Part of the problem is that there are few new faces. The alliance is anchored by Clearwire and Sprint (who are building a US WiMax network) and Intel, the main funder of WiMax for the past five years. It also includes Alcatel-Lucent, Cisco and Samsung.
Noticeably absent are the three largest 3G IPR holders: Nokia, Ericsson and Qualcomm, as well as Motorola. The ComputerWorld coverage was breathlessly foolish:
Motorola and Qualcomm would still be allowed to join, even though they are not expected to attend on Monday, said one person familiar with the discussions. He said the principal function of the group will be to open up WiMax patents held by various vendors to make licensing of future products for networks a cleaner and faster process. Most of the major patent holders have already signed on, he noted.But the Wall Street Journal article reported a flat rejection by Qualcomm, which has never joined any patent pool: "Qualcomm has consistently preferred to negotiate license agreements bilaterally.” That’s also been Motorola’s policy in the past, too.
The WSJ tries to be optimistic about the development:
A group called MPEG LA, for example, offers standard royalty rates for licensing patents associated with video compression. Patent pools are "tremendously important," said David Balto, a Washington, D.C., lawyer who handles patent and antitrust issues.MPEG LA is one of the rare examples where all the major parties got together beforehand and formed the pool. Due to conflicting interests of licensing IP and selling hardware, this rarely happens in telecom. For 3G, the patent pool includes the nearly irrelevant players, which (except for Intel) is true of the WiMax proposal.
Another optimistic WSJ expert quote:
Larry Goldstein, a patent lawyer who wrote a book on patent pools, said the WiMax group could reduce the number of licensing deals to be negotiated even if some patent holders don't join. "It can cut down on the onerous negotiations and cut down on the overall royalty rate," he said.Notice “can” and not “will.”
The claim that the patent pool covers “most” of the patent holders might reduce transaction costs, but if it doesn’t have “most” of the patents, it will have negligible effect on the overall royalty rate, unless the small patent holders pass on the transaction cost savings to licensees.
What % of the WiMax patents are owned by Intel (the main patent holder in the alliance) vs. the four major holdouts? And since the latter are moving aggressively to migrate 3G cellular carriers to WiMax’s main competitor, LTE, what incentive do they have to cooperate with Intel to reduce licensing costs?
The WSJ article quoted an analyst predicting similar patent rates for both LTE and WiMax. That seems pretty plausible, since there is a heavy overlap in the patent holders between both technologies. Someone like Qualcomm will say “we’re charging 5% for use of our technology, whether for LTE or WiMax.”
There is only one scenario that I could see the pool significantly cutting WiMax royalty rates: if Intel successfully uses it as a club to force cross-licensing by the holdouts on more favorable terms. Motorola might be loathe to give up on Sprint — one of its larger customers — but neither Nokia nor Ericsson has sold many phones through the struggling carrier. Qualcomm also has yet to announce WiMax support in its planned LTE chipsets.
Last week, an Intel executive floated the idea that WiMax and LTE should be merged into a unified OFDM-based standard. I guess that’s what you say if you can hear the stamped bearing down on you.
(BTW, the WiMax proponents are now calling it WiMAX. I guess they didn’t call it WIMAX because they know that reporters would ignore the request, as they do for QUALCOMM.)