Apple Sues Motorola Over Licensing of Cellular Technology by Qualcomm

[Lennholm]

For all of you who think it's unreasonable that Motorola should get a percentage of the phone price instead of a fixed fee since it's the same chip regardless, I'd like to draw a parallell to the In-app purchases and In-app subscriptions of the App Store;

Why is it ok for Apple to charge 30% of the price for IAP and IAS when they do the exact same (small) thing regardless of what the content provider is asking? Shouldn't it be a fixed fee? I mean, processing a money transaction doesn't get any more difficult just because you'e transferring more money.

The usual defense here goes something along the lines of: "Apple makes it possible for the content provider to sell their content, so they deserve their cut"

Well....

 

[babyj]

For all of you who think it's unreasonable that Motorola should get a percentage of the phone price instead of a fixed fee since it's the same chip regardless, I'd like to draw a parallell to the In-app purchases and In-app subscriptions of the App Store.

Except that isn't remotely similar. Apple are claiming that Motorola have failed to license their patents at a fair, reasonable and non-discriminatory price as they promised when the relevant standards were set up.

If Motorola had always demanded 2.25% of the device sale price then Apple wouldn't be complaining but that isn't what happened - when Apple released the iPhone they paid $15 for the communications chip and that was it, now Motorola on their own want $15 just for their communications patents.

 

[Lennholm]

Except that isn't remotely similar. Apple are claiming that Motorola have failed to license their patents at a fair, reasonable and non-discriminatory price as they promised when the relevant standards were set up.

If Motorola had always demanded 2.25% of the device sale price then Apple wouldn't be complaining but that isn't what happened - when Apple released the iPhone they paid $15 for the communications chip and that was it, now Motorola on their own want $15 just for their communications patents.

My post was aimed at the people in this thread who think a percentage instead of a fixed fee is unreasonable because it's the same chip regardless of the device it's put into, which I myself happen to think makes sense but I don't defend Apples high percentage instead of fixed fee for their money transaction service either.
My post wasn't a comment on any of Apple's or Moto's claims

 

[TMay]

For all of you who think it's unreasonable that Motorola should get a percentage of the phone price instead of a fixed fee since it's the same chip regardless, I'd like to draw a parallell to the In-app purchases and In-app subscriptions of the App Store;

Why is it ok for Apple to charge 30% of the price for IAP and IAS when they do the exact same (small) thing regardless of what the content provider is asking? Shouldn't it be a fixed fee? I mean, processing a money transaction doesn't get any more difficult just because you'e transferring more money.

The usual defense here goes something along the lines of: "Apple makes it possible for the content provider to sell their content, so they deserve their cut"

Well....

Apple is selling at a typical retail markup, with pricing from $0.99 to $999.00 (whatever the upper limit is now). Apple takes a 30% cut for curating and managing the store, which would be considered a fair and reasonable retail cut. Developers seem to be happy and generate much more from iOS users collectively than from Android users collectively. Win for Developers, and the 30% does ad to Apple's bottom line.

Qualcomm provided Apple pricing per a contract that was

Fair,
Reasonable
Non Discriminatory.

MMI (evidently) canceled the license for the MMI IP with Qualcomm on the day that Apple began filling its supply line with the Qualcomm device.

Now MMI wants to renegotiate the contract but not under FRAND terms as it is already by definition of the cancellation of Qualcomm's license, discriminatory.

Apple would like the basis of the pricing to be an average of current basic cellphone IP pricing rather than the basis being the retail price, which puts smartphones at a pricing disadvantage. I would argue that every smartphone manufacturer (other than MMI in this case) would benefit from that pricing model.

Apple would also like to limit injunctions in the case of FRANDed IP disputes, which would then require a third party mediator to adjudicate pricing, ie determine fair and reasonable.

It's a legal issue that will be determined by both the courts and standards licensing bodies. I believe that Apple is on the correct path, and Cisco and MS both are in general agreement.

 

[Lennholm]

Apple is selling at a typical retail markup, with pricing from $0.99 to $999.00 (whatever the upper limit is now). Apple takes a 30% cut for curating and managing the store, which would be considered a fair and reasonable retail cut. Developers seem to be happy and generate much more from iOS users collectively than from Android users collectively. Win for Developers, and the 30% does ad to Apple's bottom line.

