3G Cellular Standards and Patents (and Transaction Costs)

JUNE 12, 2006

A few months ago I came across a fascinating short paper authored by David Goodman (Polytechnic University, Brooklyn, NY) and Robert Myers (Fairfield Resource International) entitled 3G Cellular Standars and Patents (IEEE WirelessCom 2005, June 13, 2005).

The authors had participated in a project which had analyzed the 7,796 patents deemed ‘essential’_[1] to the 483 technical specifications promulgated under one or other of the two competing 3G cellular standards: CDMA2000 under the auspices of 3GPP2 and WCDMA under 3GPP. The paper provides a powerful example of the problems that multiple overlapping monopoly rights can engender in practice, particularly in relation to the promulgation of standards. As they state at the outset:

Governments issue patents to reward innovation and stimulate technology creation. However, distortions in the patent system can stifle creativity and block deployment of the best technology [2], [3]. The problem is especially acute when ... a user needs access to multiple patented inputs to create a single userful product. In these circumstances the patent system can retard, rather than encourage innovation [4].

It also gives some indication of the transaction costs involved. For example this limited investigation involved:

  • resolving 7,796 patents into 887 patent families (372 patent familes were common)
  • employing an expert to evaluate each claim against the standard at an average of 1 hour per claim

If we assume between 15 claims per patent and rate of 100 pounds per hour for the relevant expert this gives a total of 1.33 Million pounds simply to form a preliminary judgement as to what patents were or were not essential to the standard.

Summary of Results

Patents deemed essential by their owners for WCDMA (up to January 1 2004) and CDMA2000 (up to February 5 2004)
Patent Families_[2]732527
Actually Essential_[3]157108

Thus the great majority of patents declared essential turned out not to be upon a preliminary evaluation. However as the authors point out: Nevertheless, a company that creates equipment or services for third generation cellular systems still faces a formidable task obtaining rights to patented technology. Even with the narrow definition of essential … it may be necessary to acquire rights to several dozens of patents, depending on the equipment or service to be produced. In addition to the patents that are technically essential, there are probably other patents that are commercially essential because they contain the best (albeit not the only) possible implementation of the standard. They also note that some companies may have decided not to declare their patents to standards organizations at all (e.g. Lucent).


[1] The official definition of ‘essential’ from ETSI is: "ESSENTIAL” as applied to IPR means that it is not possible on technical (but not commercial) grounds, taking into account normal technical practice and the state of the art generally available at the time of standardization, to make, sell, lease, otherwise dispose of, repair, use or operate EQUIPMENT of METHODS which comply with a STANDARD without infringing that IPR

[2] The members of a [patent] family are patents and patent applications produced in different countries for a single invention. Note that 372 inventions were found to be common to both standards.

[3] This is only the result of a preliminary evaluation: Each patent was assigned to one panelist [an expert] according to the technical area of the patent. The panelists examined the independent claims of each patent and spent on average one hour comparing the independent claims with the standard to which the patent was declared. Based on this evaluation, the panelist formed a preliminary judgement as to whether the technology in at least one independent claim is necessary to implement the standard.


Top Patent Owners for WCDMA
Claimed EssentialJudged Essential
Top Patent Owners for CDMA2000
Claimed EssentialJudged Essential
NTT DoCoMo187