Apple Says Qualcomm Has Overcharged Billions of Dollars By 'Double-Dipping' on iPhone's Innovation

[TheShadowKnows!]

I always look at the merits of the case rather than fall back on the "it takes one to know one" defense... As a matter of law, all that matters is the situation at hand, not any hypothetical alternate universe.

Among the problems in trying to reverse roles is that it's not a simple substitution. It's not like Apple would have ever invented the cellular radio, or Qualcomm the iPhone without historical, technical, and personnel differences going back decades with all the impacts that would have on the companies they became.

If you want a rough sketch analysis though, look at the few places where Apple has essential patents for standards and see how they handle it. I believe they hold key IP for Firewire and Thunderbolt and their Quicktime technology is considered essential patents for BluRay. I don't know of them having been sued for violating FRAND. I haven't dug into it though, so let me know what you find.

Get your points, totally.

But when I posted my thoughts earlier, I was really thinking not of hardware (FW, TB, et al), but standard essential patents (SEPs) from Apple that were transcendental to human interfaces, such as multi-touch, inertial scrolling, and even tap to zoom.

Do not know (did not bothered to Google those patents) if they are assigned as FRANDs by some random standard-setting organization, but i do recall Apple suing Samsung for their use.

Again, not taking the false position of "it takes one to know one."

I was just asking aloud, maybe metaphorical, about Apple's stance if the roles were reversed.

 

[Michael Goff]

If i want to email one of my contacts It opens Mail instead of my preferred Spark email app. Its just annoying and unnecessary. I can set defaults on Mac OS so why not IOS? Just makes no sense.

Or If i want directions it opens maps instead of google maps. Some apps have by passed this by having an option inside.

Thanks. I didn't think of that.

 

[AlphaTeam]

Oh, I don't know, but I do know:

They own the company, the App Store, the idea , the infrastructure, the iOS, the right to run their business as they see fit.

What default app do you want see in iOS that can't be gotten as a download, i.e. somebody would have to provide that for FREE?

On their own hardware AND own software?! God forbid!

I don't think you know what anti-competitive means. In fact, I'm sure of it after what you've just said.

Lololololol

You sir, just made my day.

Edit: Wait, are you serious? This isn't a joke? smh.

It is MY phone, not theirs. After they sell it, they should have no rights to it. I can go buy a car and mod the heck out of it. You'd see people laughing if Ford said "You can't use those tires, you can only buy tires we want you to from where we say".

 

[Analog Kid]

Get your points, totally.

But when I posted my thoughts earlier, I was really thinking not of hardware (FW, TB, et al), but standard essential patents (SEPs) from Apple that were transcendental to human interfaces, such as multi-touch, inertial scrolling, and even tap to zoom.

Do not know (did not bothered to Google those patents) if they are assigned as FRANDs by some random standard-setting organization, but i do recall Apple suing Samsung for their use.

Again, not taking the false position of "it takes one to know one."

I was just asking aloud, maybe metaphorical, about Apple's stance if the roles were reversed.

Yeah, there's a difference between an invention that one sells as a product, and an invention that is necessary for many companies to interoperate. FRAND is aimed at industry standards, such as LTE. In order for LTE to work, many companies need to comply with the same standards, and some of those standards were invented by one or many companies. Those companies deserve to be compensated for their invention, so they license their patents as part of the pool of essential technologies. The tradeoff is that Qualcomm wouldn't have as many (or any) customers if LTE wasn't a global standard, so they have a guaranteed income. In exchange for that, they promise to keep their fees reasonable and not wait for the standard to be accepted and then jack up the prices because the pain of changing standards would be too high.

Slide to Unlock, for example is a totally different thing. There's no interoperability there. Qualcomm could have kept their wireless patents under the same terms and not been subject to FRAND, but then they would have needed to build out the cellular networks, backbones, and handsets in addition to the chipsets in order to really have a customer base.

 

[tooltalk]

You are mixing two different things. Yes, in general a company can charge whatever it wants for a product. In that case we rely on the free market to control prices. In this case, however, Qualcomm was issued a patent, which limits competition for a period of time. A patent still doesn't mean Qualcomm couldn't charge what it wanted, but what is different is that Qualcomm's system was adopted as an "industry standard" which means that an entire industry would be at the mercy of Qualcomm to charge exorbitant licensing fees to use their chips. To deal with this problem, and prevent companies from abusing a monopoly positions, industries have Standard Settings Org's (SSO's) which create standards but require that any licensing fees be according to FRAND., Fair-Reasonable and Non-Discriminatory terms,

The courts have fairly universally allowed FRAND to be enforced as a contract term. Qualcomm is arguably in violation of FRAND because they charge based on the value of the product. Thus, every time Apple , or other company, adds an innovation that makes the iPhone more expensive, Qualcomm gets even more from Apple, even though Apple is using the exact same chip, which is insane and costs consumers ultimately, and most relevant is violative of FRAND.

