“Consumers don’t care who owns the intellectual property behind a product or service; they just want optimal functionality,” Gustav Brismark, Vice President of Patent Strategy and Portfolio Management at Ericsson, says. “The way the telecom industry traditionally works with open standards can guarantee this, because the deciding factor when selecting a technical solution for a new standard is its technical merits.”

How vendors use patents plays a crucial role here. A vendor can either choose to use its rights to gain a monopoly, or waive these and license all of its relevant patents on fair, reasonable and non-discriminatory (FRAND) terms. The first approach can be exemplified with the IT industry and Instant Messaging (IM) software, where users are locked into individual competing products that cannot talk to each other. The other approach can be illustrated with the standardized Short Message Service (SMS), where virtually 3.5 billion subscribers can text one another regardless of the network or device they are using.

“When enough market leaders behind a technology have agreed to follow FRAND licensing principles, the result for operators will be a highly competitive market for interoperable solutions,” Brismark says. “This will benefit all parties. Operators will be able to choose vendors based on a range of factors, and all the companies that have contributed to the standard will get a fare share of the license fees to enable them to continue investing in new technology.”

The success of the GSM standard, which has been adopted in virtually every country, proves that the FRAND principle works. Since then, what is known as the 3GPP family of technologies – GSM, EDGE, WCDMA and HSPA – have maintained the position as leading standard in wireless, continually adding functionality and capacity to stay in front. The addition of LTE to the 3GPP track should ensure this lead is maintained.

“However, to stay in the lead, the standard needs to constantly evolve,” Brismark says. “A company that contributes to the standard initially cannot rest on its laurels, and simply be happy to receive the royalty payments due on past patent holdings. Such royalties need to decrease as new patented technologies are introduced by others and the relative share decreases.”