, including Apple,” he said. “It is very important for us that we are compliant with the FRAND commitment we have had. We cannot discriminate against anyone, and we would not discriminate against anyone. It has to be a fair play. It has to be a fair play for players to come in and have quality opportunities to be successful in this ecosystem.

The Texas and California cases are different, he said, because in Texas, Ericsson wants a judge to look at the company’s global standard-essential patent portfolio and find that its offer to Apple, and its other licenses, complied with the FRAND principal.

In California, Alfalahi said, Apple is asking the court to review “a very, very small subset of our patents” as to whether the iPhone infringes. If so, Apple wants the court to determine if Ericsson’s patents are essential to the technology standard. And if that is so, the court would determine a FRAND license rate.

“What we are asking the court in Texas to do, is to look at our offer and confirm that it is a FRAND offer, and it is more of a global portfolio license for the entire Ericsson portfolio of 2G, 3G and 4G patents,” Alfalahi said.

“Because we have been licensing our portfolio for so many years, we have always been committed to the FRAND terms,” he said. “We have not changed our practices. The proof is that the system actually works, and companies are not being stopped from getting access to the Ericsson technology. So I think that is a proof that this open stance is benefiting the entire industry, including Apple.”