On the morning of April 13, Nokia issued a statement in response to the recent patent litigation with Chinese mobile phone manufacturers, hoping to reach a license with Chinese mobile phone manufacturers "on fair terms".
A week ago (April 6), Germany's Mannheim Regional Court ruled in a first-instance judgment that Vivo had infringed Nokia's three cellular SEPs, and the court granted Nokia an injunction against Vivo.
Germany's Regional Court of Mannheim ruled that Vivo used Nokia's patented technology in its smartphone products and sold it illegally without a license. The court also found that Nokia's action was fair and reasonable. Nokia told First Finance and Economics that it hoped that the judgment would prompt vivo to assume corresponding obligations.
Subsequently, vivo also responded to this judgment, arguing that Nokia did not meet its obligation to provide reasonable permission on the principle of "FRAND" (fair, reasonable and non-discrimination), and the two parties could not reach an agreement for the time being. Vivo told CBN that it is appealing the first-instance judgment and will evaluate further measures.
"If necessary, the sale and marketing of the products in question will be suspended on official German channels." Vivo told reporters.
The German court ruled in the first instance that Nokia had infringed, and vivo was not satisfied
With the gradual freezing and maturity of 5G standards, the 5G patent litigation war has intensified around the world. After the patent litigation "wheel war" between Qualcomm and Apple, Nokia also launched a new round of litigation against global mobile phone manufacturers, aiming to gain the initiative in 5G patent charging.
Beginning in 2021, Nokia sued OPPO in countries such as the United Kingdom, Germany, the Netherlands, Brazil and India, demanding that OPPO pay Nokia for the patents used. In 2022, Nokia sued Vivo on similar grounds in Germany, Indonesia, India, China and other places.
According to the materials provided by Nokia to reporters, the German court's judgment involves three patents, namely EP 2 981 103, EP 3 220 562 and EP 2 087 626. The first two patents disclose the efficient allocation of preamble codes when initiating random access to LTE networks, and the third patent relates to adaptive modulation in 3G networks, in particular disclosing additional modulation information signaling for high-speed downlink packet access.
All three cases were heard in Regional Chamber II in Mannheim. Previously, Nokia also filed a lawsuit against OPPO in Germany over the first two patents, and obtained an injunction in July 2022. In addition, the claim of EP103 was also upheld in the UK, and the English court also found the validity of the patent.
Nokia told reporters that the company has taken legal action in many jurisdictions around the world, such as Germany and India, focusing on the combination of cellular standard-essential patents and exploitation patents covering connectivity.
For the above judgment, vivo responded to reporters at noon on the 13th: "We regret to learn of the first-instance judgment made by the German District Court of Mannheim, and have made relevant preparations, and if necessary, we will suspend the sales and marketing of relevant products in official channels in Germany." We are also appealing the first instance judgement and will evaluate further steps. At the same time, we will continue to adhere to the "FRAND" principle to negotiate with Nokia to solve relevant problems. ”
"In recent years, vivo has reached cross-licensing with a number of leading companies on the mutual respect of patent value. At the same time, we continue to negotiate with Nokia for cross-license renewal, but we believe that Nokia has not fulfilled its obligation to provide reasonable licensing on the principle of "FRAND" (fair, reasonable and non-discriminatory), and the two parties have not been able to reach an agreement for the time being. Vivo told reporters that the company fully respects intellectual property rights and attaches importance to the accumulation of intellectual property rights.
"Our long-term strategy for the German market will not change and will continue to operate in Germany, where users can continue to enjoy our services. Markets outside Germany are not affected. Vivo said.
"How much patent fees are charged" became the trigger for litigation
As can be seen in the statements of both parties, the patent rate is the trigger for Nokia to set off this global litigation war.
According to Nokia, Vivo's patent license agreement for Nokia's patented technology used to pay for the use of its devices expired at the end of December 2021. Before the license agreement expired, it had been negotiated with vivo for renewal. "Regrettably, vivo refused to accept our fair and reasonable offer. We also offered to conduct an independent and neutral arbitration, which was also rejected again by vivo. ”
However, vivo believes that the patent quotation provided by Nokia is not reasonable and violates the FRAND principle. An industry insider close to vivo told reporters that in the new agreement offer, Nokia proposed a quotation far beyond the previous agreement, and once accepted, the industry effect will have a greater negative impact on Chinese mobile phone manufacturers.
"Although it is a 3G and 4G lawsuit, Nokia's radical approach is actually trying to pressure vivo to accept the patent fee clause including 5G patent fees through litigation." The aforementioned insider said.
Feng Ying, OPPO's chief intellectual property officer, agrees.
"When we were 4G, we had signed a cooperation agreement with Nokia, and it was really difficult to bear the high price of 5G, and now the profit margin of hardware is not high, and there are more and more companies that charge patent fees, and each company is rising, which will lead to higher and higher hardware costs." Feng Ying told First Finance and Economics in a previous interview that if Nokia's fee standards are followed, mobile phone manufacturers cannot have profit space.
According to Nokia's 5G patent charging standards published in 2018, each 5G mobile phone that uses its patent needs to pay Nokia a patent fee of 3 euros. If calculated by a company's global shipments of more than 100 million mobile phones, that is 300 million to 400 million euros in patent fees per year. Feng Ying believes that the patent fee set is much higher than the standard of the agreement signed with OPPO at the time of 4G.
But who will charge for 5G patent fees, and how much? At present, there is no uniform standard in the industry.