The double whammy for Qualcomm, which has undoubtedly sent tremors through the executives, is that they are charging both for their chips and a licensing fee to use them. The news today is that Apple is citing the recent Supreme Court case that says you can't do both, i.e., if you sell a product, the license to use it should go with it, e.g., printer companies trying to gouge folks by arguing their patent rights prevented other companies from refilling the used cartridges and reselling to consumers. The Court unanimously held that companies basically get one bite at the Apple (pun intended!). If this ruling is applied, as Apple is arguing to Qualcomm, it would mean that once Apple or Google or any other company buys a chip from Qualcomm, they would no longer also have to pay a licensing fee to use the product, as it should be.

Actually, no. You can't just charge whatever you want for your patents. Apple tried to justify taking Samsung's entire profit using an esoteric century-old law for some frivolous design patents, and the SCOTUS stepped in to stop Apple's abuse just last year. The courts use various case laws and legal frameworks (eg, GF factors) to determine what reasonable royalty rates are (when calculating damages). You can't just ask for gazillion dollars because of a minor patent violation.

As for your FRAND comment, no again. There is nothing extraordinary about the end-user device royalty base -- that is the wireless industry norm. Again, Apple argued against this before (in 2012) and lost. Now, once you let go of Apple's misguided view that all FRAND encumbered patents are cheap (or almost free as air or water), it's not difficult to understand the dispute between the two.

QTI handles Qualcomm's chip business and R&D, but QTL owns all their intellectual properties and licensing. My understanding is that they are two separate legal entities and this is all legit. This arrangement is somewhat akin to Apple's Apple Sales International and Apple Operations Europe in Ireland -- which helps funnel oversea profit to Ireland.

 

[LordVic]

While i'm not going to go into depth about each side here, As i'm sure that Qualcomm isn't exactly innocent in their behaviour (as most large companies use their size and muscle to force others to their whims, apple included), this following statement is absolutely rich.

Apple said Qualcomm wrongly bases its royalties on a percentage of the entire iPhone's value, despite supplying just a single component of the device.

Apple themselves operate on the exact same model. They ask for percentage of the value of the sold devices for items that they either have patents out on, or believe violated their patents. For example, in the Samsung v Apple case in the US, the 1 Billion of the original claim was based on this very calculation.

IMHO, if you're going to perform legal action against another company, you better make sure you're not guilty of the exact same behaviour.

you knwo the saying: Those in glass houses shouldn't cast stones
[doublepost=1497989382][/doublepost]

Why don't Apple drop them and make their own then? If Apple is smart enough to make their own CPU, they are smart enough to make their own modems. Qualcomm is just riding on the popularity of Apple's devices and just want more.

Patents basically. Many of the patents that exist today for cellular and wireless technologies are owned by a very limited number of companies. if Apple were to decide to make their own modems that didn't violate patents, they may be forced to create their own proprietary network to use it too (since all carriers today already have their infrastructure built around current technologies).

 

[ravenstar]

It is MY phone, not theirs. After they sell it, they should have no rights to it. I can go buy a car and mod the heck out of it. You'd see people laughing if Ford said "You can't use those tires, you can only buy tires we want you to from where we say".

I'm not sure what rights you think Apple is exercising over the device you bought? I haven't heard of any cases of Apple pursuing any action against anyone jailbreaking their phones and putting whatever they want on them. But Apple sells the phones with a certain set of features, including some pretty tight security features in the software and a review service provided by the app store. I have yet to see a significant argument for why Apple should be compelled to compromise this package. It's this package that has made the iPhone as popular as it is.

 

[LordVic]

I don't get why some people are siding with Apple when they don't even know the price Apple is paying. Can't say it isn't "fair and reasonable" when you don't know the price.

Im extremely curious how this actually impacts their yearly financials.

