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September 12, 2012

Telecom Patents Provide Security for Growing Telcos

By Stefanie Mosca, TMCnet Managing Editor

As technology continues to become embedded into our everyday business transactions, it is more important than ever, particularly for the telecommunications industry, to be aware and protect your most valuable assets, which include company patents and intellectual properties. However, with a large percentage of patent technology being new to the market, today's telecom innovation is mainly revolved around software or Web-based services rather than hardware. Legacy-based patents, especially those based on hardware were in the past easier to defend, not just because of a tangible underlying asset, but also because most vendors had closed, proprietary technologies.

In a recent interview with TMCnet, Jon Arnold, Principal at J Arnold and Associates, discussed the latest legal trends building on his knowledge and experience in the telecommunication’s patent industry and his participation at the upcoming Synopsis under IP/Patents Telecom Sourcing (SUITS) Conference in Austin, Texas, October 2-5. 

Arnold told TMC (News - Alert) that the shift to the other IP - Internet Protocol – has caused disruption to this lucrative status quo, where today's solutions are based on open, standards-based technologies, which are much harder to protect with patents. Furthermore, some companies have tried to control the competitive landscape by claiming patent protection on generic terms such as VoIP, the Internet or unified communications.

Beginning with the basics, Arnold mentioned that when it comes to patent discussions regarding the telecommunication industry, the definition of a telco can be quite broad, but generally, incumbents have the most at stake in terms of protecting large customer bases, and having a business model built around a declining service, namely wireline TDM. According to Arnold, incumbents by nature have not been terribly innovative for decades, so patent protection is very much about defending the business rather than growing it.

“Since this technology is on the way out, it can be argued that better opportunities reside elsewhere for tap into carrier IP, namely around mobility, so there may not be much to worry about here,” Arnold added.

However, in order for telcos to remain in the right position in the market, there are a number of precautions they can take to ensure they are prepared to defend their critical intellectual properties if need be.  Based on his extensive experience in the technology law space, Arnold suggests taking an offensive approach by applying R&D to come up with new forms of IP that give TDM a bit more life, rather than sitting back and waiting for opportunists to come after their legacy IP.

This could take the form of either adding value to existing services, or finding new ways to graft TDM on to other modes and platforms, such as video or social media. Failing that, telcos may have to concede they have exhausted all growth options with TDM, making their IP a declining asset, according to Arnold. He added that they are probably better off exploring partners who are better able to integrate TDM with other applications, or considering licensing arrangements where TDM can be deployed in new ways, even via partners outside the telecom world.

As often becomes the challenge in many sectors of the technology industry, lack of education can sometimes become an obstacle. Arnold noted that the biggest misconception in terms of patents is telcos aren’t looking at telecom/tech as they would other industries. In sectors like pharmaceuticals, energy or life sciences, patents can be valuable over long periods of time, as they provide fair payback for the long, costly R&D cycles leading up to commercialization, according to Arnold. “On a basic level, most new vendors in telecom will remain small because their business is based on software, which is difficult to monetize unless a true breakthrough occurs. By extension, their IP will have limited value unless it ends up in the hands of an industry giant,” he told TMCnet.

“The other factor is constant innovation and a borderless global market; static IP has little long-term value in this space. No matter how good the innovation, entry costs are low, development cycles are short, and sustainable advantage is almost impossible to achieve. With so much development being based on Open Source (News - Alert) or royalty-free technology, it becomes very difficult to establish a meaningful baseline valuation, and even harder to project the lifetime value of IP,” Arnold added. “As such, both investors and attorneys need to look at telecom/tech differently from other sectors. The payoffs may come faster, but the scale could well be smaller, so expectations need to be realistic.”

Want to learn more about patents in the telecom industry? Then be sure to attend Synopsis Under IP/Patents Telecom Sourcing Conference (SUITS), collocated with ITEXPO West 2012 taking place Oct. 2-5, in Austin, TX.   Stay in touch with everything happening at SUITS. Follow us on Twitter.

Edited by Brooke Neuman
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