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Ericsson Contests Apple, Demands Licensing Offer Review - Analyst Blog

Zacks Equity Research
Updated

Countering the latest lawsuit filed against Ericsson (ERIC), by the iPhone maker – Apple Inc. (AAPL), the company pressed legal charges against the latter to overrule its claims in the United States District Court for the Eastern District of Texas.

On Jan 12, Apple charged Ericsson of demanding royalties for licensing patents on the LTE technology as a percentage of the price of the smartphone or tablet. Apple believes that royalties should be based on the value of the processor chip that deploys the LTE technology.

In opposition, Ericsson yesterday sought the help of the Texas District Court for an independent evaluation of its global licensing offer and determination of the royalty rates on non-discriminatory terms. Also, this Swedish company expects the court to verify the licensing offer’s compliance with the fair, reasonable, and non-discriminatory (‘FRAND’) terms.

As a matter of fact, Ericsson has been committed to licensing its standardized patents, based on FRAND terms, to ensure healthy competition, fair play for all firms, lowering barriers-to-entry and qualitative innovations. The company invests over $5 billion in Research & Developments on a yearly basis and thus has one of the most extensive patent portfolios in the industry.

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In Conclusion

This counter reaction by Ericsson is aimed at ending the cold war between the technology giants. Since the last two years, both the companies have been clambering over the failed negotiations to renew a licensing agreement, which was originally signed in 2008. Notably, Apple did not exhibit its willingness to renew the license on FRAND terms proposed by Ericsson.

Hence, Ericsson primarily aims to achieve a mutually beneficial verdict with Apple, along with the help of a third party. As the final outcome of the legal dispute is awaited, Ericsson’s fourth quarter 2014 IPR revenues will record the payment from Apple, based on the previous licensing agreement.

Ericsson currently carries a Zacks Rank #3 (Hold) and is expected to report its fourth quarter and full year 2014 results on Jan 27, 2015. Better-ranked companies in the industry include Aruba Networks, Inc. (ARUN) and InterDigital, Inc. (IDCC). Both stocks sport a Zacks Rank #1 (Strong Buy).


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