My point is, curating and managing the App Store has as little to do with in-app purchases and in-app subscriptions as Motorola's baseband technology has with non-baseband functions on the phone.

You might have missed it, but content providers are not happy with Apple's 30% cut for IAP and IAS, many have opted out. Basically everyone agrees that the 30% is fine for reviewing the app, storing and exposing it in the App store and delivering it to the buyer.
But for IAP and IAS, all Apple does is process the transaction. Something that requires equal effort from Apple regardless if the money transferred is $2 or $400 so if the reasoning defending that is valid, then it should be perfectly reasonable for Motorola to ask a percentage instead of a fixed fee.

I want to reiterate that I'm not commenting on the case here, my post was aimed at the people in this thread that defend Apples 30% cut for IAP and IAS but say it's unreasonable for Moto to ask a precentage instead of a fixed fee because the chip is the same whether it's put in a $20 or a $600 phone

 

[kdarling]

However when we rewind back to 2010 it was actually Motorola who sued Apple first over these patents. Apple was not suing Motorola at the time.

How can Motorola claim defensive action if they shot first?

It's called defense whenever you fall under attack or counterattack.

(As an aside about first attacks, it's been widely reported that Motorola got wind that Apple was going to make the first move against them, so Moto did a preemptive defensive strike a week before Apple did, in order to try to define where the cases would be heard. As it turned out, they were right: Apple was indeed planning to attack first.)

It also doesn't explain the similar issue with Infineon / Chi Mei over earlier iPhones.

We're not trying to explain why they're doing it as in their ultimate target reason, but just how/why they're trying to legally justify doing it.

As for the 2007 Chi Mei suspension, did it target only Apple? In any case, Apple didn't start any litigation back then because of it, as far as I know.

Several courts in Europe have recently examined the "Defensive Suspension Provision" - and ruled that it did not permit actions such as Motorola took. It very clearly is in violation of the "Non-Discriminatory" part of FRAND.

I have seen and translated part of the French decision not to allow Samsung's preliminary injunction, wherein the court said that Samsung couldn't withdraw their irrevocable license to Qualcomm... but nothing yet from a judge that talked about contract provisions or discrimination.

Got a link that is specifically about those topics in a court opinion? (Not just Müller's.)

Speaking of which, yes Floian is a great source of links to court news and documents, so there's nothing wrong with pointing to his articles... as long as the poster is aware that he's often very mistaken about big topics. E.g. thinking that certain touch patents were critical to the industry (nope) or that the test code in Android proved it was all copied from Oracle (nope).

Apple are claiming that Motorola have failed to license their patents at a fair, reasonable and non-discriminatory price as they promised when the relevant standards were set up.

The value of a FRAND patent can change over time and situations, and thus the rate is totally up to negotations between two parties.

Note also that "Fair" doesn't apply to the rate. "Reasonable" does, and since Motorola is asking less than Qualcomm does, their rate could be argued as reasonable.

Again, it feels to me like this particular US case is going to boil down to whether or not Motorola can use their escape clause on a FRAND patent. I could be way wrong, of course. Thoughtful differing opinions always welcome.

 

[TMay]

My point is, curating and managing the App Store has as little to do with in-app purchases and in-app subscriptions as Motorola's baseband technology has with non-baseband functions on the phone.

You might have missed it, but content providers are not happy with Apple's 30% cut for IAP and IAS, many have opted out. Basically everyone agrees that the 30% is fine for reviewing the app, storing and exposing it in the App store and delivering it to the buyer.
But for IAP and IAS, all Apple does is process the transaction. Something that requires equal effort from Apple regardless if the money transferred is $2 or $400 so if the reasoning defending that is valid, then it should be perfectly reasonable for Motorola to ask a percentage instead of a fixed fee.

