Key Elements for a Successful LTE Patent Pool

www.sisvel.com

Confidential

Giustino de Sanctis

Amsterdam, May 18, 2010

www.sisvel.com

Confidential

SISVELA BRIEF INTRODUCTION

2

www.sisvel.com

Sisvel: a Brief Introduction

• Founded in 1982 to spin-off a significant portfolio of television

patents developed by Indesit, Sisvel is a dynamic and full service patent management company.

• Today Sisvel is a truly independent company, but it has deep

roots in the industry.

Confidential 3

• Sisvel is one of the oldest and, with a team of nearly 80

professionals, one of the largest administrators of IP Rights.

• Sisvel is headquartered in Europe, but operates as a multinational company with subsidiaries and offices on three

continents.

• Sisvel has its own research laboratories and engineering team.

Sisvel’s Global Presence

SISVEL S.P.A.

Turin, Italy

SISVEL Japan

Tokyo, JapanSISVEL Germany GmbH

Stuttgart, Germany

www.sisvel.com

Confidential

4

SISVEL (Hong Kong) Ltd.

Hong Kong

SISVEL US, Inc.

Audio MPEG, Inc.

Alexandria, VA

Edico, Srl

Rome, Italy SISVEL Technology, Srl

Turin, Italy

4

www.sisvel.com

Current Programs:

MPEG AUDIO

Licensing Programs

Confidential 5

Programs under Development:

www.sisvel.com

Confidential

PATENT POOLSBASICS AND BENEFITS

6

Patent Pools: Basics

www.sisvel.com

• A “Patent Pool” is a portfolio of patents essential to the same

standardized technology but owned by different parties.

• The purpose of the pool is to facilitate licensing essential patents.

• Patent pools are pro-competitive:

– provide more certainty and predictability to those who are

Confidential 7

– provide more certainty and predictability to those who are

interested in adopting the standard and creates a leveled playing field;

– reduce aggregate royalties by establishing a single royalty rate for the participating companies patents;

– reduce transaction and administrative costs for both patent owners

and licensees;

– promote FRAND licensing terms and conditions.

www.sisvel.com

Confidential

A PATENT POOL FOR LTEKEY ELEMENTS

8

www.sisvel.com

Sisvel LTE/SAE Patent Pool Facilitation

• 32 Partecipating Companies – from Europe, US, China,

Japan, and Korea, including major telecommunications

companies (both network operators and equipment

vendors), consumer electronics and integrated circuit

manufacturers, and research institutes

Confidential 9

manufacturers, and research institutes

• Last Facilitation Meeting

– 21 - 22 April, 2010 in Hong Kong

• Next Facilitation Meeting

– 15 – 16 June, 2010 in Washington DC

www.sisvel.com

34%

4%

Sisvel Facilitation

Not in any Facilitation

Unknown

Sisvel LTE/SAE Patent Pool Facilitation

• 32 companies – from Europe, US,

China, Japan and Korea, including

telecom companies (both network

operators and equipment vendors),

consumer electronics and IC

manufacturers, and research institutes

Confidential 10

• Based on declarations of essentiality

to standardization bodies such as ETSI

and TTA, these 32 POs hold over 60% of the intellectual property relevant to

LTE

10

62%

Last Facilitation meeting:21 - 22 April, 2010: Hong Kong

Next Facilitation meeting:15 – 16 June, 2010: Washington

• A well-balanced, customized pool is much more likely to

achieve these goals than one based on a “cookie cutter”

approach

• A successful pool needs to attract both large and small Licensors

www.sisvel.com

Key factors for Building a Successful LTE Patent Pool (1 of 2)

Confidential

• A successful pool needs to attract both large and small Licensors

to reach Critical mass (in terms of participation and patent

coverage) and offer all Licensees a compelling licensing solution

• To attract Licensors a pool:

– Be attractive for all Licensors

– Adopt a simplified and transparent process

11

• To achieve wide acceptance among Licensees, a pool should:

– Non-discriminatory licensing by a truly independentadministrator acting globally include enforcement and

compliance mechanisms to give Licensees confidence that all

market participants are treated equally

www.sisvel.com

Key factors for Building a Successful LTE Patent Pool (1 of 2)

Confidential

market participants are treated equally

– Include administrative tools that enhance efficiency and

make the reporting and payment process easy

– Offer a license with a royalty that is reflective of what is

offered:

12

Value based proposition

www.sisvel.com

Confidential

A PATENT POOL FOR LTEROYALTY RATE

13

LTE: What Level of Royalties?

• A first step to address royalty stacking was taken by NGMN by the introduction of the "Trusted Third Party IPR Process” (TTP)

• The results are not publicly available, but some have Declared Maximum Rates (as % of handset selling price)

• The aggregated value of only 10 parties is already a 2-digit figure and there could be as many as 50 parties holding essential LTE patents.

Confidential

essential LTE patents.

Nokia 1,50% * ALU 2,00%

NSN 0,80% Nortel 1,00%

Ericsson 1,50% Huawei 1,50%

Qualcomm 3,25% ZTE 1,00%

Motorola 2,25% Vodafone 0,00%

* 2% for multistandard

14This chart reports for some companies the “maximum” LTE desired royalty rates that have been publically declared by those companies.

www.sisvel.com

LTE Royalty LevelNo Patent Pool – Possible Scenario

Based on Public Declaration and Sisvel’s Assumption% of handset selling price

cumulative

Confidential15

2.00% 1.50% 1.50%2.25%

1.50% 1.00% 0.80%

3.25%

0.00%1.00%

% of handset selling price

++

This chart reports for some companies the “maximum” LTE desired royalty rates that have been publically declared by those companies.

www.sisvel.com

Royalty Leveltwo patent pools and outside patent owners

cumulative

% of handset selling price

Confidential16

cumulative

% of handset selling price

++

www.sisvel.com

Royalty Levelone patent pool and outside patent owners

% of handset selling price

Confidential17

cumulative

% of handset selling price

++

www.sisvel.com

Royalty LevelIdeal scenario

% of handset selling price

Confidential18

% of handset selling price

=

The Challenge of Setting Royalty RatesParticipation and Royalty Rates

The chicken and the egg problem: what comes first?

www.sisvel.com

Confidential

ROYALTY RATES

PATENT OWNERS

19

19

The Challenge of Setting Royalty RatesTwo Methods

Traditional Method

Royalty Comes First

Participation Method

Patent Owners Come First

www.sisvel.com

Confidential

Royalty Comes First Patent Owners Come First

• Royalty rate is decided by the

group

• Participants decide whether to

join after royalty is set

• Participation negotiated with

all members

• Pool royalty rate set as a result

of the above negotiations

20

20

Aggregated Rate vs. Patents/POs

Pool

Royalty Rate

www.sisvel.com

Confidential

Number of Patent Owners21

21

Pool

Outside of Pool

Aggregated Rate vs. Patents/POsRoyalty Rate

www.sisvel.com

Confidential

Number of Patent Owners22

22

Pool

Outside of Pool

Aggregate

Aggregated Rate vs. Patents/POsRoyalty Rate

www.sisvel.com

Confidential

Number of Patent Owners23

23

Pool

Outside of Pool

Aggregate

Aggregated Rate vs. Patents/POsRoyalty Rate

www.sisvel.com

Confidential

Number of Patent Owners24

24

Pool

Aggregated Rate vs. Patents/POsRoyalty Rate

www.sisvel.com

Confidential

Pool

Outside of Pool

Aggregate

Number of Patent Owners25

25

Thank You

www.sisvel.com

Confidential

www.sisvel.com

Confidential