Ericsson gets patent income from Apple’s iPhone sales profit

Swedish telecommunications company Ericsson announced that it has signed a patent deal with Apple Inc. over technology that help Apple's iPhones and iPads connect to mobile networks.  For the next seven years, Apple will send a fraction of its iPhone and iPad sales profit  to Ericsson in royalties.

The deal ends a year long patent dispute between Ericsson and Apple. In February, Ericsson filed suits in many different courts for patent infringement.

According to Tech Crunch, the Swedish company filed the lawsuits in the International Trade Commission, the U.S. District Court for the Eastern District of Texas, the U.S. District Court for the Northern District of California, and in the courts in the U.K., Germany and the Netherlands.

Ericsson claimed that Apple has been violating 41 patents over the past few years related to GSM, UMTS and LTE technologies used in iPhone and iPad. Ericsson holds more than 35,000 patents with many of them are related to the wireless technologies. Many phone manufacturers have licensing agreements in place with Ericsson.

Ericsson has now dropped all the lawsuits as it has reached the deal with Apple. The deal requires Apple to make one time payment to Ericsson as well as ongoing patent royalties payment.

As reported on Ars Technica, Ericsson's patent related income will rise between 4 and 5 billion Swedish krona this year, or between $470 and $590 million. Ericsson estimated overall revenue from intellectual property rights in 2015 would hit 13 to 14 billion Swedish krona or $1,52 to $1.64 billion.

In Reuters, UBS analysts estimated the deal would boost Ericsson's operating profit by 13 percent in 2015 and 10 percent in 2016. It would provide 775 million Swedish krona per quarter in licensing fees. Ericsson shares rose 5.6 percent on Monday afternoon, the biggest one day gain in 17 months.

The financial details of the agreement remain confidential, but an investment bank ABG Sundal Collier said that it believed the deal meant Apple would be charged around 0.5 percent of its revenue on iPhones and iPads by Ericsson.

Ericsson's chief IP officer Kasim Alfalahi said that the company is pleased with the new agreement with Apple. He said that the agreement clears the way for both companies to continue to focus on bringing new technology to the global market, and opens up for more joint business opportunities in the future.

Kasim Alfalahi said that the agreement was covering the latest 4G-LTE generation of mobile technology, as well as the earlier 2G and 3G technologies. The new agreement meant that Ericsson would continue to work with Apple in areas such as 5G radio network and optimization of the network.