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MacRumors
Feb 6, 2012, 07:19 PM
http://images.macrumors.com/im/macrumorsthreadlogo.gif (http://www.macrumors.com/2012/02/06/motorola-requested-2-25-patent-licensing-royalty-on-iphone-purchases/)


Late last year, Motorola Mobility requested Apple pay a potential royalty of 2.25% (http://online.wsj.com/article/SB10001424052970204136404577207412683318278.html) on its iPhone sales in recently unsealed litigation from last year. The royalty would amount to more than $1 billion in 2011 alone, though there is no indication which specific iPhone models would be covered by the license nor if it would be retroactive to the initial launch of the iPhone in 2007.

http://images.macrumors.com/article-new/2012/02/motorola_mobility_logo_wordmark-500x64-1.jpg


The patents appear to be covered under the FRAND standard (http://en.wikipedia.org/wiki/Reasonable_and_non-discriminatory_licensing), which requires patents to be licensed for "fair, reasonable and nondiscriminatory terms". The 2.25% request that Motorola offered was in response to a demand for a FRAND pricing offer from Apple.

Florian Mueller, writing about the issue, offers some additional insight (http://fosspatents.blogspot.com/2012/02/motorola-wants-225-of-apples-sales-in.html):
I assume this relates to Apple's sales and to all of MMI's standard-essential patents, though the context is only one patent (the one over which Motorola has already forced Apple, temporarily (http://fosspatents.blogspot.com/2012/02/appeals-court-grants-apple-temporary.html), to remove certain products (http://fosspatents.blogspot.com/2012/02/apple-removed-products-from-german.html) from its German online store. Assuming in Motorola's favor that this was a license to all standard-essential wireless patents, the amount still appears excessive to me given how many companies hold patents on such standards and what royalty rate this would lead to in the aggregate.A quote (http://online.wsj.com/article/SB10001424052970204136404577207412683318278.html) in the Wall Street Journal from the chief executive of the Epicenter IP group, which helps companies license patents, noted that "there is no debate that Motorola was the inventor of the mobile phone" and its patents could be broad and necessary for a phone maker.

This is only one more step in the long and drawn-out patent battle (http://www.google.com/search?q=site:www.macrumors.com+motorola+patent) between the two companies, but the licensing rate for patents is typically a closely held competitive secret. The 2.25% rate would be a significant amount of money, given the tremendous sales Apple is generating from its iPhone business.

Article Link: Motorola Requested 2.25% Patent Licensing Royalty on iPhone Purchases (http://www.macrumors.com/2012/02/06/motorola-requested-2-25-patent-licensing-royalty-on-iphone-purchases/)



HiRez
Feb 6, 2012, 07:24 PM
The 2.25% rate would be a significant amount of money, given the tremendous sales Apple is generating from its iPhone business.

The amount of money generated should be irrelevant. The question is, how fair is 2.25%? What % are other similar FRAND patents typically licensed at? Are there guidelines or limits placed on these?

mikefla
Feb 6, 2012, 07:33 PM
Motorola almost went out of business a few years ago. They make junk and now they want to steal from Apple, wow! All that CPU business they lost from Apple has to really hurt when all your other products suck, specially all the consumer junk they make.

-Mike

Apple...
Feb 6, 2012, 07:50 PM
Wirelessly posted (Mozilla/5.0 (iPod; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Mobile/9A405)

Is that unfair?

Kevlar
Feb 6, 2012, 07:51 PM
Motorola almost went out of business a few years ago. They make junk and now they want to steal from Apple, wow! All that CPU business they lost from Apple has to really hurt when all your other products suck, specially all the consumer junk they make.

-Mike

Well Apple is stealing from Moto. Moto developed a lot of technology back in the early days and has patents on it. They deserve to make money back on it (based on the current patent system).

Now how much money is the question. And since they are patents considered to be FRAND patents, we will have to wait and see what the judge says when he see's what Moto gets from other companies that have licences the patents.

FakeWozniak
Feb 6, 2012, 07:56 PM
Wirelessly posted (Mozilla/5.0 (iPod; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Mobile/9A405)

Is that unfair?

The way I see it, there were a few hundred standards required patents available. Sure Moto and Samsung hold a significant stake between them, but say there are 50 total standards required patent holders all asking for 2%. There is no way that is fair.

Also, patent exhaustion should apply IMO. Buying a chip from Qualcomm only costs $15 and has all 175 or so patents licensed in the chip already. $0.30 (1/50th) of $15 is about all I'd give Motorola/Samsung and ONLY if there isn't patent exhaustion.

longofest
Feb 6, 2012, 07:58 PM
This is called negotiation. Moto is starting high, and they also happen to be in a good negotiating spot having won some rulings. However, I highly doubt the number will stay above 2%. Probably end up closer to 1% (which is still a significant chunk of change)

Andronicus
Feb 6, 2012, 08:16 PM
Motorola almost went out of business a few years ago. They make junk and now they want to steal from Apple, wow! All that CPU business they lost from Apple has to really hurt when all your other products suck, specially all the consumer junk they make.