Apple just did release the quarterly numbers. Does those numbers include the 500m to 1billion in back fees that they haven't paid to Qualcomm? Does Apple still reflect the 1 billion as a liability? Is it being reflected as an expense? what exactly is going on here? Because if Apple isn't reporting it as an expense on the books or a liability, Apple could very well be over-estimating their last quarterly profit results by up to a billion in owable money
[doublepost=1497990062][/doublepost]

Not to mention the fact that most "default" apps can now be uninstalled/hidden and you are free to download any alternative from the app store you see fit if one exists. Granted I wish they'd let me choose my own default browsers and email apps. Having my own installed but system level shortcuts cause safari and mail to open anyway is a bit annoying but far from "anticompetitive". Its Apples right to dictate what options to include in their OS on their hardware. If they wholesale delist and block alternative apps such as Chrome and Gmail then MAYBE an argument can be made. A thin one at that since you still have a choice. Switching to Android. Pain in the ass but a choice all the same.

I'm sure someone would make the Microsoft + IE antitrust argument but that ruling was pretty stupid. As far as I know MS never has directly prevented 3rd party software installation. To this day IE/Edge is still installed as default with the option to set another app as default.

TL;DR: Agreed. OP's position is silly.

I get why Microsoft got in trouble in the 90's with EU. you have to remember that Microsoft's OS n the 90's accounted for early 95% of all online access. They held an essential monopoly on all computers operating system. By providing IE defaultly installed, with NO links or information to the user that there were alternatives, it's an uncompetitive advantage.

the only reason why Apple isn't in the same position, is because iOS, despite being 100% marketshare for iPhones, is roughly only 30-40% of the worlds phones usage. this is far from a monopolistic position, and as you said, if iOS or Apple's hardware doesn't provide? you do have alternatives.

Back in the 90's, despite a very small hardcore Apple enthousiast movement, Apple was not a relevant player.

 

[truthertech]

Actually, no. You can't just charge whatever you want for your patents. Apple tried to justify taking Samsung's entire profit using an esoteric century-old law for some frivolous design patents, and the SCOTUS stepped in to stop Apple's abuse just last year. The courts use various case laws and legal frameworks (eg, GF factors) to determine what reasonable royalty rates are (when calculating damages). You can't just ask for gazillion dollars because a minor patent violation.

As for your FRAND comment, no again. There is nothing extraordinary about the end-user device royalty base -- that is the wireless industry norm. Again, Apple argued against this before (in 2012) and lost. Now, once you let go of Apple's misguided view that all FRAND encumbered patents are cheap (or almost free as air or water), it's not difficult to understand the dispute between the two.

QTI handles Qualcomm's chip business and R&D, but QTL owns all their intellectual properties and licensing. My understanding is that they are two separate legal entities and this is all legit. This arrangement is somewhat akin to Apple's Apple Sales International and Apple Operations Europe in Ireland -- which helps funnel oversea profit to Ireland.

You must not have read very carefully. I said, in general, you can charge whatever the market will bear, and that's true if you understand the law in this area of patents and anti-trust. It's clear that you don't, so you are letting your hatred of Apple blind you to basic facts. The issue in this particular case revolves primarily around FRAND, which is again, primarily a contract issue. As one analyst noted

"In addition, a royalty base premised on final selling prices means that Qualcomm charges manufacturers of high-value, feature-rich smartphones substantially more for a license than it charges manufacturers of basic cellphones, despite the fact that the embodied wireless communications functionality in the two products is similar or identical. This is inconsistent with the FRAND promise. Compared to a $100 Kyocera LTE smartphone, Apple estimates that its royalty payment for a $400 iPhone SE is "four to nine times more than Kyocera's royalty for its smartphone." That also means Qualcomm collects more when customers pay as much as $200 more for increased storage capacity, a feature that has nothing to do with cellular connectivity."

Qualcomm is in a lot of trouble. You may wish away the facts, but the FTC is suing them for this practice. The Korean government already found them in violation and fined them almost a billion dollars.

 

[KaliPaige]

Huh. So is this why Apple switched to Intel modems?

 

[Carnegie]

Actually, no. You can't just charge whatever you want for your patents. Apple tried to justify taking Samsung's entire profit using an esoteric century-old law for some frivolous design patents, and the SCOTUS stepped in to stop Apple's abuse just last year. The courts use various case laws and legal frameworks (eg, GF factors) to determine what reasonable royalty rates are (when calculating damages). You can't just ask for gazillion dollars because a minor patent violation.

As for your FRAND comment, wrong again. There is nothing extraordinary about the end-device royalty base -- the end-user royalty base is the wireless industry norm. Again, Apple argued against this before (in 2012) and lost.

QTI handles Qualcomm's chip business and R&D, but QTL owns all their intellectual properties and licensing. My understanding is that they are two separate legal entities and this is all legit. This arrangement is somewhat akin to Apple's Apple Sales International and Apple Operations Europe in Ireland -- which helps funnel oversea profit to Ireland.

If both parties agree, they certainly can base royalties on the entire market value of the end products. Some licensees may prefer that kind of arrangement.

But a FRAND-obliged patent holder can't unilaterally impose such terms. The Federal Circuit (consistent with more general patent law doctrine established long ago by the Supreme Court) has found that patent holders are not entitled to royalties based on the entire market value of end products unless they can demonstrate that the entire value of those products derives from the patents in question. I've cited a number of cases which have been clear on that point in other threads, so I won't quote them again here. But I can grab some of them for you if you want to read them yourself.

If you're referring to the USITC's 2013 exclusion order determination, that ruling was vetoed by the USTR for good reason. And if it hadn't been, Apple would have had a good chance to get it overturned by the Federal Circuit on appeal - or at least, it likely would have prevailed on the royalty base argument.

The royalty base issue isn't the only problematic aspect of what Qualcomm's been accused - by, e.g., Apple, Intel, and numerous regulatory bodies - of doing. It's only one piece of the puzzle. But, unless the Supreme Court decides to overrule Federal Circuit precedent on this point (which would surprise me), it's a piece on which Qualcomm is almost sure to ultimately lose in court - if this battle makes it that far.
[doublepost=1497991516][/doublepost]

You must not have read very carefully. I said, in general, you can charge whatever the market will bear, and that's true if you understand the law in this area of patents and anti-trust. It's clear that you don't, so you are letting your hatred of Apple blind you to basic facts. The issue in this particular case revolves primarily around FRAND, which is again, primarily a contract issue. As one analyst noted

"In addition, a royalty base premised on final selling prices means that Qualcomm charges manufacturers of high-value, feature-rich smartphones substantially more for a license than it charges manufacturers of basic cellphones, despite the fact that the embodied wireless communications functionality in the two products is similar or identical. This is inconsistent with the FRAND promise. Compared to a $100 Kyocera LTE smartphone, Apple estimates that its royalty payment for a $400 iPhone SE is "four to nine times more than Kyocera's royalty for its smartphone." That also means Qualcomm collects more when customers pay as much as $200 more for increased storage capacity, a feature that has nothing to do with cellular connectivity."

Qualcomm is in a lot of trouble. You may wish away the facts, but the FTC is suing them for this practice. The Korean government already found them in violation and fined them almost a billion dollars.

I would agree that Qualcomm is in considerable trouble if - and for now I'll continue with this qualifier - the allegations made against it are accurate. It's on the wrong side of a number of legal arguments.

And, at this point, I'm inclined to believe that a number of the allegations made against it are accurate. They've been made by numerous parties and at least 6 different regulatory bodies have made preliminary or final findings of wrongdoing.
[doublepost=1497992169][/doublepost]

I don't get why some people are siding with Apple when they don't even know the price Apple is paying. Can't say it isn't "fair and reasonable" when you don't know the price.

Knowing exactly what they've paid might inform some assessments (though we can put various things together and come up with estimates).

But we don't necessarily need to know that to determine whether Qualcomm has violated its FRAND obligations or the laws of certain jurisdictions. We do, however, need to know whether the factual allegations made against it are true.

If they are, then at a minimum Qualcomm has violated its FRAND obligations in a number of ways. For instance, it can't refuse to grant (exhaustive) licensees to would-be competitors. A number of parties and regulatory bodies have accused it of doing that and its own SEC filings suggest as much (though those filings may be open to alternate interpretations on this point).
[doublepost=1497992557][/doublepost]

Wonder how long this court battle will take. Anyone care to take a guess?

If final court determinations are needed to resolve the matter, quite a while - several years.

My guess, however, would be that matters get resolved before they finish working their way through the courts (perhaps not before a district court decision though).

At this point Qualcomm doesn't have the leverage that it used to. Apple has the leverage now, unless Qualcomm can, e.g., get an exclusion order preventing the import of certain Apple products (which I think is highly unlikely). There will likely be considerable pressure on Qualcomm to come to some kind of reasonable agreement with Apple, its business (and its financial reports) will be hurt more than Apple's will if this dispute drags on for a while.

 

[FriendlyMackle]

If Tim Cook wasn't so busy playing world police officer and politician, maybe he could have focused on this instead of loosing 1Billion. Pretty sure anyone on this forum would loose their job over that neglect of oversight.

Yeah, I guess he "loosed" some opinions on the world. As is his right. You obviously have reading comprehension problems if you believe Apple has lost 1 Billion dollars under Cook.

I always wonder about the hostility of people like you toward Cook. I wonder what that could be about.

Perhaps because he's not a loudly-proclaimed gun-brandishing zealot. Maybe it's his attention to human rights issues which makes you uncomfortable? Could it be his attention to energy usage issues and alternative energy sources? His protection of data-security and privacy protections for users - is that bothersome to you - and do you believe this does not add to the brand value (if you don't see that it does, there's no helping you to understand)? Is that it? Or is there something else? Why don't you just be honest about your problem with Tim Cook, rather than make spurious claims that he is a poor CEO (of one of the top index tech companies in the world).

 

[Michael Goff]

It is MY phone, not theirs. After they sell it, they should have no rights to it. I can go buy a car and mod the heck out of it. You'd see people laughing if Ford said "You can't use those tires, you can only buy tires we want you to from where we say".

The car analogy is not really a good one.
[doublepost=1497995655][/doublepost]

Huh. So is this why Apple switched to Intel modems?

And switching to Intek modems is apparently why Qualcomm decided to go against the deal they had agreed to.

Edit: I'd guess Apple moved to some Intel to diversify their supply chain.

 

[macTW]

It is MY phone, not theirs. After they sell it, they should have no rights to it. I can go buy a car and mod the heck out of it. You'd see people laughing if Ford said "You can't use those tires, you can only buy tires we want you to from where we say".

Yes it is your phone. But it is their software.

Write up your own os, get federal approval for network communications, cellular approvals from companies so you can use the SIM card, load it up on your iPhone and sure. It is, after all, your phone.

But the software is apple's, and you merely license it and all it contains. If you don't like it, sorry?

Edit: you don't see Ford saying "you have to use our internals." just like you don't see Apple saying "you have to use our OS and unique apps." Both say that warranties are voided with non-brand use.

 

[Tigger11]

Im extremely curious how this actually impacts their yearly financials.

Apple just did release the quarterly numbers. Does those numbers include the 500m to 1billion in back fees that they haven't paid to Qualcomm? Does Apple still reflect the 1 billion as a liability? Is it being reflected as an expense? what exactly is going on here? Because if Apple isn't reporting it as an expense on the books or a liability, Apple could very well be over-estimating their last quarterly profit results by up to a billion in owable money
[doublepost=1497990062][/doublepost]

You seem to be confused about who owes who money. Qualcomm owes Apple $1B in rebates, Apple doesnt owe Qualcomm any money as part of this lawsuit. According to Apples original January Lawsuit, Qualcomm didnt pay the rebates to Apple because Apple testified in the South Korea case against Qualcomm where they were fined $850 Million. They had to they were served to show up. Obviously Apple will not report the $1B dollars income until it actually shows up. Qualcomm is selling parts to Apple, then charges Apple a percentage of the cost of the total device in question for a licensing fee, in the beginning of cell phones it wasnt a a terrible idea, but now Qualcomm gets $4 or $8 more for a cell phone because I decide to get 128Meg phone instead of a 64Meg phone. Why exactly should that happen in your opinion? I mean if Intel charged Dell more money for the processor depending on which video card or monitor you bought with it, is whats happening here, or Microsoft getting more money for Windows based on the cost of the laptop. Buy Alienware, same DVD but now its $25 more, or $50 if you buy the triple monitors.

 

[LordVic]

Yes it is your phone. But it is their software.

Write up your own os, get federal approval for network communications, cellular approvals from companies so you can use the SIM card, load it up on your iPhone and sure. It is, after all, your phone.

But the software is apple's, and you merely license it and all it contains. If you don't like it, sorry?

Edit: you don't see Ford saying "you have to use our internals." just like you don't see Apple saying "you have to use our OS and unique apps." Both say that warranties are voided with non-brand use.

Problem is you do have to use Apple's OS.

I agree with you though on all the other points, except at the end. As far as I last saw, there is absolutely no way to load an alternative OS onto an iPhone. Even if you wanted to write one.

we buy the hardware. We should have exclusive right to do whatever we want to it and install any software we want to it we own the right to. The manufacturers should warn that it's advanced to do so and could void warranties, But it is still my hardware and I should have the right to bust my device doing something stupid if I so shall please.

