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April 28, 2005

3G Patents Could Strangle Device Innovation: Report

Courtesy of Mobile Pipeline

Royalties on patents related to 3G mobile devices could significantly hurt the wireless industry and, in particular, hurt smaller device vendors, according to a report released Thursday by U.K. market research firm Informa.

In the next 12 years, the mobile device industry could spend between $80 billion and $100 billion in royalties on patents held by companies such as Qualcomm, Nokia, Motorola and Ericsson, the report notes. Not only would that level of expenditure hurt smaller vendors, but it also could stifle innovation, the report claims.

One major owner of intellectual property, Qualcomm, has set its royalty rate at between 4.65 percent and 6 percent. The report concludes that if other holders of essential intellectual property charge similar rates, the total royalty rate could be as much as 25 to 30 percent of the device vendor's selling price.

"In this case, second-tier equipment and handset manufacturers will be severely impacted," Informa said in a statement. The result would be that innovative but smaller companies could withdraw from the market and fewer devices would be available to wireless operators and their customers, the report said.

The report noted that this situation has caused the GSM Association, the trade organization of wireless operators that use GSM technology, to ask the royalty holders to limit royalty payments.

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