-Mike

Obviously you're an apple......enthusiast, but Motorola has been making phones a lot longer than apple and it's not surprising that they have patents that apple is using and if so then apple should pay.

swordfish5736
Feb 6, 2012, 08:50 PM
I'd be interested to see what percentage other companies have to pay for a patent like this.

sjinsjca
Feb 6, 2012, 09:09 PM
The amount of money generated should be irrelevant. The question is, how fair is 2.25%? What % are other similar FRAND patents typically licensed at? Are there guidelines or limits placed on these?

The court will want to know all these answers. If Motorola is deemed as attempting to gouge a FRAND patent, there will be trouble.

2.25% strikes me as a tad high, but the reporting is unclear on what the 2.25% would be levied upon.

Peace
Feb 6, 2012, 09:16 PM
The court will want to know all these answers. If Motorola is deemed as attempting to gouge a FRAND patent, there will be trouble.

2.25% strikes me as a tad high, but the reporting is unclear on what the 2.25% would be levied upon.

If Motorola is shown to charge less to other phone makers they can and will be under scrutiny for anti-competitive monopoly laws in Europe. That's a big no no.

kdarling
Feb 6, 2012, 09:19 PM
A few information tidbits for the thread:


Re: Motorola's 2.25%. Samsung had asked Apple for 2.4% for their patents.


It's probable that one reason other companies aren't making as much profit on their phones as Apple, is that they're paying far more in license fees, some of which Apple has been avoiding as long as possible.


Motorola first asked Apple for royalties a month after the iPhone went on sale in 2007. Reportedly Apple stalled four years to respond with a counter-offer. (Similar to what they did with Nokia.)


Over 150 companies belong to the GSM FRAND alliance. Unknown how many get license fees.


Fee example: in 2007, Broadcom won an ITC import injunction on certain Qualcomm chips. Verizon ended up themselves paying the $6 patent fee per CDMA phone to Broadcom for a while, just to be able to import phones into the US and not run out of stock.


FRAND does NOT mean that everyone, big or small, new or old, must get the same terms. Quantity, length of contract, cross licensing of patents, all these and more are factors.

Koodauw
Feb 6, 2012, 10:19 PM
I say pay them. Maybe that money will go to R&D and we can finally get the powerbook G5.

Rajani Isa
Feb 6, 2012, 10:25 PM
I say pay them. Maybe that money will go to R&D and we can finally get the powerbook G5.

So Apple paying out a billion or so bucks to Motorola is supposed to make the G5 come about?

O.o

jontech
Feb 6, 2012, 10:29 PM
I say pay them. Maybe that money will go to R&D and we can finally get the powerbook G5.

LOL


I have seen one.... I promise!!

Imhotep397
Feb 6, 2012, 11:04 PM
At the end of the day I suspect Motorola won't get much of anything, simply because they've not asserted the violation of these basic patents with the release of any of the other of the thousands of mobile phones that have been released over the years or even when the iPhone was first released which would indicate that patent issues were never an issue.

ChristianJapan
Feb 6, 2012, 11:06 PM
Actually it will not be Apple who is paying for it ... eventually it will end up on our wallet ... at least for the next generation. For the last generations they must have some big accruals in their balance sheet.

Rodimus Prime
Feb 6, 2012, 11:07 PM
At the end of the day I suspect Motorola won't get much of anything, simply because they've not asserted the violation of these basic patents with the release of any of the other of the thousands of mobile phones that have been released over the years or even when the iPhone was first released which would indicate that patent issues were never an issue.

That or they already have FRAUD agreements in place with the others. This would not be the first time Apple avoided trying to pay FRAUD patents. They did the same on Nokia. Question is how much did Apple end up paying Nokia at the end of that case as Apple did settle and it was an undisclosed amount.

zapnyc
Feb 7, 2012, 01:11 AM
I think Apple should just buy Motorola and dissolve their languishing mobile business. buuuuuh-bye

justperry
Feb 7, 2012, 01:45 AM
Wow, 2.25% seems a lot to Me.

Isn't this all about GPRS, an "outdated" technology, In the last few years I can't even remember that My connection fell back to GPRS.
Why pay that much if it's so rare that a connection is made through GPRS.

Should Apple pay a fair amount, Yes they should pay as long as this technology is part of the iPhone but to Me a fairer deal should be more or less a few hundreds of a Percent, something like 0.2-3%.

