Source: Science Photo Library

Ericsson Seeks New Patent Revenue in Internet-of-Things Push

  • Network maker wants predictable flat fees for licensing
  • Transparent prices would speed adoption of new technologies

Ericsson AB is trying to create a new licensing program so it can speed up technology adoption and increase sales and profitability from the burgeoning market of Internet-connected devices.

A Swedish pioneer in mobile phones and now the largest maker of wireless-networking equipment, Ericsson wants to start a new program where patents on fundamental wireless technology are available at a predictable flat fee that reflects the value connectivity has for a product to makers of so-called Internet-of-Things devices.

The program would give Ericsson access to a new market for things such as smart thermostats, robotic surgery, and upgraded municipal traffic systems. Total revenue for the Internet-of-things industry is expected to reach $4.59 trillion by 2018 from $2.29 trillion this year, according to Bloomberg analysis based on data from researcher IDC. There will be 28 billion of the devices connected to the Internet by 2020, more than three times the number today, according to the data.

“The opportunity here is so important, we need to make sure we do everything we can to facilitate the take-up of new ideas and ensure there are no obstacles on the way,” Gustav Brismark, head of patent strategies at Ericsson, said in a phone interview. “By having that pricing transparent and known we hope to speed up the adoption of the technology. It can be extremely affordable for the low-end use cases.”

The licensing practices of companies like Ericsson that created some of the baseline wireless technology have been under pressure in a debate that’s embroiled courts and regulators worldwide. Apple Inc., Intel Corp. and Hewlett-Packard Co. are among the companies who say the patent royalties are too high when it comes to complex devices like smartphones.

High Margins

Apple has filed a lawsuit accusing Ericsson of charging unreasonably high fees, while Ericsson has lodged a trade complaint seeking to block Apple products from the U.S. market.

Ericsson spends about 33 billion Swedish kronor ($3.9 billion) on research annually. It received 9.9 billion kronor in patent-licensing revenue in 2014. Any new revenue from licensing patents comes with a high profit margin, Brismark said, declining to elaborate.

“The investments we’ve done in communications are providing great value in a more broad sense than earlier and we need to have a fair return on our investments,” he said. “This initiative will be helpful to us to increase our overall revenues.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE