3 IPR questions to ask your cellular module supplier

Cellular IPR litigation is all too often overlooked by companies developing connected solutions using cellular technology. Two key issues must be addressed to avoid litigation: 1)  how to license cellular standard essential patents (SEPs), a set of thousands of patents required to comply with cellular technology standards, and 2) how to avoid over-paying.

Generally, owners of SEPs included in cellular standards are obliged to license their patents on fair, reasonable, and non-discriminatory (FRAND) terms and conditions. One challenge when licensing on FRAND terms is that what is fair and reasonable has traditionally been determined by the patent holder without an eye toward the patent implementors’ needs and market realities. 

It is even more difficult to evaluate a FRAND offer because a potential licensee must rely on the statements of the SEP owner regarding SEP value and patent essentiality. This happens because there is no transparency regarding how SEP values or essentiality were determined, only statements that what is offered is FRAND and that other companies have signed a license, so it must be a FRAND offer. However, under this scenario and based on actual facts, a SEP holder’s offer is rarely fair and reasonable, let alone non-discriminatory.

All this places the companies that build cellular solutions implementing these SEP patents on treacherous terrain. Only 20 to 30 percent of SEPs declared by patent owners are actually essential for implementing the related standard. Of these 20 to 30 percent, many are essential only to base station designs and have nothing to do with user equipment. Identifying the right SEPs so that you only pay licensing fees for patents used by your products rather than the patent portfolio held by a SEP owner is time-consuming, costly, and error-prone to those new to SEP licensing. u-blox can carry this burden because of our deep knowledge regarding SEP licensing and the underlying technologies.

With the accelerating rise of cellular technology adoption and new cellular standards constantly in the making, it’s hardly a surprise that cellular patent litigations have increased significantly in recent years. Even in the middle of a pandemic, litigation regarding cellular SEPs increased by 19% and continued to rise through 2023.
If SEP use rights and the potential for the related devastating litigation of SEPs are not yet on your radar, they should be. We highly recommend making it a key factor when choosing a cellular module supplier. To help you, we offer three critical questions you should consider and understand before selecting a cellular module supplier:

What patent coverage do you offer?

First, it is important to ask and understand what patent coverage your cellular module supplier offers. Many operate with one or two signed SEP license agreements that cover a tiny percentage of the SEPs needed for wireless connectivity and security. This leaves a lot of product risk exposure (potentially higher royalties to be paid at some point), product injunctions (import and manufacturing stops due to lack of a license), and the extensive costs of defending a patent infringement lawsuit or negotiating a settlement.

Unlike our competitors, at u-blox we focus on licensing the largest and most litigious patent holders. We offer the broadest cellular SEP patent coverage of any module manufacturer in the market. Our competitors offer either very limited coverage or none. As a result, our customers benefit from lower royalty rates because the royalty rate in our licenses is FRAND-based and negotiated without the threat of an infringement litigation or product injunction hanging over the negotiation outcome.

What is the fine print of your indemnification clause?

In many cases, indemnification clauses have critical coverage and reimbursement limitations that may result in no coverage or – at best – little meaningful protection. For example, sometimes indemnity is offered but with limitations such as  “only after a final court decision.” That final court decision occurs after you litigated and disrupted your business and doesn’t include early settlements. In the alternative, a product import injunction may be sought to force a case to settle quickly and never reach a court decision.

Another example to watch out for is competitors claiming that patent coverage is not needed because full indemnification is offered. These “indemnification” offers are hollow because damages in patent litigation cases can cost hundreds of millions of dollars and could bankrupt a module supplier, leaving your company to pay. The best advice is to press your module supplier to disclose limitations, such as those based on geography, technology, final judgment, refund policies, guarantees, or other restrictions and caveats. Additionally, ask how they will assist if an injunction shuts down your ability to manufacture or import your products.

Keep in mind that indemnification does not protect from injunctions or lawsuits. In both cases, your business will suffer extensively and face the additional financial burden of defending a lawsuit, which can quickly add up to millions of dollars. These are costs that a company must carry for years as litigation progresses, even if indemnification might apply “after the verdict.” 

Likewise, your business must manage the business disruption caused by the litigation, such as time best spent on R&D to provide internal personnel to find documents, be deposed, and coordinate the discovery of all things you are required to provide. These costs are generally not covered by indemnification clauses. Finally, business disruption is common when the actual cost of using the patent is unknown, leading to inaccuracies in product pricing and profit estimates.

u-blox offers full coverage for licensed patents to reduce business risk and can offer additional “insurance” for unlicensed patents (per the terms of the agreement). This alone far exceeds any indemnification clause, as our licenses eliminate the risk of an injunction or lawsuit filing for the covered patents.

Do you offer support in case of a patent infringement lawsuit?

As mentioned, patent infringement lawsuits can be enough to derail even a large global business because they entail a high financial cost, potentially disrupt manufacturing, and distract from a company’s main goals. Smaller companies lacking a dedicated and proactive legal team can find themselves in a losing “David vs. Goliath” battle, with no one left on deck to steer their business in the right direction, much less coordinate a strategic response to the litigation.

u-blox offers a range of patent use protection services to address our customers’ diverse needs and means. Our services can include providing assistance by intervening to resolve a patent assertion or mitigating customer patent infringement allegations with any SEP owners (including patent trolls) that are not currently part of existing u-blox coverage. This unique offering includes enhanced assistance, such as a commitment to seek negotiations with any SEP holder that asserts a patent against you, with our goal being to obtain a module license, as well as to seek an offset for the module-level fees u-blox paid even though our customers may have already signed a license with the SEP holder.

Best-in-class patent coverage

It’s impossible for any cellular component supplier to enter license agreements with all SEP holders. Some SEP holders don’t actively pursue licensing agreements, while others only enter agreements with end product manufacturers and don’t license at the module level. That said, it is possible to significantly reduce the risk of patent infringement lawsuits by having u-blox secure agreements with the top SEP owners that protect your products and avoid litigations and injunctions. At u-blox, we are dedicated to doing just that.

When you source your cellular modules from u-blox, you receive the best patent coverage of any cellular module manufacturer. By proactively seeking licenses from SEP holders, u-blox strives to protect device makers using u-blox cellular modules from lawsuits and injunctions for cellular patents.

You don’t have to look far into the past to see how this benefits our customers. In one example that is still ongoing, Philips filed several lawsuits in Delaware against end product manufacturers for patent infringement. Because we at u-blox have a license agreement with Philips, our customers’ products using a u-blox module were protected and never part of the lawsuit. Indeed, we have one customer who has been sued three times by three different SEP owners, and each time, our u-blox’s licenses protect them because they used a u-blox module.