Istranka
Feb 7, 2012, 01:53 AM
Hello everyone, I'm new here :)

justperry
Feb 7, 2012, 04:25 AM
Hello everyone, I'm new here :)

Bye bye:rolleyes:

mijail
Feb 7, 2012, 05:55 AM
That or they already have FRAUD agreements in place with the others. This would not be the first time Apple avoided trying to pay FRAUD patents. They did the same on Nokia. Question is how much did Apple end up paying Nokia at the end of that case as Apple did settle and it was an undisclosed amount.

What is a FRAUD agreement? Does it have anything to do with organized crime or some such?
:rolleyes:

(anyway, I would also try to avoid paying for that :D)

Steve121178
Feb 7, 2012, 06:35 AM
I think Apple should just buy Motorola and dissolve their languishing mobile business. buuuuuh-bye

You are aware that Google are in the process of acquiring it for $12.5bn, yes?

samcraig
Feb 7, 2012, 07:28 AM
At the end of the day I suspect Motorola won't get much of anything, simply because they've not asserted the violation of these basic patents with the release of any of the other of the thousands of mobile phones that have been released over the years or even when the iPhone was first released which would indicate that patent issues were never an issue.

Yes. They have. And yes they did. They approached Apple in 2007 and Apple has been stalling ever since.

Instead of making things up - maybe you should do some research? You don't even have to go far. KDarling posted the facts a few posts up from yours...

----------

You are aware that Google are in the process of acquiring it for $12.5bn, yes?

Makes you wonder if people just knee-jerk a silly response as if buying every company in Apple's "way" is a solution and/or they actually read tech news.

Rodimus Prime
Feb 7, 2012, 08:07 AM
If Motorola is shown to charge less to other phone makers they can and will be under scrutiny for anti-competitive monopoly laws in Europe. That's a big no no.
Remember apple also does not have any patents in the pool like others do.

Wow, 2.25% seems a lot to Me.

Isn't this all about GPRS, an "outdated" technology, In the last few years I can't even remember that My connection fell back to GPRS.
Why pay that much if it's so rare that a connection is made through GPRS.

Should Apple pay a fair amount, Yes they should pay as long as this technology is part of the iPhone but to Me a fairer deal should be more or less a few hundreds of a Percent, something like 0.2-3%.
EDGE is based off of GPRS and that is still a in use.

Oletros
Feb 7, 2012, 08:29 AM
Why this case takes me to the Nokia case? Perhaps because I can read the same wrong arguments that were said then?

gnasher729
Feb 7, 2012, 08:40 AM
The amount of money generated should be irrelevant. The question is, how fair is 2.25%? What % are other similar FRAND patents typically licensed at? Are there guidelines or limits placed on these?

Well, the iPhone is lots of things. It is a complete iPod Classic, it is a tiny portable computer, a small games console, and, by the way, it also makes phone calls. So if you defined first what the value of the phone component of the iPhone is, then you could take a percentage of that. But I suppose Motorola wants 2.25% of the purchase price of the whole iPhone.


That or they already have FRAUD agreements in place with the others. This would not be the first time Apple avoided trying to pay FRAUD patents. They did the same on Nokia. Question is how much did Apple end up paying Nokia at the end of that case as Apple did settle and it was an undisclosed amount.

I would hope very much that Apple wouldn't pay for any FRAUD patents :-)

As far as FRAND patents are concerned, the patent owner has a duty to license them under reasonable terms, and it is obvious that Apple doesn't have to and isn't going to pay if the patent owner only offers terms that are not reasonable. In the Nokia case, it was Apple _and_ Nokia that settled. The exact amount was not disclosed, but we know that an FRAND "reasonable" number would easily be nine digits due to the huge number of iPhones sold with no license to non-FRAND Apple patents, and we know that Nokia received a nine digit number with no license to non-FRAND Apple patents (enough to get them out of the red in that quarter, but not enough to create a huge black number).

samcraig
Feb 7, 2012, 08:43 AM
Well, the iPhone is lots of things. It is a complete iPod Classic, it is a tiny portable computer, a small games console, and, by the way, it also makes phone calls. So if you defined first what the value of the phone component of the iPhone is, then you could take a percentage of that. But I suppose Motorola wants 2.25% of the purchase price of the whole iPhone.

I'm sure they do. Because I'm pretty sure it doesn't matter "how much" of the device is used for what. It could never be determined. I know people that use their iPhones for just calls and emails. Others who don't even make calls (or very few) and use it for Apps.

If the device incorporates the technology - the device is "liable"

Oletros
Feb 7, 2012, 08:59 AM
and we know that Nokia received a nine digit number with no license to non-FRAND Apple patents (enough to get them out of the red in that quarter, but not enough to create a huge black number).

Mmmm, in the agreement Apple licensed to Nokia some iPhone patents.

