Richard Lloyd

Via Licensing has announced a significant change to the royalty rates for its pool relating to long-term evolution (LTE), fourth generation wireless technology. The move is an attempt to attract small and medium-sized players in the smartphone and tablet markets, with the biggest changes for those selling the lowest volume of devices. There is no fee for manufacturers selling up to 100,000 devices, while after that the rate rises to $1 per device up to 1 million sold. The rate then goes up to $1.50 for up to 2.5 million in sales and is then $2.10 for all sales after that. You can see the new and old rates in the table at the end of this story.

The latest move follows a similarly radical change in its AAC pool for audio compression technology, which was announced last month. Those were aimed at giving manufacturers in a range of emerging markets lower royalty rates than companies in Europe and North America pay. The rationale was that relatively new technology companies in China and India, which make the vast majority of their sales in their domestic markets, often balk at taking a global licence at rates that have typically been established with businesses in the US, Japan or Germany in mind. The rate for a global licence to Via’s AAC pool remained unchanged.

With the changes to its LTE pool, Via did not opt for a differentiated, regional rate structure. In reality, however, they have clearly been made with China and India in mind, given that those two markets count for the vast majority of new mobile entrants. Via’s new rates which, in contrast to the previous rate structure, will rise as unit sales increase, should be more attractive to local Chinese and Indian players, many of whom have been somewhat reluctant licensees.

The new play can also be seen as an attempt to inject some life into Via’s LTE efforts. Since patent pools underwent something of a renaissance 20 years ago with the formation of the MPEG-2 pool, attempts to establish a collaborative licensing approach for each generation of wireless technology have largely failed to gain traction. Via’s LTE pool includes licensors of the calibre of AT&T, Google and ZTE, but does not include some of the fundamental players such as Ericsson, Nokia and Qualcomm.

Pools are generally successful when their members account for a critical mass of the key patents in a particular technology standard. Very few, if any, ever start with all of the major IP owners signed up so, typically, once a pool is established the administrator races to get  member numbers to a point where it is possible to convince companies of the value of taking a licence. Without IP from the major wireless players, LTE licensees have been more reluctant to sign up to pools from the likes of Via and Sisvel (Sisvel’s pool does include some patents purchased from Nokia acquired in 2011).

So while Via’s royalty rate change has been pitched as a way to attract more small and mid-sized manufacturers there could be another angle to the move. If it can significantly grow its licensee base, particularly from markets that have traditionally been hard to license into, then it might be able to convince more patent owners to join. Developing an LTE pool that is as successful as MPEG-2, which has earned royalties on billions of devices, is probably still a stretch but you can’t fault Via for trying. 

In a separate move announced a few days after the LTE rate changes, Via has taken over the administration of the W-CDMA pool as it continues to grow its reach in the cellular sector. That pool also lacks some big industry names, but as Via grows its profile in the market, it might start to bring some of those holdouts on board.

Original LTE pool rates 

Volume (per unit/annual reset) Per unit fee
For the first 500,000 units $3
For units 500,001 to 2,500,000 $2.55
For units 2,500,001 to 5,000,000 $2.40
For units 5,000,001 to 10,000,000 $2.25
For units 10,000,001-plus  $2.10

Modified LTE pool rates

Volume (per unit/annual reset) Per unit fee
For first 100,000 units  No fee
For units 100,001 to 1,000,000 $1
For units 1,000,001 to 2,500,000 $1.50
For units 2,500,001-plus $2.10

Source: Via Licensing