I want to reiterate that I'm not commenting on the case here, my post was aimed at the people in this thread that defend Apples 30% cut for IAP and IAS but say it's unreasonable for Moto to ask a precentage instead of a fixed fee because the chip is the same whether it's put in a $20 or a $600 phone

If Apple was pocketing the 30% without any overhead or incurred charges, you might have a point. Even then, the policy has remained consistent and non-discriminatory. If the developer charges nothing, Apple gets nothing, even though there is as you say, "equal effort". Obviously, the larger and more successful developers pay higher dollar amounts, but I haven't heard of any reports of even modest dissatisfaction with those developers about the cut. As I pointed out, developers are making bank on iOS above and beyond Android, and if these same developers aren't happy with the terms, other platforms beckon.

BTW, Microsoft's Windows Phone app store has basically the same terms and exactly the same cut.

It's only unreasonable if MMI is changing its IP pricing selectively for Apple; then it is discrimination. Based on the limited information available, that surely seems like what is going on, but I'll let the court system decide that.

 

[Rodimus Prime]

It's only unreasonable if MMI is changing its IP pricing selectively for Apple; then it is discrimination. Based on the limited information available, that surely seems like what is going on, but I'll let the court system decide that.

remember with the other players in the market more than likely are trading patents. Something Apple does not do as such Apple is going to be treated differently because it behaves very differently than everyone else.

 

[TMay]

It's called defense whenever you fall under attack or counterattack.

(As an aside about first attacks, it's been widely reported that Motorola got wind that Apple was going to make the first move against them, so Moto did a preemptive defensive strike a week before Apple did, in order to try to define where the cases would be heard. As it turned out, they were right: Apple was indeed planning to attack first.)



We're not trying to explain why they're doing it as in their ultimate target reason, but just how/why they're trying to legally justify doing it.

As for the 2007 Chi Mei suspension, did it target only Apple? In any case, Apple didn't start any litigation back then because of it, as far as I know.



I have seen and translated part of the French decision not to allow Samsung's preliminary injunction, wherein the court said that Samsung couldn't withdraw their irrevocable license to Qualcomm... but nothing yet from a judge that talked about contract provisions or discrimination.

Got a link that is specifically about those topics in a court opinion? (Not just Müller's.)

Speaking of which, yes Floian is a great source of links to court news and documents, so there's nothing wrong with pointing to his articles... as long as the poster is aware that he's often very mistaken about big topics. E.g. thinking that certain touch patents were critical to the industry (nope) or that the test code in Android proved it was all copied from Oracle (nope).



The value of a FRAND patent can change over time and situations, and thus the rate is totally up to negotations between two parties.

Note also that "Fair" doesn't apply to the rate. "Reasonable" does, and since Motorola is asking less than Qualcomm does, their rate could be argued as reasonable.

Again, it feels to me like this particular US case is going to boil down to whether or not Motorola can use their escape clause on a FRAND patent. I could be way wrong, of course. Thoughtful differing opinions always welcome.

I suspect that Apple was paying Qualcomm for a device with an IP bundle, so your point that MMI may be less expensive than Qualcomm isn't relevant.

It's the "non-discriminatory" part that I believe that MMI may be overstepping in the case of Apple; again something for the courts to decide.

 

[gkpm]

It's called defense whenever you fall under attack or counterattack.

May be so, but knowing who sued first seems important as Apple detailed that in their complaint:

"40. Apple has not asserted any of its Customer Essential Patents against Motorola and did not first assert any of its patents against Motorola. It was Motorola who first sued Apple for patent infringement on October 6, 2010 in the United States District Courts for the Northern District of Illinois, the Southern District of Florida, and in the International Trade Commission. Accordingly, Motorola is not entitled to terminate license and covenant rights that flow to Apple under the Qualcomm/Motorola agreements."

But, like you say, both sides have their points and only a court can reach a decision.

 

[Lennholm]

If Apple was pocketing the 30% without any overhead or incurred charges, you might have a point. Even then, the policy has remained consistent and non-discriminatory. If the developer charges nothing, Apple gets nothing, even though there is as you say, "equal effort". Obviously, the larger and more successful developers pay higher dollar amounts, but I haven't heard of any reports of even modest dissatisfaction with those developers about the cut. As I pointed out, developers are making bank on iOS above and beyond Android, and if these same developers aren't happy with the terms, other platforms beckon.

BTW, Microsoft's Windows Phone app store has basically the same terms and exactly the same cut.