*LTD*
Feb 7, 2012, 09:01 AM
Motorola is a has-been that has now been relegated to coasting on patents. Another victim of June 2007. They are of no account. I wonder if Google plans to use them as something more than a $12 billion legal weapon to wield at competitors, since apparently the legitimacy of most of Android seems to be increasingly in question these days.

samcraig
Feb 7, 2012, 09:14 AM
Motorola is a has-been that has now been relegated to coasting on patents. Another victim of June 2007. They are of no account. I wonder if Google plans to use them as something more than a $12 billion legal weapon to wield at competitors, since apparently the legitimacy of most of Android seems to be increasingly in question these days.

I assume you just mean the mobility division of Motorola. And call them whatever you want - if it weren't for them, you wouldn't have your precious iPhone. And if Google uses them to fight a patent war against competitors - it's their right since they are buying them. If this were Apple and they bought patents you would be defending Apple to the corp. Motorola's place in the current market has nothing to do with the VALIDITY of their patents.

You want people to respect Steve and all he did for the world from now until the end of time? Why not show the same respect to the engineers and minds at Motorola for everything they did. Or are you admitting to complete hypocrisy?

jerrykim16
Feb 7, 2012, 09:17 AM
**** google, samsung, motorola... frickin copy cats, and patent hoggers

Steve121178
Feb 7, 2012, 09:18 AM
Google will own their patents & IP which makes it a significant arsenal in this silly war. Google are not stupid with acquisitions. Apple will know only too well about Motorola seeing as they illegally stole their ideas:

http://www.engadget.com/2012/02/03/motorola-wins-permanent-injunction-against-apples-icloud-in-ger/

Read the quote, Motorola innovated, Apple stole & must pay. Google knows this & could possibly thread out a deal whereby they gain access to some of Apple's patents in some kind of cross-licensing arrangement.

Oletros
Feb 7, 2012, 09:19 AM
**** google, samsung, motorola, apple, htc, nokia... frickin copy cats, and patent hoggers


Corrected, you're welcome

*LTD*
Feb 7, 2012, 09:44 AM
I assume you just mean the mobility division of Motorola. And call them whatever you want - if it weren't for them, you wouldn't have your precious iPhone. And if Google uses them to fight a patent war against competitors - it's their right since they are buying them. If this were Apple and they bought patents you would be defending Apple to the corp. Motorola's place in the current market has nothing to do with the VALIDITY of their patents.

You want people to respect Steve and all he did for the world from now until the end of time? Why not show the same respect to the engineers and minds at Motorola for everything they did. Or are you admitting to complete hypocrisy?

This isn't the Motorola of 30 years ago, nor is it 30 years ago. Time to move on.

Nor do I particularly care at this point that Moto invented the mobile phone technology or whatever the hell they did. That isn't helping them NOW, nor do consumers give a sweet damn about it. What Moto did in the caveman days of consumer mobile tech is irrelevant. Barely anyone remembers. And why should they? Moto is just another dinosaur that deals more in patents than great products.

The real tragedy here is that Sanjay Jha is still CEO *and* Chairman. Not that it really matters at this point.

Steve121178
Feb 7, 2012, 10:01 AM
This isn't the Motorola of 30 years ago, nor is it 30 years ago. Time to move on.

Nor do I particularly care at this point that Moto invented the mobile phone technology or whatever the hell they did. That isn't helping them NOW, nor do consumers give a sweet damn about it. What Moto did in the caveman days of consumer mobile tech is irrelevant. Barely anyone remembers. And why should they? Moto is just another dinosaur that deals more in patents than great products.

There real tragedy here is that Sanjay Jha is still CEO *and* Chairman. Not that it really matters at this point.

Dress it up how you want, Apple still stole their IP & must pay.

gnasher729
Feb 7, 2012, 10:20 AM
I'm sure they do. Because I'm pretty sure it doesn't matter "how much" of the device is used for what. It could never be determined. I know people that use their iPhones for just calls and emails. Others who don't even make calls (or very few) and use it for Apps.

If the device incorporates the technology - the device is "liable"

So if Daimler Benz decides to sell a car with built-in phone, you think Motorola should get 2.25% of the purchase price?

Oletros
Feb 7, 2012, 10:31 AM
So if Daimler Benz decides to sell a car with built-in phone, you think Motorola should get 2.25% of the purchase price?

Well, if Daimmler Benz defines it as a phone perhaps yes :P

vvswarup
Feb 7, 2012, 10:32 AM
That or they already have FRAUD agreements in place with the others. This would not be the first time Apple avoided trying to pay FRAUD patents. They did the same on Nokia. Question is how much did Apple end up paying Nokia at the end of that case as Apple did settle and it was an undisclosed amount.

