News

Why on earth is Ericsson suing Sendo over IP? Politics? or buy-out plans?

The fact is simple: this morning, a legal letter arrived at the Birmingham HQ of one of the world's smallest GSM phone builders, Sendo, informing them that they were in breach of Ericsson patents.

There's no dispute about the truth of the allegation: Sendo is using Ericsson intellectual property. That's because it has to:  anybody who builds a GSM phone uses Ericsson IP - and Nokia IP and Siemens IP and Samsung IP and Motorola IP - because there exists a cosy cartel of phone builders, who all swap patent rights with each other.

So why the legal action by Ericsson?

"It was unprovoked, a complete surprise, and somewhat unnecessary," commented Hugh Brogan, founder and CEO of Sendo. Yes, he says, he is using Ericsson patents - but he has been negotiating with them over a price, and the negotiations proceed.

So what provoked legal action? Two possibilities, say inside sources. First, it could be pique over the fact that Sendo has complained about Ericsson, to the EC; and second, it could be that Ericsson is about to make an offer to buy Sendo.

Normally, these deals are done as part of a "gentleman's agreement" - which is, also, enforceable under European law. At least, Sendo believes it should be.

When the original GSM engineering work was done, various large companies - including Ericsson - contributed to the project by sending technical experts to propose solutions. Some went and patented their ideas. A dispute arose: it was resolved when Etsi said: they could keep the patents, but had to license them on fair, reasonable and non-discriminatory terms.

Brogan says that he has negotiated with all these big companies, "and we have concluded fair reasonable and non-discriminatory deals. But Ericsson's proposal is far from that in our opinion. They were asking impossible, double-digit royalty figures on sales."

So, some months ago, Sendo filed a complaint with the EC to have this investigated, under unfair trade practices law.

This wasn't announced at the time, because, says Brogan, "we felt it was unfair to report it publicly."

No such scruple has prevented Ericsson from announcing its lawsuit, however - and observers think it could be pique, but they also say that it could be something else.

Specifically, as one industry insider said, there are rumours that Sendo, recently emerged from the shadow of the Microsoft, might welcome approaches from potential buyers.

Which has, of course, prompted some insiders to speculate: if Ericsson were planning to take over Sendo, would the shadow of a potential lawsuit make the price lower?