Tech Group Representing Samsung, Google, Microsoft and More Supports Apple in Qualcomm Fight

[kdarling]

Why? They seem to be doing things they ought not too. Please explain

What ought they not do?

This is another of many recent cases where courts and governments are changing decades-old rules. Not that it's a bad thing, but it certainly doesn't mean the previous rules were wrong either, for their time.

For example, the past few years has seen courts suddenly decide that FRAND-encumbered patents cannot be used to get an injunction, something which had been possible before then. (There are still judges who disagree with this recent change; to them, patents are patents and should all get the same protection.)

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Now there's a big lobbying/lawsuit effort to change license pricing. Obviously for less (you never hear anyone argue that they're not paying enough - grin).

I've mentioned before that Motorola, back when it held most cellular patents, only had two license methods. Neither was a direct cash payment. Either you cross-licensed all your patents with them, or you only bought Motorola equipment and chips. This was not seen as unusual at the time. Nowadays people would howl that it's unfair.

Likewise, the ETSI FRAND contract -- which everyone including Apple has signed -- specifically states that requiring a cross license is a valid FRAND rule for cellular patents. But now governments are rewriting the rules, telling Qualcomm that they can no longer require a cross license, and if there is one, they must give fair value to the other company's patents. Again, this was never a requirement before.

There are at least a half dozen other similar recent changes or change attempts, as seen in the Korean FTC rulings and in Apple's lawsuit. These are not really about what WAS; it's about how they WANT it to be. And they want it to be cheaper so they can make more profit. (No one thinks Apple is going to lower prices if they get a cheaper rate.)

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The upshot is that no doubt changes will be made, but it's not really fair to paint Qualcomm as evil when they were doing what was considered pretty normal for decades... and for which companies gladly paid at first.

 

[maflynn]

What ought they not do?

They probably should have avoided their anticompetitive behavior and threaten phone manufacturers to disrupt their supply if they didn't pay the elevated royalties

From ftc.gov

The Federal Trade Commission filed a complaint in federal district court charging Qualcomm Inc. with using anticompetitive tactics to maintain its monopoly in the supply of a key semiconductor device used in cell phones and other consumer products.
...
The FTC alleges that Qualcomm has used its dominant position as a supplier of certain baseband processors to impose onerous and anticompetitive supply and licensing terms on cell phone manufacturers and to weaken competitors.
...
According to the complaint, by threatening to disrupt cell phone manufacturers’ supply of baseband processors, Qualcomm obtains elevated royalties and other license terms for its standard-essential patents that manufacturers would otherwise reject

 

[44267547]

Both Samsung and Apple might actually agree that Samsung copies Apple relentlessly.

Honestly, Where did you even come up with this? It's not like Samsung has direct access to Apple's research and development. A lot of Samsungs hardware design and technology has nothing to do with Apple and years into Development before it's finalized . Sure, there are some similarities. Other phone manufacturers also resemble the iPhone. It's not just Samsung.

One could even make the counter argument other phone manufacturers that release their hardware Before the iPhone, were first with a design before Apple had it.

 

[kdarling]

They probably should have avoided their anticompetitive behavior and threaten phone manufacturers to disrupt their supply if they didn't pay the elevated royalties

No sir, I don't mean repeating some lawyer's fancy word play.

Heck, what does that line above even mean? It sounds like it says simply that Qualcomm told phonemakers that they couldn't use QCOM's IP without paying royalties. Well duh. Nothing wrong with that. The complaint boils down to price alone.

(The new FTC Chief Commissioner was against the lawsuit and hinted that it was an Obama parting gift to Apple. She also noted that, "Importantly, there is no suggestion that Qualcomm charges higher royalties to OEMs that buy non-Qualcomm chipsets", and says she thinks it's all about price, too.)

So I meant what do YOU think they shouldn't have done, in particular?

 

[tongxinshe]

“.....availability of iPhones and other smartphones at better prices...”

Apple from all firms, sticks to a price point like no other. “Better prices” will happen when hell freezes over. I think they meant to say better margins. LOL

No, actually other smartphone brands WILL gradually force Apple to drop its price, no matter who wins this legal battle.

