Qualcomm Technology Licensing (QTL) is the lesser-known side of what Qualcomm does as a business. Most who know Qualcomm know it for its physical chips and 5G modems for smartphones under Qualcomm CDMA Technologies (QCT). QCT also creates chips for automotive and IoT markets. While QCT is Qualcomm’s semiconductor business, QTL is its segment for licensing their patented breakthrough technologies to other companies. It is impressive how the company has been able to operate both of these business segments successfully to drive the adoption of 5G into the hands of consumers one year ahead of schedule.
John Han is the SVP and GM of Qualcomm’s QTL division and, as I have covered QTL’s President Alex Rogers and Qualcomm’s CEO Cristiano Amon, I want to share some of my conversations with John Han on QTL and how it is helping the promulgation of 5G technology. You can watch the conversation in our special Six Five INSIDER here. And most recently, John Han and David Kappos – the former director of the USPTO – conducted a fireside chat at the Licensing Executives Society annual conference about similar topics. You can watch the highlights of that conversation here. It is always interesting to listen to John breakdown the seemingly complex legal jargons into simple terms and help us understand the facts about technology licensing.
QTL’s contribution to the wireless ecosystem
Qualcomm Technology Licensing has sometimes been viewed as controversial over the years and even accused by some of monopolistic practices; however, after the completion of multiple legal cases, this was proven to be untrue.
John Han does a great job of unpacking QTL’s customer base and how QTL is enabling the ecosystem. Qualcomm is made up of engineers and inventors that work on early R&D for fundamental technologies. Rather than holding these developed technologies for themselves, QTL grants licenses to other companies and enables them to use Qualcomm’s IP. Sure, there are rewards for licensing patented technology, but it’s also a big risk with significant R&D investments years ahead of the game, often with some that don’t pan out, additionally – their competitors get a detailed, first-hand look at exactly how Qualcomm created their inventions.
QTL’s licensees include all the major smartphone OEMs, including Xiaomi, VIVO, Samsung, and Apple. John Han mentions that, regardless of whether smartphone OEMs use Qualcomm’s chipset products or not, Qualcomm’s technology licensing business model is open and inclusive to those who want to use its technologies. It allows for the sharing of a broad range of IP with its licensees while helping them to compete, innovate, and grow globally. I believe this is the opposite of the perceived NPE-like monopoly that is sometimes portrayed. It is the sharing of IP for fair compensation, market competitiveness, and technology standards. John Han described beautifully how many entities recognize QTL’s role on a macro level as the R&D center for the ecosystem. They (Partners and OEMs) recognize that what Qualcomm does is pure and early research, especially for cellular and radio spectrum technologies. Understanding Qualcomm as the R&D center of the ecosystem puts tremendous value and support into its customers. As QTL is rewarded for its R&D risk, Qualcomm can continue R&D for future technology generations.
QTL’s IP portfolio
Qualcomm’s patent portfolio globally is a whopping 140,000+ patents and patent applications. It might not be the largest patent portfolio by number of patents, it by far has the most valuable patents. On top of 5G technologies, Qualcomm’s patent portfolio covers a wide array of technology areas, including multi-media, RF, compute, graphics, position location, and Wi-Fi. John Han makes a great point when he says that not all patents are created equal. More doesn’t always mean better and, in the case of patent portfolios, quality far exceeds quantity. Han gives a better indicator of the value of a portfolio is the number of licensing agreements because agreements are negotiated by experienced IP experts and reflect the true value of patents in the marketplace. As of today, Qualcomm has an impressive licensing customer base that boasts 150+ 5G licensing agreements, including all key handset OEMs globally.
FRAND, hold up and hold out
If you haven’t caught on yet, Qualcomm’s licensing business model is a key driver of the way the wireless ecosystem successfully innovates and competes. FRAND (Fair, Reasonable, and Non-Discriminatory) commitments play a huge role in QTL’s model as well. Han points out that the intent of FRAND is to support the thriving IP ecosystem that will continue to incentivize foundational inventions. A patent holder makes a FRAND commitment when they share or contribute their technology to the standard as standard essential patents (SEP).
It keeps patent holders and implementors from taking advantage of a standard by exerting unreasonable demands. Without FRAND commitments, unreasonable terms could keep the industry from moving forward and innovating. But FRAND brings fair, reasonable, and non-discriminatory clarity to commercial negotiations and, in the process, encourages both sides to continue innovating.
Companies are required to commit their standard essential patents to FRAND terms, and these terms are a two-way street. Implementers have a FRAND obligation just as patent holders have a FRAND obligation.
Han explains how these implementors and patent holders, licensees and licensors, relationships can be hindered by misbehaving and not holding to the FRAND commitment. The industry calls this “holding up and holding out”. Holding up is when a patent holder misbehaves, and holding out is when the implementor is misbehaving. Hold out is also known as patent infringement and happens when an implementor does not want to negotiate in good faith or under FRAND terms and infringes on patented technologies. The result is that it forces the innovator to undertake litigation costs and time delays. Holding up is the opposite where SEP (Standard Essential Patents) holders refuse to negotiate in good faith, like asking more than what is reasonable, making it difficult for the implementors to build a profitable business.
What is sometimes argued is that FRAND terms don’t work, and that there is a problem with licensing technology. Han highlights that “what has been abundantly clear after years of heated debate with the economists, the IP experts, and industry pundits—there is no evidence showing that hold up actually even exists, because the vibrant mobile ecosystem proves contrary.” Court rulings are even positive for SEP holders and further validate its longstanding licensing program. Looking at what Qualcomm is pushing for with QTL, it is abundantly clear that it is to push innovation, competition, and collaboration toward technological advancement.
I don’t think QTL gets enough credit. It is undoubtedly the most successful technology licensing business with the most 5G licensing agreements globally in the industry. It played a significant role in the rollout of 5G and, as we know, is expanding into diverse industries.
QTL can be a tough area to explain and is sometimes criticized when not fully understood. QTL, simply put, licenses out technologies that Qualcomm has been researching and developing for the past ten years or longer, to OEMs who can implement that technology through products for the market place. Qualcomm is more times than not on top when it comes to the licensing business, and it doesn’t hold this title by having the most patents. Rather, it holds it through the quality of patents which is the reflection of its R&D success.
Note: Moor Insights & Strategy co-op Jacob Freyman contributed to this article.