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Ericsson Issues Demand in HTC Dispute

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Patent negotiations broke down

Ericsson (ERIC) and HTC are still wrestling over patent royalty rates in an ongoing dispute that has been running for more than a year. Ericsson recently told a Texas federal court that the claims that HTC has raised against it should be resolved in arbitration, not in court.

HTC sued Ericsson in April 2017 after the two companies disagreed over rates for licensing Ericsson’s standard essential patents related to wireless networks and cellular connectivity. In the suit, HTC accused Ericsson of attempting to overcharge it for aging patents.

According to Ericsson, HTC’s refusal to negotiate patent license rates in good faith showed it wanted to utilize its technology without paying a fair and reasonable price. Ericsson claimed that HTC sought to enjoy an unfair advantage over its competitors.

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Ericsson made $200 million from patent licenses

In addition to selling telecom network equipment, Ericsson has also built a large patent portfolio. The company monetizes this portfolio by licensing the patents to other companies, including handset makers. Ericsson’s patent-licensing business generated ~$200.0 million in revenues in the second quarter.

Ericsson sets 5G patent rates

Ericsson is in a race with Nokia (NOK), Qualcomm (QCOM), and other peers to license patents to makers of 5G phones. Ericsson said in 2017 that it would charge a maximum of $5 on every 5G phone that utilizes its patents. 

Nokia recently published its royalty rates, saying it would charge handset makers a maximum of $3.50 per device to utilize its 5G patents. Qualcomm could charge as much as $16.25 per 5G phone that applies its technology.

Verizon (VZ) and AT&T (T) are underway with 5G network deployment programs in the United States, ready to deliver ultrafast wireless speeds. Plus, 5G-ready phones are expected to start arriving next year, and Samsung (SSNLF) is in the running to be the first with consumer 5G-ready handsets.

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