Qualcomm now has 4G licensing deals with the big three

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Qualcomm now has 4G licensing deals with the big three

By CAROLINE GABRIEL

Published: 16 November, 2009

Just as Samsung's renewal (without lawsuits) of its licensing deal with Qualcomm was the highlight of the chip company's recent Q3 results announcement, so the long line of product announcements at its analyst day last week were outshone by news on the IPR front. Few doubt Qualcomm's ability to compete in advanced cellphone silicon, but the patents licensing business that delivers so much of its profit and industry power has been under far more serious question, as major firms challenge the US giant's model, and the market shifts slowly towards platforms not based on CDMA. So Qualcomm backers were delighted at the news that LG had joined its compatriot in renewing its existing licensing deal, with none of the bitter dispute that surrounded Nokia's renewal last year, and that the big three phonemakers have all agreed to license Qualcomm '4G' technology.

There is no clarity yet as to the terms of Qualcomm's 4G licenses - how the terms compare to its 2G and 3G agreements, or exactly which patents are involved. Nobody knows yet exactly what IPR Qualcomm holds in LTE, though for several years it claims to have been developing or acquiring significant patents for OFDM (the core technology underpinning LTE and WiMAX) and other technologies, in areas like power and multimedia, that could impact on LTE. But it will inevitably have a less powerful grip than it did in 3G, where all the standards were based on its CDMA, and this will have affected its new licensing deals, as will rising industry pressure to keep the royalty burden down, and therefore allow for far cheaper handsets in future.

Qualcomm told its investor meeting that LG has joined Samsung and Nokia in agreeing to pay to use its technology in future 4G products. "This means they have 65% of the handset market signed up to long term royalty agreements," JP Morgan analyst Steven O'Brien told Reuters. "We have more certainty in the royalty streams and cashflow streams from the major handset vendors."

Qualcomm's 3G licensing deals cover 3G subscriber units and multimode devices (such as CDMA/LTE or CDMA/GSM). They do not cover single-mode LTE or WiMAX products. The company claims 27 new licensees this year, 16 of these from China - important in the light of some past uncertainties over how far it would be able to claim payments for its patents in TD-SCDMA. President Steven Altman said it was receiving royalties for "the majority" of TD-SCDMA devices.

The new deals with the big three also include licenses for single-mode OFDMA units (LTE and WiMAX) and in total, Qualcomm now has nine royalty bearing agreements in place for single-mode OFDMA, though the terms are not known in any case. In OFDMA, Samsung has significant IPR to trade in cross-licensing deals (it is the lead patent holder in WiMAX). Derek Aberle, president of Qualcomm Technology Licensing, said on the recent earnings call that Samsung had agreed to assign ownership to Qualcomm of about 55 patent families, comprising about 300 patents and pending applications, many of which Samsung has declared as potentially essential to WCDMA or OFDMA-based standards.

Aberle said: "Several years ago, we indicated that we had four licensees whose W-CDMA subscriber unit royalty obligations needed to be extended before 2017. With this Samsung extension behind us, we have now concluded three of the four extensions." It now seems, with the LG deal, that the work may be concluded.