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Ericsson joins the $1 billion a year patent licensing club

The on-going patent spat between Ericsson and Samsung shows no sign of dying down. After two years of fruitless negotiations between the two over the terms of FRAND licences being offered by Ericsson, in November the Swedish company initiated patent infringement action against its Korean competitor in the Eastern District of Texas and filed a complaint against Samsung with the ITC. In retaliation, Samsung also went to the ITC to seek bans on sales of some Ericsson products and has now launched legal action in Texas against what it claims is a “usurious ransom” being demanded by Ericsson which “dwarfs the amounts paid by Samsung in two prior agreements (with Ericsson) as well as the payments made by any other Ericsson licensee." The dispute shows that FRAND is no panacea; while it is also worth noting that there is not a troll or NPE in sight.

The Samsung move comes as it emerges that Ericsson has joined that select band of companies which generates over $1 billion a year from licensing out patents in its portfolio. In 2012, the Swedish company generated SEK6.6 billion from royalties. That equates to $1.02 billion and is up from SEK4.66 in 2010, representing growth of close to 50% in just two years; so not a bad effort. It’s also worth noting that the Swedish company’s R&D budget in 2012 was SEK30 billion; so the licensing operation’s income represents over 20% of that amount. Given that a very large proportion of royalty revenue usually makes it straight to the bottom line, patents are clearly an important Ericsson revenue stream.

In the last issue of IAM, Ericsson was identified as a member of the US Patent 100, the owner of one of the 100 biggest active patent portfolios in the US. It was also named in an even more select band of 14 companies with what was described as a stand-out portfolio; one which is not only among the largest, but is also fast-growing and, crucially, widely cited by others operating in the owners’ industry. The man responsible for maximising the value of this portfolio is Ericsson CIPO Kasim Alfalahi, who in January 2012 became a direct report to the company’s CEO Hans Vestberg.

In the next issue of the magazine, which comes out at the start of April, we have an exclusive interview with Alfalahi, who confirms the $1 bilion licensing figure, as well as talking about his promotion, the relationship he has with Vestberg and the approach that Ericsson takes to monetisation – including the thinking behind its recent privateering deal with Unwired Planet. What is clear is that even though the $1 billion Rubicon has been crossed, the company believes there is more to come. Vestberg certainly believes that. In 2011, he stated: “By 2015 two thirds of all consumer electronics devices will have some sort of connectivity … Any company or manufacturer that wants to get in there will need an agreement with Ericsson.” Alfalahi’s work has only just begun!


Joff Wild
IAM Magazine
21 March 2013

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Licensing, IP litigation, Patents, IP business, IP valuation

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