Apple was not trying to avoid paying FRAND patent fees. Apple went to court against Nokia because they believed that Nokia was charging Apple more than what they charge other people. Apple wanted a deal similar to what everybody else was getting.

Oletros
Feb 7, 2012, 10:34 AM
Apple was not trying to avoid paying FRAND patent fees. Apple went to court against Nokia because they believed that Nokia was charging Apple more than what they charge other people. Apple wanted a deal similar to what everybody else was getting.

Yes, that is what Apple said, but not what reality was.

samcraig
Feb 7, 2012, 10:39 AM
This isn't the Motorola of 30 years ago, nor is it 30 years ago. Time to move on.

Nor do I particularly care at this point that Moto invented the mobile phone technology or whatever the hell they did. That isn't helping them NOW, nor do consumers give a sweet damn about it. What Moto did in the caveman days of consumer mobile tech is irrelevant. Barely anyone remembers. And why should they? Moto is just another dinosaur that deals more in patents than great products.

The real tragedy here is that Sanjay Jha is still CEO *and* Chairman. Not that it really matters at this point.

Irrelevant in your world perhaps. Do you have any idea how many patents Motorola has in terms of cell phone technology? thousands upon thousands. All original ideas. And not even 1% have been utilized. Many are still extremely forward thinking and haven't been adopted (yet) but could and should be in the future. Just because you call them a dinosaur or fail to think they are relevant doesn't make it a fact. It only shows your ignorance and inability to see anyone other than Apple as relevant.

And it is or will be helping them now. Those patents. Years of being innovative - they are paying off by being able to claim ownership and getting paid for them. How is that not a payoff?

Again I say - You want people to respect Steve and all he did for the world from now until the end of time? Why not show the same respect to the engineers and minds at Motorola for everything they did. Or are you admitting to complete hypocrisy? Are you saying that in 10, 20, 30 years we can call Steve a dinosaur, that he is irrelevant? I thought not.

Rodimus Prime
Feb 7, 2012, 10:54 AM
Apple was not trying to avoid paying FRAND patent fees. Apple went to court against Nokia because they believed that Nokia was charging Apple more than what they charge other people. Apple wanted a deal similar to what everybody else was getting.

What Apple said and what Apple really was doing are two different things. Apple more or less did not response to Nokia until you noticed Nokia sued them.

Apple has been and continuing to play a dangerous game. They are hoping they can hold onto the money as long as possible and gain the interested off of it that they keep. If they loss in court it will be a lot uglier for Apple because they not only have to pay all the money they owe, legal fees, and interested payments north of what they were gaining on saving it in the bank.

It will be a good 9 figure settlement.
What Apple wants is a low to lower rate than everyone else with out putting any patents in the pool. Does not work that way. Apple is a new player to the cell phone market and as such it they do not have many of the key patents.

samcraig
Feb 7, 2012, 10:59 AM
Apple is a new player to the cell phone market and as such it they do not have many of the key patents.

Didn't you read LTD's posts on this page? It doesn't matter that Apple doesn't have any key patents. They are relevant. And Motorola isn't! LOL!!!!

*LTD*
Feb 7, 2012, 11:01 AM
Irrelevant in your world perhaps. Do you have any idea how many patents Motorola has in terms of cell phone technology? thousands upon thousands.

Maybe they could use some of them to make products that don't suck.

Never mind, I have a better idea. They could give them to Apple and have *them* do it.

Patents are paper. But they need to make money somehow, right?

samcraig
Feb 7, 2012, 11:05 AM
Maybe they could use some of them to make products that don't suck.

Never mind, I have a better idea. They could give them to Apple and have *them* do it.

Patents are paper. But they need to make money somehow, right?

They don't have to do anything with them. They can sit pretty and just keep suing Apple if they want. Just because you don't like it doesn't matter. Just like Apple doesn't have to give to charity or care about anyone else but themselves. Motorola is a business - and if they can make money suing for violations of their patents - good for them. You should be happy, LTD - they are doing exactly what you think companies should do. Taking care of their own best interests...

*LTD*
Feb 7, 2012, 11:20 AM
They don't have to do anything with them. They can sit pretty and just keep suing Apple if they want. Just because you don't like it doesn't matter.

I have absolutely no problem with that. In fact, I wouldn't mind seeing Moto adopt this as their long-term strategy. It's quite fitting.

The market and consumers will render their judgment. And they are.

samcraig
Feb 7, 2012, 11:24 AM
I have absolutely no problem with that. In fact, I wouldn't mind seeing Moto adopt this as their long-term strategy. It's quite fitting.

The market and consumers will render their judgment. And they are.

The question is - why does it "offend" you so much that they put out products. You'd never buy one anyway - so why so upset or "annoyed" with them? Why do you care what they do?

