The first EVS technical standard patent report released: the public rate is more than ten times higher than the 5G rate

Recently, STOUT, a foreign consulting agency, released the “Enhanced Voice Services Patent Landscape” (hereinafter referred to as “EVS Overview”.Click to get the original report). This is the first report on the overall state of EVS technical standards, giving practitioners an overall understanding of EVS for the first time.

▲ Diagram: usage scenarios of EVS technology

EVS is a high-definition HD voice service technology for mobile phones that is one of the standards developed by the Third Generation Partnership Project (“3GPP”). Although it sounds close to the audio codec standard,EVS is essentially part of a wireless communication standard. “EVS Overview” shows that there are 350 standard essential patent (SEP) families declared under the EVS standard, and the current number of effective families is 339, accounting for about 0.6% of the total 3GPP 3G-5G SEP. However, disproportionate to its SEP share, EVS’s published rates far exceed the general level of wireless communication patents. Calculated on the basis of fees per patent family,More than ten times higher than the average 5G SEP rates announced by communication giants such as Huawei, Ericsson, and Nokia.

EVS rate: ten times or even nearly a hundred times higher than the average rate of unlimited communication

▲ Graphic: EVS public rate

There are currently three organizations that publicly announce EVS licensing rates: VoiceAge EVS, Crystal Clear Codec, and MPEG LA. The respective published rates, number of patent families, and patent fees per family are shown in the figure above.

As mentioned earlier, EVS is a type of wireless communication technology. The conventional rate calculation methods in the field of wireless communication are the top-down method and the comparable transaction method. “EVS Overview” is the first time to scientifically and systematically calculate the reasonable rate of EVS according to the top-down method.

The calculation logic of the top-down method is to first determine a total license cost, and then determine the license rate based on the share of the licensor’s patents. According to the judgments in TCL v. Ericsson and Unwired Planet v. Huawei, total wireless communication licensing costs should account for 8.8% of 2G/3G/4G multimode handset revenue, and 4G costs should account for 6% to 10%. On the premise that there is no 5G ruling rate for the time being, taking the 4G cost ratio as a reference, combined with the EVS ratio in 3GPP (0.61%), the EVS licensing cost should account for 0.036% to 0.061% of mobile phone revenue. Based on IDC statistics, the average price of 5G mobile phones from 2019 to 2024 is $410.54. Based on this calculation, the total licensing cost for EVS should be between $0.15-$0.25, with an average patent family value of $0.0004-$0.0007.

This result is a far cry from the rates published by VoiceAge EVS et al.The latter is equivalent to 11-15 times the former based on the single-family patent fee.

▲ Graphic: 5G SEP rates of some patentees

In order to verify whether the above calculations are reasonable, the EVS Overview also compares the EVS single-family patent fees with the 5G rates claimed by some companies. The results show that the average rate of single-family 5G patent fees declared by four patent holders, Ericsson, Nokia, InterDigital, and Huawei, is about $0.0006-$0.0008. Although this data range is not exactly the same as the patent family value calculated by the top-down method, it does maintain the same order of magnitude. Two-phase confirmation, data available.

On this basis, we may wish to further analyze the rates of each EVS licensor in detail. VoiceAge EVS holds 14 families with declared rates of $0.22 to $0.40, with an average of $0.016 to $0.028 per family; Crystal Clear Codec holds 6 families, with declared rates of $0.29 to $0.44, with an average of $0.29 per family The price range is from $0.048 to $0.073, a premium of nearly 100 times.

The right holder hopes to obtain a corresponding return on investment by charging royalties. However, it is debatable whether it is still in line with the FRAND principle to seek returns that are more than ten times or even nearly a hundred times higher than the average rate in the industry.

The Road to EVS Patent Monetization: The Litigation-Settlement Model pioneered by NPE

The patent monetization model that is independently licensed as part of wireless communication technology is extremely special. This particular pattern, so to speak, is driven by NPEs (non-implementing entities),The method adopted is the “litigation-conciliation” model commonly used by NPE.

In December 2018, Fortress, a subsidiary of Softbank, and VoiceAge (a Canadian company) announced a “strategic transaction”, and VoiceAge EVS was born, with CEO David Rosmann. Shortly thereafter, VoiceAge EVS began a large-scale EVS lawsuit, with companies sued including HMD, TCL, Lenovo, Apple, Xiaomi, and more.