If Qualcomm loses, the price competition will surely get more fierce at a quicker pace, thus Apple will HAVE TO drop their prices as well at a quicker pace.
[doublepost=1500669001][/doublepost]

What ought they not do?

This is another of many recent cases where courts and governments are changing decades-old rules. Not that it's a bad thing, but it certainly doesn't mean the previous rules were wrong either, for their time.

For example, the past few years has seen courts suddenly decide that FRAND-encumbered patents cannot be used to get an injunction, something which had been possible before then. (There are still judges who disagree with this recent change; to them, patents are patents and should all get the same protection.)

--
Now there's a big lobbying/lawsuit effort to change license pricing. Obviously for less (you never hear anyone argue that they're not paying enough - grin).

I've mentioned before that Motorola, back when it held most cellular patents, only had two license methods. Neither was a direct cash payment. Either you cross-licensed all your patents with them, or you only bought Motorola equipment and chips. This was not seen as unusual at the time. Nowadays people would howl that it's unfair.

Likewise, the ETSI FRAND contract -- which everyone including Apple has signed -- specifically states that requiring a cross license is a valid FRAND rule for cellular patents. But now governments are rewriting the rules, telling Qualcomm that they can no longer require a cross license, and if there is one, they must give fair value to the other company's patents. Again, this was never a requirement before.

There are at least a half dozen other similar recent changes or change attempts, as seen in the Korean FTC rulings and in Apple's lawsuit. These are not really about what WAS; it's about how they WANT it to be. And they want it to be cheaper so they can make more profit. (No one thinks Apple is going to lower prices if they get a cheaper rate.)

--
The upshot is that no doubt changes will be made, but it's not really fair to paint Qualcomm as evil when they were doing what was considered pretty normal for decades... and for which companies gladly paid at first.

It was NEVER fair for Qualcomm to keep the same royalty rates (the same percentage and the same base-on-the-whole-unit model) against the smartphones and the dumb phones. Qualcomm unfairly kept it for over a decade, and got a lot of extra profits it would have never gotten, if it didn't have *THE* monopoly power and used that power to gain the extra benefit. Go check the other companies who hold only the smaller portion of the 3G standard, none of them were able to get the free ride from the smartphone trend (the royalty income tripling, resulted from the average unit price hike).

Sure, any company at the same position would do the same thing, nothing to blame Qualcomm here. But, any company with a minimum consciousness would understand those extra income cannot be taken for granted, jiggling and laughing for every extra day it can keep it going. Unfortunately, Qualcomm obviously did the total opposite way, taking for granted that it should be THE KING of the industry FOREVER, and hate anyone trying to shake anything off that "tradition", including any governments (the Korean government) and anyone else cooperating with such a government (Apple), and think that it has the absolute power and rights to punish these entities (stop giving Apple the quarterly rebate). Now, this is the part Qualcomm made itself evil and earned the current situation.

 

[kdarling]

It was NEVER fair for Qualcomm to keep the same royalty rates (the same percentage and the same base-on-the-whole-unit model) against the smartphones and the dumb phones.

Qualcomm unfairly kept it for over a decade, and got a lot of extra profits it would have never gotten, if it didn't have *THE* monopoly power and used that power to gain the extra benefit. Go check the other companies who hold only the smaller portion of the 3G standard, none of them were able to get the free ride from the smartphone trend (the royalty income tripling, resulted from the average unit price hike).

You can stop right there.

The same rate structure was and still is used by most every other ETSI member. Here, for example, are the starting negotiation rates for LTE as announced by various contributors:

And those are just the announced ones. All of those and more are based on handset price.

Anyone who brings that up as a negative does not understand that it is not only a totally valid way of licensing patents, but is quite common in the cellular world.

As noted many times before, part of the reason for this is so that lower priced handsets can exist, even down to $40 smartphones which net a profit of $4 each. Obviously they cannot pay the royalties out of that profit that a company which nets hundreds of dollars (e.g. Apple) can.