*LTD*
Feb 7, 2012, 11:31 AM
The question is - why does it "offend" you so much that they put out products. You'd never buy one anyway - so why so upset or "annoyed" with them? Why do you care what they do?

Upset? It's pure comedy. It's always amusing to see industry giants (former) not "get" the obvious.

chrmjenkins
Feb 7, 2012, 11:35 AM
It's probable that one reason other companies aren't making as much profit on their phones as Apple, is that they're paying far more in license fees, some of which Apple has been avoiding as long as possible.

I'd say that has more to do with their high subsidy levels from the carriers and the profit sharing agreement they had with AT&T.

Steve121178
Feb 7, 2012, 11:50 AM
Maybe they could use some of them to make products that don't suck.

Never mind, I have a better idea. They could give them to Apple and have *them* do it.

Patents are paper. But they need to make money somehow, right?

Think of all the R&D (and millions of $'s) that went into those patents.

It's only right they be rewarded for what others steal. You said the same about Apple many times so I am not sure why you are being so foolish about this.

I am right. You are wrong.

BC2009
Feb 7, 2012, 01:42 PM
The amount of money generated should be irrelevant. The question is, how fair is 2.25%? What % are other similar FRAND patents typically licensed at? Are there guidelines or limits placed on these?

Yes, that is the right question. But since FRAND patents are very common-place, utilizing 10 of them at these terms would mean 22.5% in royalties. That hardly seems "fair and reasonable". At first glance, it seems that 2.25% is excessive. I would have guessed somewhere in the range of 0.5% or some flat amount per device that could be added to the base cost of the device.

The beauty of a FRAND patent is that it gets very widely used and so you make your money on it. It is assumed that everybody will have to license a FRAND patent in order to compete in a given space. Hence, low royalties, but large volume. You are more the compensated for your work.

kdarling
Feb 7, 2012, 04:36 PM
Nor do I particularly care at this point that Moto invented the mobile phone technology or whatever the hell they did.

Perhaps Motorola isn't a big name where you are in Canada, but it's been a respected name in the USA for a century, providing chips and radios to consumers and the military (and Apple, of course).

Motorola spent 15 years and 100 million dollars before they brought out the first cell phone in 1983.

Moto is just another dinosaur that deals more in patents than great products.

Motorola is hardly a dinosaur in the telecom area. It was the first to demonstrate a handoff of video streaming back and forth between LTE and 3G in 2008.

The current... not past... fact of the matter is that Motorola can build a smartphone without Apple's patents, but Apple cannot build any kind of phone without Motorola's patents.

At first glance, it seems that 2.25% is excessive. I would have guessed somewhere in the range of 0.5% or some flat amount per device that could be added to the base cost of the device.

As far as rates, it's widely assumed that Nokia got 1% from Apple.

Microsoft gets $3-6 per Android phone, which is also about 1%.

But as some wags have noted, with over 150 companies being part of ETSI, the GSM patent pool, even 1% per company would be 150% of a phone's price :)

Oletros
Feb 8, 2012, 03:10 AM
The hilarious thing about Mueller is that he is really concerned about the 2.25% Motorola is asking and when iPcom is asking 2.5-3.5% royalties against HTC he clearly doesn't have any problem with the amount.

http://fosspatents.blogspot.com/2011/12/ipcom-demands-25-to-35-percent-of-htcs.html

So, yes, yet another biased Muellr article

kdarling
Feb 8, 2012, 08:41 AM
I've done a lot more research on this topic, and found some interesting stuff:


Up to 20% of the cost (not sales price) of making a simple GSM phone is composed of just GSM license fees. Add up to another 10% for UMTS (3G), with Qualcomm getting the majority of that for the WCDMA.

E.g. the phone part costs $100; add another $30-45 for GSM fees. (Then you also need fees for cameras, visual voice mail, OS, UI features, etc.)


Motorola owns 50% of the 132 essential GSM patents for phones and network equipment. The next closest owner is AT&T, with 16%, followed by Philips and Bull with 8% each. It goes down from there.


Motorola did not agreed to FRAND in the beginning, unless you bought chips or equipment from them. Otherwise they would not take money for their patents; they would only do cross-licensing, which was worth a lot more to them as a phone maker. Nokia and Ericsson were the first takers of this, and presumably other makers have done the same cross licensing since then.

So it's not clear that there's any FRAND rate history for using Motorola patents without also using Motorola parts or engaging in cross-licensing (which Apple dislikes).

mijail
Feb 8, 2012, 09:10 AM
I've done a lot more research on this topic, and found some interesting stuff: ...

Interesting. Thanks for sharing!

gnasher729
Feb 10, 2012, 12:02 PM
Yes, that is the right question. But since FRAND patents are very common-place, utilizing 10 of them at these terms would mean 22.5% in royalties. That hardly seems "fair and reasonable". At first glance, it seems that 2.25% is excessive. I would have guessed somewhere in the range of 0.5% or some flat amount per device that could be added to the base cost of the device.

