Context: The Internet of Things (IoT) is a growth area for standard-essential patent (SEP) licensing. New device categories, some of them very low-priced, depend on wireless connectivity. The cellular IoT SEP licensing business is still in its infancy, yet some use it for an excuse to urge regulatory intervention (March 15, 2024 ip fray article). Last year, Huawei was the first major cellular SEP holder to publish a detailed price matrix for IoT-related licenses (Huawei webpage).
What’s new: Qualcomm has now published the terms of its cellular IoT licensing program (Qualcomm webpage). The company notes that many companies making embedded modules with cellular functionality “have been Qualcomm licensees for over a decade” and many device makers are therefore already covered. But those who are not can now also take a direct license from Qualcomm. Depending on technology capability, the royalty is either 3.5% or 5% of the module purchase price, with no absolute minimum amount for Nb-IoT, CAT-M and CAT 1bis, and a $0.50 minimum per-unit royalty for 3G or CAT1-4.
Direct impact & wider ramifications: The new offer provides flexibility with respect to the licensing level as device makers can choose to buy fully-licensed modules or take a direct license from Qualcomm. Most SEP holders don’t. The publication of Qualcomm’s terms is another example of companies making SEP licensing more transparent without formal regulatory requirements.
When it comes to smartphones and similar devices, Qualcomm collects its SEP royalties from device makers. In that device category, Qualcomm’s position on the appropriate licensing level is the same as Nokia’s and Ericsson’s.
In the IoT space, Qualcomm has traditionally considered modules the most efficient licensing level, presumably because of the large number of device makers in that field, many of which are very small. Now, Qualcomm is also open to device-level licensing.
The debate in the SEP holder community over the licensing level will continue. Qualcomm provides flexibility. Huawei is presumably also prepared to license module makers, based on component-level license agreements it has struck in the past (such as with Sharp, though in the context of the automotive supply chain) and the reference to “module products” in footnote 2 of its cellular IoT licensing webpage.
This is not the time for lawmakers or regulators to mandate a particular licensing level or impose a “license to all” requirement. As Qualcomm’s new licensing option shows, the space continues to evolve. Just like Qualcomm has now shown flexibility by offering license deals at the end-product level, it’s conceivable that other companies may be more receptive to module-level licensing going forward.
There is no crisis involving rampant SEP enforcement against IoT companies. Instead, SEP holders are creating more and more choices, such as through joint licensing programs, and increasing transparency. The trend is positive, and indeliberate intervention will likely be counterproductive.