Global telecom cos find India IP gold mine

Written by Nikita Upadhyay | Nikita Upadhyay | Mumbai | Updated: Feb 21 2012, 10:46am hrs
Global telecom equipment makers have managed to slash illegal use of their intellectual property (IP) to below 10% by beefing up enforcement teams, suing offenders and charging for the use of their patented product and technologies in India. Global companies are also using their IP rights as a steady revenue source in the country, whereas domestic firms are lagging behind as they still dont believe IP assets can generate cash.

Swedish network solutions and device maker Ericsson, which owns 27,000 patents, has restructured its IP division and expects significantly more revenue from IP in this financial year. We earned royalties of $700 million in 2010 from different players, says Ericsson vice-president and chief intellectual property officer Kasim Alfalahi. This is still just 4.6% of the revenues, but is growing.

We have done better for the year 2011 and this will go up, added Alfalahi.

The new push to curb illegal use of their IP assets in India comes close on the heels of many telecom equipment makers spending money on research and development of patents. Apart from Ericsson, US-based wireless technology and services provider Qualcomm and French mobile technologies giant Alcatel Lucent are some of them.

Better monitoring and enforcement have substantially helped curb misuse. A decade back, illegal users were more than 50% of the total device ecosystem, today, it has reduced to single digits, says Alfalahi.

India is a maturing nation in this space. Here, a large number of device manufacturers use our technology, but dont pay us. Such players lives are short-lived, he added.

Globally, monetising IP is part of the corporate strategy for companies, but Indian companies lag behind as they still do not consider intangible assets like patents, copyrights, trademarks and designs as a revenue source. Global companies find India a gold mine to monetise their IP assets, said Dilip Kumar, founder & director of Bangalore-based Inolyst Consulting, an IP advisory. Qualcomm is one good example that collects almost all its revenues from selling licences. However, except a few pharmaceutical giants, Indian companies are lagging in this space.

Alcatel-Lucent, which holds 29,000 patents, on February 10 roped in RPX Corporation, a patent licensing management expert, to offer access to its portfolio through a licensing syndicate.

In the third quarter of 2011, Alcatel Lucent earned 376-million euro revenue from its IP division, a 2.7% increase from the year-ago quarter. We have chosen to undertake an innovative approach to realising the value of our patent portfolio, and while retaining ownership of our patents, said Alcatel-Lucent CEO Ben Verwaayen in a media release. We seek to expand access to them for a diverse set of industries. We expect to generate substantial proceeds from this arrangement.

A large number of lawsuits between telecom companies are over patent infringement. In April last year, Ericsson had sued Chinas ZTE, a telecom equipment maker, over patent infringement.

The enforcement effort is painstaking. We have to manually go to the market and buy the devices, which we test in our lab and an independent lab, says Ericssons Alfalahi. Having found that our technology is being used, we try and talk to the company and convince them to buy our licence. Suing them is the last resort. Ericsson spends $5 billion, or 16% of its total revenues, on research and development.

In India, the biggest challenge for IP monetisation of MNC companies is the sale of their counterfeit products, says Inolyst Consultings Kumar. India is a price sensitive market. The legal and IP department of these companies spend almost 50% of their time with enforcement teams to keep a check on counterfeiting.

The IPR regime needs to be made more robust for not just multinational companies, but also for Indian companies to favour their monetisation efforts, he added.