Before the birth of VoiceAge EVS, the cooperation with VoiceAge (a Canadian company) was Saint Lawrence Communications (SLC), a subsidiary of the famous American NPE Acacia Research. After EVS was standardized by 3GPP in 2014, SLC was licensed by VoiceAge (a Canadian company) to begin large-scale claims for AMR-WB (the voice coding standard chosen by 3GPP prior to EVS) and EVS patents (“SLC Licensing Action” for short) ).The object of the lawsuit basically includes all mobile phone companies in the world, including Apple, AT&T, HTC, LG Electronics, Lenovo (Motorola Mobility), Samsung, Sony, Verizon, and ZTE. At the time, David Rosmann was Executive Vice President of Acacia Research, one of the leaders of the SLC licensing effort.

Another active licensor in the EVS space, Crystal Clear Codec, is also a litigation NPE. Crystal Clear Codec was founded in May 2019 and its CEO is David Sewell. Crystal Clear Codec sued LG in April 2021. Some of its EVS patents come from Huawei, and some industry insiders have posted in the media that the reason why Huawei transferred some patents to Crystal Clear Codec is related to an infringement lawsuit Huawei encountered in 2018.In 2018, a company called EVS Codec Technologies sued Huawei, ZTE and LG. The company was also founded by David Sewell. Just two months after the establishment of Crystal Clear Codec, EVS Codec Technologies reached a settlement with Huawei, and then Huawei transferred some EVS patents to Crystal Clear Codec.

It is worth mentioning that David Rosmann has participated in the SLC licensing action to the later stage, mainly operated by two companies founded by David Sewell. One of the two companies is EVS Codec Technologies, which has sued Huawei, and the other is called Advanced Codec Technologies. In addition to Huawei, the companies sued by these two companies,There are also Apple, Samsung, LG, OPPO, ZTE, Lenovo, Sony, etc..

It is not difficult to see that the “litigation-settlement” model is the consistent licensing strategy of VoiceAge EVS, Crystal Clear Codec and the traders behind them. Through litigation pressure forcing handset makers to accept high licensing fees far above the industry average, VoiceAge EVS has achieved a high return on investment, while bringing greater uncertainty and a higher licensing cost burden to standard implementers.

The harm of EVS mode: aggravating the stacking of royalties

The harm of EVS model is not limited to the scope of EVS license,More because it exacerbates the destructive effect of stacking royalties. The stacking problem of patent fees has always been one of the most important problems that plague the development of the industry. To solve this problem, the rate of wireless communication SEP is usually determined by a top-down method. The EVS model breaks through the top-down method’s restriction on total licensing costs by starting anew. While obtaining excess licensing revenue, it also destroys the efforts of predecessors to solve the stacking of patent fees.

The stacking of patent fees will inevitably increase the uncertainty of technology adoption and promotion, increase the burden on patent implementers, and ultimately affect the use of technology by consumers. The promotion of HEVC video codec technology is a lesson from the past. As we all know,HEVC technology was released as early as 2013, but the promotion was not smooth, and it is still the previous generation technology that dominates the market today, not the more advanced HEVC. One of the reasons is that some HEVC patent holders are not satisfied with the FRAND rates of MPEG LA’s HEVC licensing program, and set up a new patent pool HEVC Advance (now Access Advance), intending to charge the implementers higher rates. As a result, many video product and service providers have not adopted the HEVC standard due to cost considerations, and lawsuits have continued in this field. Earlier this year, GE Video and Dolby in the patent pool were ruled not to comply with the FRAND principle by the Düsseldorf court in their lawsuit against Vestel, and their application for injunction was dismissed.

If the EVS model is successful, will there be more rights holders who start to claim higher licensing fees? Will it stimulate more litigation funds to enter? Will it cause new uncertainty to affect the promotion of technology? Will it further exacerbate the burden on implementers and affect access to and use of new technologies by end consumers? These are all questions worthy of consideration by the industry.

But what is certain is that if more and more wireless SEP holders pursue ultra-FRAND rates, the royalty stacking problem will worsen, creating a severe cost burden for handset manufacturers, which will be reflected in handset sales. The price is ultimately passed on to consumers. With the popularity of wireless communication modules in automobiles and IoT products, the scope of influence will no longer be limited to mobile phones, and it may not be long before car manufacturers will face the same dilemma.