According to the data provided by Wisdom Bud to reporters, the world's leading companies in the number of 5G standard essential patents include Huawei, Samsung, Qualcomm, LG, Nokia, ZTE, NTT, Ericsson, OPPO, Sharp and so on. The charging standards of leading manufacturers are worth learning.
As early as 2017, Ericsson announced the patent fee standard for 5G multi-mode mobile phones, which were mainly adjusted according to the different sales prices of mobile phones, and the patent fee of a single mobile phone was capped at $5. Nokia capped the licensing fee for the 5G SEP combination at €3 per device.
Qualcomm's standard is that 5G single-mode mobile phones will be charged at 2.275% of the sales price of the mobile phone, 5G multi-mode mobile phones will be charged at 3.25% of the selling price, and Qualcomm single-mode and multi-mode mobile phones will be charged $11.4 and $16.25 respectively for mobile phones with a unit price of $500.
In March 2020, Huawei announced the external licensing of 5G patents, with a patent license fee of US$2.50 per mobile phone, which is far lower than the rate announced by other overseas patentees. For the "first brother" occupying the 5G SEP family ranking, Huawei's move has undoubtedly added fuel to the already surging 5G patent licensing market.
"Since Huawei's contribution rate ranks first, why do other companies receive more?" The person in charge of a country-made mobile phone manufacturer bluntly said that the patent license fee of the right holder is inflated, and the problem of not completely matching its patent strength has always existed. In other words, some enterprises have invested a high proportion of R&D in the 3G and 4G era, and it is understandable that they collect more patent fees, but 5G players are more diverse, patent contributions are more diversified, and the game mechanism of patent licensing and payment has become more complex.
"At present, the dispute over patents is not about whether to pay or not to pay, but about how to price patent fees." The person in charge of the above-mentioned mobile phone manufacturer believes that the inherent rules of the communication patent game are being broken.
The "business" behind the patent war
From the perspective of the formation of the patent licensing model, born in the 3G era, licensing rules are formed by the game between "right holders".
"5G handsets will generate nearly $20 billion in global patent usage revenue annually to patent holders in 2025." Strategy Analytics' emerging device technology research service pointed out in a report that Ericsson, Nokia and Qualcomm will account for the vast majority of these patent revenues.
Taking Nokia as an example, from the perspective of Nokia's revenue composition, Nokia's technology business is one of Nokia's four major businesses, mainly for patent licensing.
In the past decade, Nokia has filed patent lawsuits against Apple, Huawei, HTC, Research In Motion (RIM) and visual technology company ViewSonic co. Even after falling behind in the smartphone market, revenue from patent licensing has become an important part of Nokia's revenue.
Financial report data shows that in the past five years, the annual revenue of Nokia's patent licensing business has remained above 1 billion euros, and in 2021, although the revenue of Nokia's patent licensing business accounted for only 5.72%, the net profit accounted for 40%. In the third quarter of 2021, Nokia's net sales increased by 6% year-on-year, but operating profit fell short of market expectations. Nokia said that technology revenue fell 19% to 305 million euros in the quarter, mainly due to the impact of lawsuits with OPPO and vivo.
In Nokia's latest 2022 revenue, its revenue was 1.595 billion euros, a year-on-year increase of 6%. Although affected by the lawsuit, Nokia's technology business increased its share of the company's overall revenue to 6.4% compared to other businesses that sell communications equipment, with a profit margin of 99.7%.
"The essence of patent licensing is to talk about business, a mobile phone has about 100,000 patents, if it is paid in full accordance with the patent fee required by the patent owner, the cost of the patent fee will exceed the cost of the mobile phone hardware." The person in charge of a mobile phone manufacturer who did not want to be named once told reporters that once the bargaining power disappears, the entire industry will quickly go downhill.
Aware of the importance of patents, mobile phone manufacturers have begun to consciously accumulate a voice on communication patents in the past few years.
In the patent situation in the communication industry sorted out by Yicai and Wisdom Bud at the beginning of this year, communication equipment manufacturers led by Huawei and ZTE and Chinese mobile phone manufacturers represented by OPPO, vivo and Xiaomi accounted for more than 60% of the total number of invention patent applications of communication companies in 2022 (49,164).
OPPO insiders told reporters that five years ago, OPPO had less than 10,000 patents worldwide, but now OPPO has deployed patents in more than 40 countries and regions around the world, applying for nearly 90,000 patents, of which invention patents account for 90%.
In 2016, before the 5G communication standard was perfected, vivo also began pre-research and investment. As of May 2022, vivo has applied for more than 4,000 5G invention patents, submitted nearly 8,000 5G proposals to 3GPP standardization organizations, and led 5G terminal OTA testing, multi-card terminal enhancement, terminal low-power wake-up, personal area network, network intelligence and other projects in 3GPP 5G R18, and continued to promote 5.5G technology innovation.
According to Xiaomi's financial report, as of September 2022, the company's R&D personnel accounted for about 48% of the total number of employees, and there were 9,884 inventors in the R&D team.
Shen Hongfei, vice president of Huawei's legal department, revealed to reporters in an interview last year that 350 million 5G mobile phones are expected to be licensed by Huawei in 2022.
He said that many Chinese companies are currently participating in the global mainstream patent pool, and usually large manufacturers are both rights holders and users, so the licenses between large manufacturers are usually cross-licensed. "In a cross-licensing agreement, each party licenses the other's patents, and ultimately which party pays the other a net license fee depends on the value of the patents and market conditions of both parties."
In his view, in the long run, 5G patent fees will evolve more reasonably under a more complex game.
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