Ericsson sues Sendo over cell patents

Ericsson's litigation, filed in the Netherlands, Britain and Germany, accuses U.K.-based manufacturer Sendo of making handsets that unlawfully use Global System for Mobile Communications technology that Ericsson patented. GSM is the world's most popular cell phone standard. Sendo has admitted that it is manufacturing GSM phones, but said it has been trying to negotiate a fair licensing deal with Ericsson.

The central issue is what companies charge to license their intellectual property. Manufacturers that don't own cell phone patents, like Sendo, usually promise the patent-holder a certain percentage of revenue from the sale of handsets using the technology. Higher-priced patent licenses force consumers to dig deeper into their wallets to buy the phones, Sendo says.

"All we ask is that companies who use technology invented by Ericsson compensate us for this, the same way we are prepared to compensate others for our use of their technology," Kasim Alfalahi, Ericsson's vice president of patent licensing, said in a prepared statement.

In its defense, Sendo on Wednesday disclosed that the European Competition Commission is investigating whether Ericsson and other handset makers operate an intellectual property licensing "cartel." Sendo said handset makers treat each other fairly if both sides own patents required by cell phone standards, but gouge the companies that don't. Sendo Chief Executive Hugh Brogan on Wednesday didn't say which other manufacturers are involved in the investigation.

Patent squabbles invariably force consumers to wait for new technology--and to pay higher prices when they finally get it. Intellectual property scuffles are not particular to the cell phone industry, but the impact is more severe there because handsets become smarter and faster by incorporating new patent-packed standards with tongue-twister names like Universal Mobile Telecommunications System or CDMA 2000 1xRTT EV-DO Rev. A.

Nokia Chief Executive Jorma Ollila hinted earlier this year that a spat over UMTS, a third-generation cellular standard, could drive up prices of those handsets. Sendo's CEO said his company had been trying to avoid a legal fight over the issue.

"We were in negotiations to license the intellectual property, so the lawsuit took us by surprise," Sendo's Brogan said. "It's not that we don't want to license the intellectual property, but we believe it should be fair, reasonable and nondiscriminatory. We thought we were doing things the responsible way."