With India embarking on a massive smart meter rollout programme under RDSS, a new ecosystem is being created involving a variety of entities like smart meter manufacturers, AMISPs, providers of RF mesh network technology, etc. However, there are some finer aspects in the smart grid architecture that are neither widely discussed nor completely understood. In this exclusive interaction, we have Sven Torringer, Program Manager, Sisvel Cellular IoT, discussing one such aspect — Standard Essential Patent (SEP) fees. Torringer touches upon all subtleties of SEP fees, providing a holistic picture of this crucial aspect of the smart grid ecosystem. An interview by Venugopal Pillai.
Let us start by understanding the core issue: what are Standard Essential Patent (SEP) fees in the context of smart metering? Essentially, do SEP fees have to do with intellectual property rights (IPR)?
Standards – like NB-IoT – power interconnectivity in smart products. During the standards-setting process, dozens of companies come together and combine their best inventions into a single technology that can be used everywhere. So when you put LTE-M or NB-IoT technology into a device, it can be used to connect to existing cellular networks almost anywhere in the world.
The technologies unlocking this great potential are the result of continuous investments in effort, time, skill and money made by a group of companies that have taken the risk to focus on innovation. Instead of keeping the results of their R&D for themselves as trade secrets, these companies disclosed their inventions in patents and collaborated with other companies in the cellular IoT (c-IoT) field to bring their technologies together in open standards. This enabled a broad number of entities to learn how to build c-IoT networks and c-IoT products. It is a process that delivers benefits to, and improves the lives of, people across the globe.
Open standards innovation can be described as an ecosystem, requiring a balance between invention and implementation, investment and reward, all parts contingent and dependent on each other. It allows companies that are good at innovation to innovate, and allows companies who are good at implementing these innovations into products to focus on this instead. In return for sharing their knowledge, the innovators are entitled to obtain patents for their innovations and to ask for a fair and reasonable royalty from companies making products that implement their patented technology.
One feature of open standards is that there are usually many innovators involved. This means that it can be complicated and time consuming to obtain all the necessary licenses for a standard compliant product.
A patent pool, such as Sisvel Cellular IoT, provides a solution to this problem by gathering multiple companies’ patents and offering all of them under a single license, a one-stop-shop. A pool solution replaces a multitude of discussions, licence agreements, sales reporting obligations and invoices, with a single licence, single reporting and a single royalty payment.
This single licence gives implementers peace of mind to choose NB-IoT and LTE-M as their communication technology if they are believed to provide the best match with their product design and function – and not to make intellectual property conflicts a decisive factor. In turn, this will allow the industry the freedom it needs to grow.
Sisvel’s role in this is to act as an independent administrator, offering commercial solutions that work for both innovators and implementers. Our pool provides innovators with a fair reward for their innovation while also facilitating technology adoption by ensuring its license offering is fair and reasonable for the implementers. This is how Sisvel helps to foster innovation.
In the context of smart metering, how are SEP fees structured?
It depends on the technology. Sisvel Cellular IoT is focusing on the NB-IoT and LTE-M technologies. The royalty rates in our program, which start at just US$0.08 per unit, have been designed with the central objective of encouraging greater use of NB-IoT and LTE-M in all IoT devices. After all, we all want to see the cellular IoT space grow further. The royalty rate for NB-IoT varies depending on the smart meter’s selling price, while the royalty rate for LTE-M smart meters is fixed.
Does the royalty for an NB-IoT smart meter vary according to its selling price?
Correct. When Sisvel Cellular IoT launched a couple of years ago, we did so with only one royalty rate level for NB-IoT, i.e. $0.66/unit. We quickly learnt from the market that it was looking for a quick transition to cheaper devices to enable higher volume of products on the market, and that this royalty rate may become a challenge for this transition to take place. At Sisvel Cellular IoT we believe that everyone would benefit from greater adoption of NB-IoT, so we developed two new royalty tiers ($0.08 and $0.35) that would apply to these cheaper devices when they reach the market.
Do SEP fees come into the picture only when cellular or NB-IoT technology is used in smart metering projects? This is to say is there no SEP fee when RF-mesh technology is used, for instance?
An NB-IoT license will only be needed for devices that implement the NB-IoT technology. If a device makes use of any other connectivity technology then no NB-IoT royalty would apply. This does not mean, however, that no patent royalties may apply. For example, there are already well-known patent licensing programs for e.g. WiFi, MIOTY, 4G and 5G that charges a royalty rate for the use of these connectivity solutions as well.