 

[IG88]

As Apple innovates, Qualcomm demands more. Qualcomm had nothing to do with creating the revolutionary Touch ID, the world's most popular camera, or the Retina display Apple's customers love, yet Qualcomm wants to be paid as if these (and future) breakthroughs belong to it. Qualcomm insists in this Court that it should be entitled to rely on the same business model it applied over a decade ago to the flip phone but while that model may have been defensible when a phone was just a phone, today it amounts to a scheme of extortion that allows Qualcomm unfairly to maintain and entrench its existing monopoly.

I agree 10,000% with Apple's stance here. This is exactly the argument I was making when this story first broke several months ago. It's total ******** that Qualcomm should get percentage of a smartphone like an iPhone when all they're doing is supplying the radio. I'm surprised it took Apple this long to fight it. They should have fought it from day 1. I hope Qualcomm loses big in this one.
[doublepost=1498005784][/doublepost]

Why don't Apple drop them and make their own then? If Apple is smart enough to make their own CPU, they are smart enough to make their own modems. Qualcomm is just riding on the popularity of Apple's devices and just want more.

Apple developing their own wouldn't get them out of paying licensing fees to Qualcomm for the standards essential patents.

 

[Thunderhawks]

It is MY phone, not theirs. After they sell it, they should have no rights to it. I can go buy a car and mod the heck out of it. You'd see people laughing if Ford said "You can't use those tires, you can only buy tires we want you to from where we say".

That comparison doesn't really work. A tire would be maybe a protective case and you are free to mod the heck out of that.
But, if you were to buy a FORD car and would try to override/exchange or install something onto it's internal computers software that would be a problem.

We are all free to choose what is best for us. I can't get excited that I can't install Android on my iPhone or some app they have, let alone jailbreak. iOS is great (yes, some clunkers in between) and getting even better with # 11.

 

[macfacts]

Huh. So is this why Apple switched to Intel modems?

Apple switched to Intel because it was cheaper, not because they are better. Not good for premium products.

 

[Markoth]

Would be nice if "IANAL" tagging was mandatory so I could know who on here to not believe. Smh -.- I'll just skip the legal babble here for now.

 

[edwardlanti]

Im extremely curious how this actually impacts their yearly financials.

Apple just did release the quarterly numbers. Does those numbers include the 500m to 1billion in back fees that they haven't paid to Qualcomm? Does Apple still reflect the 1 billion as a liability? Is it being reflected as an expense? what exactly is going on here? Because if Apple isn't reporting it as an expense on the books or a liability, Apple could very well be over-estimating their last quarterly profit results by up to a billion in owable money
[doublepost=1497990062][/doublepost]

I get why Microsoft got in trouble in the 90's with EU. you have to remember that Microsoft's OS n the 90's accounted for early 95% of all online access. They held an essential monopoly on all computers operating system. By providing IE defaultly installed, with NO links or information to the user that there were alternatives, it's an uncompetitive advantage.

the only reason why Apple isn't in the same position, is because iOS, despite being 100% marketshare for iPhones, is roughly only 30-40% of the worlds phones usage. this is far from a monopolistic position, and as you said, if iOS or Apple's hardware doesn't provide? you do have alternatives.

Back in the 90's, despite a very small hardcore Apple enthousiast movement, Apple was not a relevant player.

 

[kdarling]

IThe middle ground is FRAND and this is what Apple is saying Qualcomm is violating by setting their price as a fraction of the cost of the phone as opposed to a set price for each modem and its license.

Yet Apple knows full well that charging a percentage of product price has been standard cellular FRAND licensing for over two decades.

Apple's argument is 2-fold.

1. Qualcomm is basing their royalty rate based on the final cost of the end product. Apple is arguing that this is unfair and that Qualcomm's royalty should be based on the cost of the component that the patent was used for (e.g. the modem and the wifi chips).

Apple itself is no stranger to the idea of charging a percentage of profits gained by using one's technology.

Is it also unfair that Apple charges higher priced apps a higher royalty, even though the same storage and download costs exist as for free apps?

Is it also unfair that Apple charges banks a percentage of each Apple Pay purchase, even though the chips and software being used have already been bought by a user at a high profit to Apple?

