Motorola Files Suit Against Apple for Patent Infringement

[cmaier]

What I don't seem to understand is... Apple doesn't manufacture any products containing these techs. They buy the products that contain the tech and, aside from assembling them, resell them to the public. Didn't they pay for the use of the tech when they bought the item? So (and I am sure these relationships are completely incorrect, but go with me) if Qualcomm has Nokia or Motorola tech through legal means to manufacture what are obviously OEM products, haven't they already been compensated for the tech in that chip by Qualcomm? How many times does the tech need to be paid for on that one chip? Is Apple claiming the tech as their own?

I probably don't understand the law behind all of this as well as I need to, but common sense dictates that once a "royalty" or "license" has been paid for on a particular unit, then it is paid for. So if Nokia and Motorola one this tech, and they license it to Qualcomm, and they manufacture a product and sell it to Apple, how has Apple done something wrong? If it is a matter of competitive advantage vs. competition, then shouldn't Nokia and Motorola take that up in their licensing agreement with Qualcomm? It seems they underestimated a competitor who is using tech in an OEM part manufactured by someone who paid for the right to use the tech... and now is trying to damage that competitor because they cannot compete...

Like I said, all I have to go on is common sense. I understand the need to protect and receive compensation for developed tech... But it feels like this is more about not being happy about who is using the tech... Not because it was not paid for, but because it ended up in a competitor product. That feels like an issue and negotiation between the tech owner and the company that licensed the tech to manufacture and sell.

First, some of the patent claims apply only to assembled devices, not to the individual components, so no one paid a license.

Second, whether a license, once paid, applies to value-adding downstream manufacturers is actually a complicated legal issue, known as "patent exhaustion." The case law is evolving on this. Recent cases include Quanta and Transcore. (Google them if you want to see the state of the law).

 

[Amnesia87]

Again... people confusing market cap with profits.
Example:
APPL Market Cap $264B
NOK Market Cap $38B

Apple is expected to report approx. $50B in revenue this year (Q4 final results will be reported on Oct. 18) a majority of which is NOT iPhone sales.

Nokia reported Q2 2010 revenue of $22B. (Nokia hasn't reported Q3 or Q4 2010 numbers yet... at least not on their investor relations page yet.)
A majority of which is phone related sales.

That's nearly half of what Apple made for the whole year and they haven't reported the other half yet. I'd say that makes Nokia pretty profitable.
Not bad for a company with a $38B market cap.

I think you haven't been paying attention...

Please go read this article:

http://tech.fortune.cnn.com/2010/09/21/pie-chart-apples-outrageous-share-of-the-mobile-industrys-profits/

Pay particular attention to this image:

Oh, and this quote:

"We are also impressed with Apple's ability to monetize its innovative products through selling high-margin consumer products that drive strong earnings results and growth trends for Apple shareholders. A case in point is the mobile phone market, where most handset OEMs struggle to post a profit or even 10% operating margins (except RIM and recently HTC), while we estimate Apple boasts roughly 50% gross margin and 30%+ operating margin for its iPhone products."

Now this is specific to the Mobile Phone industry, not all of Apple's profits.

Also so you know the iPhone recently surpassed the iPod as Apple's best selling product, so it does account for a great deal of their profits.

 

[kdarling]

What I don't seem to understand is... Apple doesn't manufacture any products containing these techs. They buy the products that contain the tech and, aside from assembling them, resell them to the public. Didn't they pay for the use of the tech when they bought the item?

The answer is mostly "no". As Cmaier noted, a lot has to do with what you actually build with the chips.

For easy example, you can buy most of the individual chips used in an iPod touch, and you can build anything you want to with them... except, of course, an iPod touch. You'd have to pay Apple a license fee for that (assuming they miraculously would sell you one.)

Likewise, anyone can buy radio chips. I might get one to build a remote data lab that transmits its results home once a day. As long as I don't build a phone out of it, I'm okay with the patent holders. If I make it GSM voice compatible, I'd have to pay for that. If I add on UMTS-3G capability, I'd then have to pay for that as well.
--
Every smartphone has $35-50 of license fees attached to it. GSM/CDMA fees, camera patents, visual voicemail patent, power saving tech, even possible royalties for smooth scrolling in a browser. These are all owned by outside parties.

IIRC, raw GSM fees alone are usually set at around 10% of the phone's retail price. (This pricing method is used to encourage selling more phones at lower prices, something Apple is totally against, as they love taking double the profit margin of anyone else.)

However, and this is a big point, most phone makers trade patent cross-licenses in exchange for much lower fees. This way, everyone shares in the cost and the IP. Here again, Apple is a lone wolf who does not like to cross-license, and thus is liable for much higher fees instead.
---
So when people talk about Apple's huge profits, they have to realize that's because Apple is not paying or sharing what other companies are, not by a long shot. One day this could change.

 

[aegisdesign]

"We are also impressed with Apple's ability to monetize its innovative products through selling high-margin consumer products that drive strong earnings results and growth trends for Apple shareholders. A case in point is the mobile phone market, where most handset OEMs struggle to post a profit or even 10% operating margins (except RIM and recently HTC), while we estimate Apple boasts roughly 50% gross margin and 30%+ operating margin for its iPhone products."

As the quote says, most handset OEMs have small margins. That's because they compete at all price points including the budget dumbphone end of the market so their average gets dragged down. Plus they pay their licences and spend billions on their own R&D instead of using somebody elses.

Apple does none of that hence huge margins and huge profits.

 

[chagla]

I didn't realise Kodak even made mobile phones. I'll have to do some research, they are suing five other companies, so their phones must have tonnes of features

Kodak doesn't have to make phones. They are probably suing because of camera/image on cell phone related patents.

 

[kdarling]

Kodak doesn't have to make phones. They are probably suing because of camera/image on cell phone related patents.

Someone correct me if I'm way off (I haven't looked at them), but I believe the Kodak patents address two main items that most digital camera implementations use:

1) The concept of a realtime camera preview display (instead of using a small optical aiming lens). Yes, that was a unique idea back then.

2) Being able to save images in multiple resolutions.

I think that Samsung already lost in patent court over this, and now pays a license fee. So there is precedent.

 

[cmaier]

Someone correct me if I'm way off (I haven't looked at them), but I believe the Kodak patents address two main items that most digital camera implementations use:

1) The concept of a realtime camera preview display (instead of using a small optical aiming lens). Yes, that was a unique idea back then.

2) Being able to save images in multiple resolutions.

I think that Samsung already lost in patent court over this, and now pays a license fee. So there is precedent.

I thought it was the idea of a realtime camera preview where the sensor and the preview varied in some way (perhaps by resolution), but I don't remember the details anymore. It was more specific than it appeared at first blush.

 

[Bernard SG]

Patently Apple releases more details on the lawsuit.