Say my neighbor and I both build devices with a Qualcomm LTE chip. His device sells for $100, my device sells for $1000. Why should Qualcomm get more $$ per device on mine when their chip is being used for the same function in both, which is LTE connectivity?
For a reason similar to why Apple gets 30% of every app in their store, even though storing and serving a $1000 app costs them no more than for a $1 app. Why doesn't Apple charge a flat distribution fee of $20, or whatever their server cost is?
Answer: partly because the higher priced devices / apps subsidize the lower cost devices / (free) apps, the latter of which could not possibly pay the desired fee. As I mentioned, a $40 phone that gives $4 in profit to the manufacturer, cannot afford a $20 royalty fee, whereas a $700 phone making $300 in profit certainly can.
Plus the expensive device / app makers benefit from all the cheaper phones / apps creating a larger infrastructure and future market.
To take it further, let say my neighbor across the street builds something that costs $10,000,000 with their LTE chip. Again, that's ludicrous that they get a cut of the $10,000,000 machine that has a $5 LTE chip in it.
Ah, I see. Good Q. There's a self-imposed maximum to prevent unfairly huge fees. For example, most LTE patents besides Qualcomm's and probably LG's, have been grouped together and even though their total percentage could be much higher, their fee is capped at $10 for even the most expensive device in the world.
To me what the industry is doing would be like Home Depot charging more $$ for 2 x 4 lumber just because it's being used in a more expensive house.
Not an accurate analogy, as the lumber (chip) is not being charged more for individually. Also, builders don't charge a set fee for any house. They charge a percentage on top of the cost of the house.
Wrong. The more money Apple makes the more they are charging for their licenses also that other companies pay less.
Except not really, since Apple reportedly only pays Qualcomm based on the price of the iPhone that Apple pays Foxconn... about $250. That cost hasn't changed a lot in ten years.
Also this isn't just Apple suing them it's a group of companies and government agencies. Nokia tried this multiple times and failed.
What is it that you think Nokia tried and failed at? Certainly not charging a percentage, because that's how major cellular patents are licensed. For example, for LTE, the starting negotiation prices are:
Few companies pay the full starting percentage, because almost all of them cross license in order to reduce the fee. (Nokia is said to be so cross licensed that they pay virtually nothing.)
The reason why Apple wants to change this decades old practice, is because they understandably don't want to cross license to get lower fees. They just want the lower fees. Which is not fair to the other companies who gave up more.
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