2. I think I read where Apple is claiming that Qualcomm is double charging for their patents. They first charge companies like Foxconn a royalty for assembling a device with an LTE chip. Then they charge Apple a royalty for selling the iPhone that was assembled with an LTE chip. To Apple, this is a double dip.

Nope, that never happens. Apple has no license from Qualcomm, and thus does not directly pay royalties themselves.

Qualcomm instead has a license agreement with Foxconn and the other iPhone assembly companies. The licenses cover many phone brands and predate Apple's iPhone. Those assembly companies pay a royalty for building devices which include 2G/3G/4G tech invented by Qualcomm.

And it's the same percentage whether it's an Apple or Moto phone, or whether it uses an Intel or Qualcomm or MediaTek modem. That's the fair and non-discriminatory parts of FRAND.

What Apple means by their disingenuous use of "double dip", is simply that the royalty Foxconn pays (and passes on to Apple) is higher for higher value iPhones. But see next response, because it's not based on anywhere near as much as Apple's retail or even wholesale prices. If anything, Apple has been getting by like a bandit for a decade by not paying on the full price.

I don't get why some people are siding with Apple when they don't even know the price Apple is paying. Can't say it isn't "fair and reasonable" when you don't know the price.

Qualcomm's rates are well known, as hundreds of companies currently have licenses, all using the same basic terms, which is what FRAND requires. They charge ~3.25% of the device price.

However, in this case that means the price that Foxconn charges Apple for a boxed iPhone ready for Apple to make hundreds of dollars in profit from (something they could not do without using Qualcomm patents).

Analysts estimate that Foxconn charges Apple about $245 per phone, so the royalty would be about $8. And that's for thousands of essential patents without which the iPhone would only be an iPod.

Interestingly, Apple wanted that much per device from Samsung for just three Apple patents that ended up either being worked around or no longer used, like slide to unlock. In other words, non essential patents.

Apple is simply once again making its usual claim that its patents are worth tons, while everyone else's are worth mere pennies. It's just business, in the pursuit of higher profits. It's not like Apple would lower the price by $5 if they got a better royalty rate.

 

[VernonDozier]

Huh. So is this why Apple switched to Intel modems?

Well, in telecommunication trade journals, it's been reported that most telecom companies across Europe are waiting for US to launch 5G networks first; see what adoption levels are like. So at the time Intel bought Germany-based Infineon on the advice of Apple, Qualcomm was a contributor into quite a few Linux-foundation projects like AllJoyn. Almost the same month Qualcomm would announce something in Health, (for example) Apple, would release a "Kit"- HealthKit, HomeKit, etc. The Qualcomm efforts were to grow open-standards for features on these next generation networks.

As for Apple, well, today's iPhone 7 featuring more expensive, and better performing chips on Sprint/Verizon cost the same as an iPhone 7 using the commodity low-quality Intel/Infineon chips. However, when Qualcomm found a way to more efficiently send data over the air, (freeing up time/space for more simeoutaneous customers) Apple took the opposite approach- slowed down the chip and forced it so it was less efficient in sending data. It's similar to adds protocol overhead.


What Apple is doing is going back on an agreed-upon contract, and sales order. They claim the pricing is not in their favor, however, they agreed to the terms, and it certainly is a legit business model. Reminds me of a franchise type business model. If you own a McDonald's franchise, you pay a percentage based on all sales, not just the sales you think should count.

I think its odd no one has pointed out the royalty amount is a function of the selling price, and Apple is in complete control of product sale prices. There's an article in MacWorld titled "How Apple Sets Its Prices" by Marco Tabini. In that article, it's described how Apple places restrictions on its authorized retail partners. Apple restricts what can be sold and at what price. A reseller can't set their price without Apple's permission, and also, Apple performs enforcement of those prices. They'll sometimes audit the store, go secret shopping to ensure prices are set at the price Apple wants. So that leaves me curious why Apple just doesn't lower the cost of its devices. Generally in the tech world, the price of handsets goes down as technology becomes commotized and/or productivity increases via automation. The only logical thing I can think of is that Apple's prices must be the way they are to support of Apple's insatiable appetite for prime retail space at locations like Grand Central Station, Carousel du Louvre (in Paris), Regent Street, Berlin. Any company with premium retail presence in places like these, presents additional overhead costs which simply aren't functional. Apple wants to put their hands in your pants pocket, and grab your pocket change for their rainy day.

 

[MacBram]

Get your points, totally.