It's worse than that. Let's say you have a device that would sell for $100 if there were no patent licenses. And you need to pay 22.5% in patent licenses. Increasing the price to $122.50 doesn't cut it, because you now need to pay 22.5% of $122.50 instead of 22.5% of $100. You need to increase the price to $129.03, because 22.5% of $129.03 is $29.03, leaving exactly $100. So the customer would pay 29.03% more, not 22.5%. Plus the sales tax on the price increase. Plus the stores will want to make more profit from a device that sells for $129 than from a $100 device.

But the iPhone is a device doing multiple things. It is a phone, a music player, a portable computer, a portable games console. Probably more things. Let's say there are 10 patents that are essential for building a phone, 10 patents essential for building a music player, 10 patents essential for building a portable computer, and 10 patents essential for building a portable games console. Now you have 40 patent owners asking for 90% of the total device cost. Which means if it costs $100 to build, you need to sell it for $1000 and still just get the cost of building it in return. Motorola is asking for 2.25% of the phone, but also for 2.25% of the music player, portable computer, and portable games console.


The hilarious thing about Mueller is that he is really concerned about the 2.25% Motorola is asking and when iPcom is asking 2.5-3.5% royalties against HTC he clearly doesn't have any problem with the amount.

http://fosspatents.blogspot.com/2011/12/ipcom-demands-25-to-35-percent-of-htcs.html

So, yes, yet another biased Muellr article

Well, I thought everyone knew that. He seems to have an interesting ordering: Microsoft comes first. If it is possible to put a spin that favours Microsoft, he'll do that. Google comes last. Any possibility to spin it against Google, he'll do that. Apple is in between, so in Motorola (soon to be owned by Google) vs. Apple, he'll take side against Google and for Apple, while in a case of anybody against HTC (Google Android licensee), he'll take sides against HTC. It seems there hasn't been anything between Microsoft and Apple for a while, but when it happens, you can bet he will side with Microsoft.

BC2009
Feb 10, 2012, 04:46 PM
It's worse than that. Let's say you have a device that would sell for $100 if there were no patent licenses. And you need to pay 22.5% in patent licenses. Increasing the price to $122.50 doesn't cut it, because you now need to pay 22.5% of $122.50 instead of 22.5% of $100. You need to increase the price to $129.03, because 22.5% of $129.03 is $29.03, leaving exactly $100. So the customer would pay 29.03% more, not 22.5%. Plus the sales tax on the price increase. Plus the stores will want to make more profit from a device that sells for $129 than from a $100 device.

But the iPhone is a device doing multiple things. It is a phone, a music player, a portable computer, a portable games console. Probably more things. Let's say there are 10 patents that are essential for building a phone, 10 patents essential for building a music player, 10 patents essential for building a portable computer, and 10 patents essential for building a portable games console. Now you have 40 patent owners asking for 90% of the total device cost. Which means if it costs $100 to build, you need to sell it for $1000 and still just get the cost of building it in return. Motorola is asking for 2.25% of the phone, but also for 2.25% of the music player, portable computer, and portable games console.

I saw something on FOSS patents where he points out that if the stereo in a BMW used a patent and that patent required 2.25% of the end product price, that it would 2.25% if the entire vehicle sale price, rather than the price of the stereo. I see his point. Licensing terms on the final sale price are ridiculous. Patent licenses need to be about a fixed price per unit sold.

kdarling
Feb 10, 2012, 06:10 PM
Motorola is asking for 2.25% of the phone, but also for 2.25% of the music player, portable computer, and portable games console.

While you and I might think it's unreasonable to charge by device price, every phone maker has been legally paying patent holders like that since 1990 or so.

That's important, because it means there are twenty years of legal precedents where charging that way is considered part of the standard's FRAND terms.

Of course, to get around that, most bigger companies cross license their patents as part payment. Note that companies are NOT forced to cross license. (Edit: I'm wrong! See post below) There have always been cash terms available, but almost nobody pays those. Instead they all cross-license patents and avoid huge fees.

Now here Apple is asking to not pay what everyone else does, which is very understandable, but from the sheer FRAND side of things I don't think they can overcome all that history of how everyone else has paid for decades. At most, they'll probably be able to clarify what the cash percentage should be.

chrmjenkins
Feb 10, 2012, 06:17 PM
It seems a case could be made that Apple is more on the antitrust side if they are refusing to cross-license and that is common practice in the industry.

kdarling
Feb 10, 2012, 07:08 PM
Note that companies are NOT forced to cross license.