It's only unreasonable if MMI is changing its IP pricing selectively for Apple; then it is discrimination. Based on the limited information available, that surely seems like what is going on, but I'll let the court system decide that.

Again I'm not really talking about developers, I'm talking about content providers who sell their content through in-app purchases and subscriptions (they may be the same as the devloper of the app in many cases, but that's beside the point).
They have not been happy with the 30%. Amazon, for instance, opted out. Other content providers have been vocal with their displease, how the 30% is even higher than their entire margin. Most importantly, Apple was forced to change their policy about the pricing.
How can you have missed that?
And how is what Microsoft do with their app store any relevant to the point I was making? Plus, I believe (but I could be wrong about this) Microsoft don't prevent you from using a different money transaction service of your choice

 

[vvswarup]

remember with the other players in the market more than likely are trading patents. Something Apple does not do as such Apple is going to be treated differently because it behaves very differently than everyone else.

Examples?

 

[TMay]

Again I'm not really talking about developers, I'm talking about content providers who sell their content through in-app purchases and subscriptions (they may be the same as the devloper of the app in many cases, but that's beside the point).
They have not been happy with the 30%. Amazon, for instance, opted out. Other content providers have been vocal with their displease, how the 30% is even higher than their entire margin. Most importantly, Apple was forced to change their policy about the pricing.
How can you have missed that?
And how is what Microsoft do with their app store any relevant to the point I was making? Plus, I believe (but I could be wrong about this) Microsoft don't prevent you from using a different money transaction service of your choice

Apple's contention is that if the developer includes in app subscription or purchase, or a link or links to an external website for subscription or purchase, then Apple gets 30%. I don't recall what the pricing changes were, but I don't see that it has been any burden for these "unhappy" developers' such as Amazon and Netflix to find their own customers outside of their apps and pay Apple nothing.

Why should Apple provide a free venue for a third parties subscriptions through its very popular App Store? Amazon certainly would not, although the percentage would be/is likely smaller.

How can I have missed that? Because I'm not purchasing subscriptions at all and have no skin in the game.

 

[babyj]

Again I'm not really talking about developers, I'm talking about content providers who sell their content through in-app purchases and subscriptions (they may be the same as the devloper of the app in many cases, but that's beside the point). They have not been happy with the 30%. Amazon, for instance, opted out. Other content providers have been vocal with their displease, how the 30% is even higher than their entire margin.

I don't think Apple really had any choice and have to charge the same 30% for in-app purchases and subscriptions. If they didn't there would be widespread abuse with publishers removing content from the music and book stores and selling it as in-app purchases at the lower percentage.

The 30% isn't that high, it's lower than a standard retailer markup and doesn't compare that badly with what others charge (eBay take 15% of the sale price, Amazon take 18%).

I believe it was mainly the resellers / content aggregators that were most upset with the 30%. Not sure what they expect, most of their content is already available through iTunes and if it isn't it's not that difficult for the content owner to add it - why should Apple allow others to sell the same content and get a lower percentage?

 

[miraclehobo]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_0_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9A405 Safari/7534.48.3)

I am so sick of reading about all of these ****ing lawsuits. I wish MacRumors would quit posting them...they make me want to puke!!!

 

[inkswamp]

been a mac user since 1992 never heard of motorola. enlighten me?

Sure. AIM alliance

Motorola was a key partner with Apple through the PPC era. They jointly developed the PPC processor. I still wonder to this day if Apple, Motorola and IBM profit in any way from the use of PPC chips in the XBox 360 or Sony's Playstation 3.

 

[KingJosh]

 

[MacinDoc]

See above. They didn't stop the chip sales, or Apple couldn't have sold millions more phones. What Motorola canceled was their agreement with Qualcomm, so that now Apple would have to pay patent fees directly to Motorola. Nice or not, if someone upholds Apple's right to protect their patents, then they must also appreciate Motorola's right to profit from theirs.

It'll boil down to how the Moto-Qualcomm agreement was worded, methinks.

My point was that to sell it as a licensed product to every company but Apple, but as an unlicensed product to Apple (therefore attempting to justify a hundredfold increase in licensing fees to Apple alone by basing the fee on a percentage of the phone's price as opposed to a percentage of the chip's price) is still anti-competitive.