But when I posted my thoughts earlier, I was really thinking not of hardware (FW, TB, et al), but standard essential patents (SEPs) from Apple that were transcendental to human interfaces, such as multi-touch, inertial scrolling, and even tap to zoom.

Do not know (did not bothered to Google those patents) if they are assigned as FRANDs by some random standard-setting organization, but i do recall Apple suing Samsung for their use.

Again, not taking the false position of "it takes one to know one."

I was just asking aloud, maybe metaphorical, about Apple's stance if the roles were reversed.

There are a couple of elements to the interface context that you mention (multi-touch, scrolling, etc).

One is the technology underlying it. One is the implementation, in terms of the human interaction. Oh, and whether it is "transcendental" or not, is yet another side of it.

Let's say "multi-touch" and "scrolling" are "transcendental". Nobody, including Apple, are saying that Samsung can't have touch interfaces that include touching in more than one spot at a time or scrolling.

It's up for debate whether inertial scrolling is "transcendental" -- you can have functional scrolling without the "rubber-band" effect that was a key innovation of Apple's particular implementation of scrolling, which makes the scrolling feel more immediate to a user using their finger.

Similarly, with Multi-touch, it is up for debate whether it is "transcendental" ("natural", and no-one can possibly think of any other way) to, for example, pinch or separate two fingers to zoom in and out (or whatever Apple or its acquisitions such as FingerWorks may have come up with that hadn't been done before).

On the technology side: again, no-one is saying that anyone using capacitive touch panels owes Apple. Far from it. But, Apple has done significant work on its own with materials and the lamination of touch sensors in different kinds of arrays and within different layers of the glass.

The things Apple sued Samsung for are very specific.
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...I get why Microsoft got in trouble in the 90's with EU. you have to remember that Microsoft's OS n the 90's accounted for early 95% of all online access. They held an essential monopoly on all computers operating system. By providing IE defaultly installed, with NO links or information to the user that there were alternatives, it's an uncompetitive advantage.

the only reason why Apple isn't in the same position, is because iOS, despite being 100% marketshare for iPhones, is roughly only 30-40% of the worlds phones usage. this is far from a monopolistic position, and as you said, if iOS or Apple's hardware doesn't provide? you do have alternatives.

Back in the 90's, despite a very small hardcore Apple enthousiast movement, Apple was not a relevant player.

You start by saying you get it, then show that you don't. As you note, the reason that MS got in trouble is that it was supplying an (essential) element to OEMs: the OS.

Not remotely the same situation as with the iPhones, whatever the marketshare. So, even if iPhone had 99% market share among all phone users (or even just "premium", smart phones), it would not be "in the same position"!

Apple is not anti-competively supplying iOS to other phone makers and in doing so keeping Android or Windows off of competing phones. It doesn't charge Samsung or LG a fee for every phone they make regardless of what OS is installed on it. Yet that is the crux of the charges against MS.

MS had its OEM's over a barrel, because OEM's had no (or little) alternative for an OS to put on their hardware (MS had tied up the market for OS ever since it's first deal with IBM and stabbing IBM in the back over OS/2).

If OEMs had the gall to offer alternatives (Linux or whatever), MS would still charge a Windows license per PC.

And regarding IE: MS required IE to be present (Windows didn't work without it).

(All sound familiar? Google is trying similar tactics with Android OEMs who want to use variants of Google's Android -- if OEMs want to roll their own, they don't get certain services, or something).

So, the monopoly charges were all about the above, B2B concerns, not in the first instance about having 99% market share of all PC users. It is about 99% market share of OS among PC makers (or 99% Android share among all phone OEMs), and about having the means to ensure that it stays that way and that no other OS could effectively compete for the business of those OEMs!

Apple can't have a "monopoly" over its own phone! That is non-sensical. Everyone has a "monopoly" over their own product, by definition. And neither is the issue whether people overwhelmingly buy iPhones, or Windows PCs, or not instead of whatever else is available (because presumably the end user finds their choice a good value proposition) -- the issue is whether MS and Google keep their OEMs from using alternatives.

 

[StevieD100]

Why did it take so long for Apple to sue? Or is this something their lawyers thought up recently?

Until Intel produced a half decent Modem there was really no alternative but to use QC devices. Now there is an alternative and the barrel that QC had Apple (and all the other Device makers) over is suddenly an awful lot smaller.
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Apple's win means mo' money in their oversea cash stash in Ireland.

And more taxes paid to the IRS in DC. All you lucky iPhone users in the USA, will contribute a little more money to the billions that Apple already pay the IRS.