Immediately after writing that, I thought I might be wrong, and I was. As it turns out, a prohibition against forced cross-licensing did pass with ETSI back in 1993, but it was repealed a year later. In 2003, another attempt was made:

"Proposals included prohibitions on licences that require a royalty-free cross licence, prohibitions on requiring ‘grantbacks’ of rights to improvements, and prohibitions on licencing for certain regions of the globe at rates different from those charged for other regions. But none of these restrictions ever were agreed to, whether by the AHG or by the ETSI General Assembly."

That is from a very pertinent paper on "The Meaning of Voluntary Commitment to FRAND", found here (http://www.cravath.com/files/Uploads/Documents/Publications/3233990_1.pdf), which uses ETSI (the GSM patents standard overseer) as an example. Anyone who wants to debate cellular FRAND terms should read it.

Several things of note jump out:


Commitment to FRAND is voluntary, not mandatory, and ETSI does not set the terms. Each company does.


It's okay to require royalty-free cross-licensing (which must drive Apple crazy).


What is ‘fair and reasonable’ after a legal infringement challenge, can be higher than it was before that challenge.


Courts do not determine what FRAND terms are, but only whether the offered terms for a specific circumstance fall outside of a reasonable range.


PS. As far as the last point, something that I've noted here before, that Apple lawyers do a lot in their court cases, is brag about how much money Apple is making... then turn around and claim that their payments to others are too much. I think this backfires on them. If they were a OLPC group and wanted to avoid high terms, a judge could look favorably. Bragging about making huge profits is just going to make it easier for a judge to allow higher rates.

vrDrew
Feb 10, 2012, 11:42 PM
Commitment to FRAND is voluntary, not mandatory, and ETSI does not set the terms. Each company does.


I think you are misinterpreting that.

Nobody can force a company to declare any of their IP "Standards Essential." Company XYZ could come up with a way of quadrupling the amount of data you could send over a 3G or 802.11 connection, and ETSI couldn't force them to to make that technology part of the next standard specification.

However, a company that did declare it Standard Essential would gain a tremendous commercial advantage. To begin with, they would have a pretty-much guaranteed royalty revenue stream, albeit at a "less-than-bank robbery" rate. But more importantly, thanks to "Network Effects" their newly developed technology becomes much more valuable because it is considered Standards Essential: Its not much good designing a chip that can send or receive data very quickly if there are only a few devices it can communicate with.

Its not mandatory to make FRAND commitments. But once you do, you have to live up to the commitments you made. Samsung's failure to live up to its FRAND commitments is believed to be the reason they are being investigated by the EU; and why its extremely likely Motorola and Samsung will find themselves facing Anti-Trust action from the US Justice Department.

Also, the "Requirement for Royalty-Free Cross Licensing" refers only to other FRAND-encumbered patents that are part of the same standard. Motorola can't force Cisco to cross-license its patents on IP-switching technology (which aren't part of the ETSI Standard-Essential pool).

This, by the way, is the heart of what Motorola (and by default Google) and Samsung are trying to do. For all their protestations to the contrary, they aren't really looking to get licensing money from Apple. What they really want is to try and force Apple to cross-license its non-Frand smartphone IP (ie. scroll and bounce back, multitouch, touch-to-e-mail, etc.) patents.

kdarling
Feb 12, 2012, 04:51 PM
I think you are misinterpreting that.

I understood it, but was trying to get people interested in reading the paper to understand the details.

Also, the "Requirement for Royalty-Free Cross Licensing" refers only to other FRAND-encumbered patents that are part of the same standard. Motorola can't force Cisco to cross-license its patents on IP-switching technology (which aren't part of the ETSI Standard-Essential pool).

Do you know of some court case that decided that? Because there's nothing in the ETSI policy that specifies the patents be related. It only states that irrevocable licenses "may be made subject to the condition that those who seek licences agree to reciprocate."

In fact, the 2001 book, Mobile telecommunications standards: GSM, UMTS, TETRA, and ERMES, that I've been quoting took pains to mention that smaller companies without any valuable GSM IP to exchange, would often cross license unrelated patents instead: "But one has to keep in mind that cross-licenses can exchange essential IPR for nonessential IPR, or even for IPR that is not relevant to GSM."

This, by the way, is the heart of what Motorola (and by default Google) and Samsung are trying to do. For all their protestations to the contrary, they aren't really looking to get licensing money from Apple. What they really want is to try and force Apple to cross-license its non-Frand smartphone IP (ie. scroll and bounce back, multitouch, touch-to-e-mail, etc.) patents.

I tend to agree, but if that's their target, then the offered rate we heard about (2.25%) won't do it. That's not unreasonable, and it doesn't seem high enough to force Apple to give up any patents. Still, rumors said that Apple gave Nokia some touch patents along with 1% of the iPhone price.

I think we'll know more if/when we find out the rates charged to other companies _without_ cross licensing... if there are any!

Regards.