New Devices Will Challenge Mobile Royalty Levels

(Business News & Technology News, 4 Dec 2008)

The status quo of mobile phone licensing today is that royalties are levied for access to patents that are essential to the mobile standard being incorporated in each device. For a multimode WCDMA and GSM device, the average cumulative royalty rate is 12.2 percent. As the relative value of new components such as advanced displays and, more importantly, software, increases in the average device, many companies are questioning the fairness of current licensing models. This issue will only become more pressing once MIDs and connected consumer electronics become more commonplace.

"The average selling price of many mobile devices is being kept fairly stable not through advances in wireless technology but by the addition of more complex and advanced features that are outside of the innovations covered by many current mobile patent licenses," says ABI Research Vice President Stuart Carlaw. "When you use an ASP from a voice-centric device as the base to calculate royalty rates rather than the artificial higher value, the indications are that royalty rates should be closer to 5.8 percent."

As well as challenges from the perceived value of the wireless component of a device, the current intellectual property licensing regime will also be pressured into change from the notion that declared essentiality in the ETSI standardization process is somewhat flawed.

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