Who is expected to pay SEP fees, and to whom?
Sisvel Cellular IoT’s standard offer is aimed at smart meter manufacturers of finished products. Sisvel’s role is to offer a simple and efficient solution that includes licenses to thousands of patents owned by more than 30 companies, all via one agreement. The royalty collected by Sisvel is then forwarded to the innovators of the NB-IoT and LTE-M technologies. This royalty can then be invested by these innovators into the development of future connectivity solutions, benefiting also the smart meter industry as well as consumers.
Is Sisvel associated with India as yet?
Yes, Sisvel Cellular IoT offers licenses globally, including in India.
In the developed world, what is generally the situation with SEP fees? Specifically, is there is a robust framework to govern SEP fee-related issues?
Yes, SEP licenses, including royalty rates offered thereunder, are governed by FRAND rules, which is a system that has been developed by regulators and courts across the globe, including in India. FRAND stands for “Fair, Reasonable and Non-Discriminatory terms”. These rules may differ somewhat between technologies and countries. The licenses offered via Sisvel Cellular IoT has been developed to ensure compliance with these rules.
We hear that in Europe some SEP holders (e.g. Qualcomm) are collecting fees from smart metering companies/utilities. Is this the norm worldwide?
SEP holders have licensed their patents globally for decades, including in India. Much of the revenue from the 3G licensing programs were re-invested into the development of 4G, and revenue from the licensing of 4G was likewise essential to fund the development of 5G, which we all benefit from today. This is what keeps the innovation wheels spinning for these complex global technologies, and it will also help the world to soon see the deployment of 6G networks, bringing even more benefits to everyone across the globe.
Globally, which are the major (cellular) companies that hold IPR and are eligible for SEP fees?
This varies depending on the technologies. When it comes to NB-IoT and LTE-M, Sisvel Cellular IoT represents the largest patent portfolio by far, i.e. more than 50 per cent.
India has ambitioned to install 250 million prepaid smart meters, which is considered to be the biggest smart meter rollout ever globally. Despite this, there is very little discussion or even knowledge about SEP fees. What is your reading of the situation?
Sisvel Cellular IoT has already reached out to all NB-IoT smart meter manufacturers known to us. This amounts to hundreds of companies worldwide, and also includes all known manufacturers in India. We have also reached out to hundreds of companies involved in the wider IoT sector to raise awareness of SEPs and the fees related thereto.
The vast majority of IoT companies clearly have some knowledge about SEPs, SEP fees and the need to ensure that their products have obtained necessary licenses.
It is another question entirely why this issue is not being discussed. It is likely due to an ostrich mentality, where all the relevant players are aware of the issue, but chose to ignore it in the hope that they can sell as many products as possible at a lower price before the legal reality of their actions catches up with them. This is not the way businesses should be run, and it creates a lot of risks and uncertainties. We have seen similar patterns in other industries where it was initially thought that it might be possible to ignore IP costs. This approach later led to a lot of friction and legal liabilities and made the problem much larger than it had to be. We hope that the IoT industry will not repeat the same mistake.
Companies who knowingly ignore SEPs are a problem for the industry. They are essentially exploiting an unfair market advantage to offer products at a lower price than companies that do the right thing from a compliance perspective and seek the necessary licenses.
It is therefore important that the market informs itself about what SEPs are and why licenses are necessary so that they can bring this discussion into the light. Industry cannot allow bad actors to avoid their responsibilities by sticking their heads into the sand or trying to hide in the shadows.
If there were three things that a smart metering industry observer or player would need to know about the SEP fees issue, what, in your opinion, would they be?
- There is a lot of material available on this question; therefore, great scope for self-education!
- Though open standards, such as NB-IoT, often may go unnoticed and are taken for granted, they have transformed all of our lives. Open standards mean consumers and companies have access to outstanding technology quickly and affordably. It is important that everyone takes responsibility for ensuring that the innovation loop continues to benefit us all. The SEP licensing system is what underpins this universe and plays an essential role in ensuring that the world will continue seeing new tech improving our lives even more.
- Sisvel Cellular IoT offers a simple, efficient solution to NB-IoT licensing by bringing together thousands of patents from more than 30 world-leading patent owners, via a single agreement and transaction.
