Highlighting the relevant IPR strategies related to the company. The telecommunications industry in which Ericsson operates extensively uses patents to develop new products and services. The number of patents Ericsson has, continues to increase, and it had a portfolio of approximately 49,000 granted patents by end of year 2018. Ericsson has invested 18.5 % i.e. 38.9 billion SEK of its net sales in R & D and net IPR revenue sands at 8.0 SEK in 2018.
The IPR strategy of Ericsson predominantly utilizes patents to protect its intellectual property rights in combination with copyright and trademark laws. In addition, the company also employs trade secrets, non-disclosure, confidentiality policies and other contractual arrangements to strengthen its IPR protection.
Adopting prudent patent strategies is crucial for Ericsson to protect as well as leverage its patent portfolio which is one of the in the world. The nature of Ericsson IPR contracts is predominantly based on licensing where customers earns a right to access Ericsson’s respective Intellectual property for decided duration of time and royalty revenue based on usage/ sales shall be recognized based on when usage or sales occur measured on a quarterly basis. In addition, some contracts are also designed with lump sum amount payable up front or on an annual basis. Ericsson operates its patent licensing under “fair, reasonable and non-discriminatory” (FRAND) terms. The FRAND system provides a balanced system to standardize essential technology as well as also ensures fair and timely return on investments with patent royalties which enables such companies to invest in future technologies.
Ericsson has initiated a patent licensing platform, “Avanci” as first of its kind marketplace for licensing of patented cellular technology IoT (Internet of things). This platform facilitates those who contribute towards standard essential patent to share their innovations with other companies who need to access the technology to commercialize their products with fair agreements of flat per unit rate.
Patent shopping: Ericsson has acquired 35 companies till date. Despite all efforts, these measures cannot be considered foolproof to prevent infringement or any other from of misappropriation. We discuss below some risk factors; Analyzing the exposure to risks for each company. The ability of company to completely realize potential of its intellectual property can be limited by number of risk factors; The inherent complexity of industry in which Ericsson operates makes it difficult to assure that violations to do not occur and ensuring compliance with changes in laws and regulations can lead to increased costs as well reduced demand of products and services. Such changes can have adverse impact on customers as well as companies’ business, financial condition and brand perception. For example, delay in allocation of frequency spectrum may affect costs as well as can force a company to develop altogether a new product.
It is not always possible to detect unauthorized usage and take timely action and appropriate steps to protect and establish our IP rights. Also, the current legal systems of some countries that do not have necessary systems and infrastructure or motivation in place to offer required level of protection for intellectual property rights (IPR) limits ability to prevent infringement.
The industry in which we operate as well as our business model require us to license technologies from third parties which are obliviously for a defined period of time as per contractual agreements. Quite often it is required to seek or renew licenses in future but there is no guarantee that such renewal or extensions are available on acceptable terms or even are available at all or not. Same is true for our customers i.e. whether they will seek current licenses from us in future what would be the terms and conditions they will be willing to negotiate at. In addition, there are instances when the inclusion in our IPR licensed from third parties especially on a non-exclusive basis can limit the companies’ ability to protect proprietary rights in own products.
With the increase in complexity and overlap of technology as well more competitors, the chances of unintentional infringement due to functional overlap of intellectual property rights also increases and implications of such infringements can be huge costs in terms of fines, penalties as well as damage to brand value.
Ericsson has experienced such lawsuits in India recently, In 2013 Ericsson filed a lawsuit for patent infringement in Delhi High court against India based Mobile handset manufacturing company Micromax, seeking injunction and damages. As a defense strategy, Micromax went to Competition Commission of India (CCI) and filed a complaint which was later referred to Director General’s office for in-depth investigation. Another lawsuit came from Intex technologies (India) limited. Ericsson has challenged CCI’s Jurisdiction in both these cases before Delhi High Court and the decision is still awaited. Meanwhile Ericsson has tried to sign a license agreement under “Fair, Reasonable and Non-discriminatory” (FRAND) terms and reached a settlement with Micromax in January 2017 putting an end to patent infringement dispute with Micromax.
There is increasing attention on licensing of patents with respect to adoption of open standards ( for e.g. 2G, 3G and 4G technology), antitrust investigations and legislative change as well as court rulings poses risk in terms of Ericsson’s ability to utilize profitably its patent portfolio particularly in domain pertaining to such open standards and hence can adversely affect company’s financial condition, operating results and reputation. With Ericsson leading in patents portfolio in area of open standards, effective risk management is crucial. Ericsson relies on many software patents and the inherent limitation of patent law as a protection tool to protect software may materially affect the business.
More and more industry wide key software solutions developed these days are developed as free and open source code software. Such development and distribution of open source software free of cost can adversely impact Ericsson’s ability to enforce required patents in near future. Such open source software can allow our competitors and third parties to get access to our software due to free accessibility of source code. In fact, there are instances where third parties have contended and can contend in future, against us and also against our clients for infringement of intellectual property rights. “Threat actors” trespassing Ericsson’s Intellectual Property and other important data via cyber-attacks.
In addition, there are risk arising from factor external to company/Industry such as civil disturbances, terrorism acts, misuse of technology leading to human rights violations, cyber security issues, recessions, governmental sanctions and protectionist measures etc.
Recommendations for an appropriate strategy. After identifying the risks in the current IPR strategy and more specifically if it requires a change in approach while doing business in India. After identifying the risks in the current IPR strategy and more specifically if it requires a change in approach while doing business in India.
Investing high in risk management strategic team: Investing highly in risk management strategic teams by incorporating highly knowledgeable and young people will help the team to assess and handle the risks better as IP is the main source of the company’s earning.
Intellectual Property Insurance:
Investing in ‘Intellectual Property Insurance’ is an investment that can protect inventors and the company if any uncertainty happens inside the company or they are sued for infringement of any IP of any other company. This can save mainly the monetary damages and he legal fees if the company is found guilty of the charges.
Strengthening the Infringement Liability Policies:
The Infringement liability policies of the companies should be improved and made stronger. This can help you in getting more and more return and compensation if any other company tries to infringe your intellectual property right. You can sue them in court and thus, according to your policies and the agreement made, the defaulter company can be made liable for the losses you went through.
Strong Exit Interviews:
Whenever any employee leaves the company, there is a chance of him to leak the information or knowledge he or she has gained when they worked with you. Thus, the clauses like non-competing and non-discloser in the agreements when they joined are needed to be reminded. These clauses can be made stronger that can reduce or eliminate any possible chances of the person infringing them in one or the other way.
Techniques like ‘Patent Blocking’ can be adopted so that other companies could not copy one or the other technologies of the company. In this, a company files its patents in such a way, that if any other company tries to copy one of their patented technology whose patent is about to or have already expired, then also they cannot do that as it will infringe a second patent of the company which have been recently issued.