Ericsson, InterDigital settle patent dispute

InterDigital Communications Corp. has reached a worldwide patent and royalty settlement with wireless infrastructure supplier Telefonaktiebolaget LM Ericsson and handset joint venture Sony Ericsson Mobile Communications AB, ending a decade-long patent infringement dispute.

The pact also established new financial terms and royalty obligations for Nokia Corp. and Samsung Electronics Co. Ltd.

Under the agreement, Ericsson and Sony Ericsson will pay about US$34 million, based on sales of digital terminal and infrastructure products through the end of 2002, while the handset venture will additionally pay a royalty on each licensed product sold through 2006, InterDigital said in a statement Monday.

InterDigital in King of Prussia, Pennsylvania, designs wireless product platforms.

The settlement covers second-generation and 2.5-generation digital technologies, such as circuit-switched GSM (Global System for Mobile Communications) and packet-switched GPRS (General Packet Radio Service), according to InterDigital. It excludes all products built on the 3G (third-generation) standard, the company said.

The new royalty agreement with Sony Ericsson triggered a clause in the patent licensing agreements of Nokia and Samsung, entitling them to receive the same favorable conditions of other major customers, according to an InterDigital spokeswoman.

Nokia's royalty obligation for 2002 could be between $100 million and $120 million, while Samsung's could be in the range of $22 million to $27 million, according to InterDigital. The aggregate prepayment of royalties from Nokia and Samsung could range between $180 million and $220 million.

Analysts doubt the patent settlement will have an affect on handset prices for consumers and businesses.

"The settlement will add a few dollars to the cost of each handset," said Chris Jones, an analyst with Ltd. "But Sony Ericsson, which has been losing market share, can't afford to pass on that additional cost to customers. It will keep a close line on prices to remain competitive in the market."

The good news about the settlement, which had been looming over the Swedish company for years, is that "Ericsson knows what it has to pay and can move on," Jones said.

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