Yet the higher profit devices would have far less value if it weren't for the hundreds of millions (if not billions) of cheap handsets which allowed cellular companies to create the worldwide network we have now.

It's similar to the way that franchises are often licensed and charged by profits. Or how Apple charges more in royalties to higher priced apps, even though the cost of storage and delivery is the same.

 

[tongxinshe]

You can stop right there.

The same rate structure was and still is used by most every other ETSI member. Here, for example, are the starting negotiation rates for LTE as announced by various contributors:

View attachment 709498

And those are just the announced ones. All of those and more are based on handset price.

Anyone who brings that up as a negative does not understand that it is not only a totally valid way of licensing patents, but is quite common in the cellular world.

As noted many times before, part of the reason for this is so that lower priced handsets can exist, even down to $40 smartphones which net a profit of $4 each. Obviously they cannot pay the royalties out of that profit that a company which nets hundreds of dollars (e.g. Apple) can.

Yet the higher profit devices would have far less value if it weren't for the hundreds of millions (i not billions) of cheap handsets which allowed cellular companies to create the worldwide network we have now.

It's similar to the way that franchises are often licensed and charged by profits. Or how Apple charges more in royalties to higher priced apps, even though the cost of storage and delivery is the same.

Totally wrong. Other than Qualcomm, none of these standards patent holders keep this rate against smartphones, those data are the percentages against dumb phones.

 

[hotgril]

I see a concerted effort to bring QC down and give their IP to china and perhaps steal some IP in some settlement case.

I'll bet 99% of their IP has been stolen long ago and since then has been baked into commodity electronics designed in China. Just like how so many routers popped up in China powered by Cisco's algorithms... that identified as Cisco-branded routers.

 

[tooltalk]

Totally wrong. Other than Qualcomm, none of these standards patent holders keep this rate against smartphones, those data are the percentages against dumb phones.

Finally, a fanboi with conclusive evidence that Qualcomm's royalty rates are unfair and illegal! Would you mind sharing "other patent holders'" asking rates? and explain why/how these rates apply only to dumb phones and not smartphones?

Or are you part of Apple's legal team who always makes unsubstantiated claims without any evidence?

 

[maflynn]

Heck, what does that line above even mean?

It means that Qualcomm used its position and the threat to withholding its licenses as a means to extract exorbitant royalties. Basically like MS in the 90s they used their dominant position conduct business in a manner that violated the law

So I meant what do YOU think they shouldn't have done, in particular?

I already answered that, and I'll post it again
They probably should have avoided their anticompetitive behavior and threaten phone manufacturers to disrupt their supply if they didn't pay the elevated royalties

 

[kdarling]

It means that Qualcomm used its position and the threat to withholding its licenses as a means to extract exorbitant royalties. Basically like MS in the 90s they used their dominant position conduct business in a manner that violated the law

So you agree it's about price. Yet hundreds of companies have paid that price (actually more at first) starting quite eagerly 25 years ago... instead of coming up with an alternative.

Mind you, I think the current regulatory winds are blowing against some of their core license practices. But then, I think change is coming in a lot of IP related areas, including the way big US corporations are cleverly keeping nearly a trillion dollars offshore using IP license transfer tricks.

Totally wrong. Other than Qualcomm, none of these standards patent holders keep this rate against smartphones, those data are the percentages against dumb phones.

The fact that their rates apply to smartphones as well, is well documented in Apple's previously attempted lawsuits against Nokia, Ericsson, etc.

Even casual readers here can remember Apple complaining about Motorola's rate of 2.25% of device value. And complaining about Samsung using the same method, before the ITC banned iPhones for non-payment.

Are you sure you don't want to withdraw your claim and salvage some credibility?

 

[Ghost31]

Honestly, Where did you even come up with this? It's not like Samsung has direct access to Apple's research and development. A lot of Samsungs hardware design and technology has nothing to do with Apple and years into Development before it's finalized . Sure, there are some similarities. Other phone manufacturers also resemble the iPhone. It's not just Samsung.

One could even make the counter argument other phone manufacturers that release their hardware Before the iPhone, were first with a design before Apple had it.

I was literally looking for the /s tag at the end of your post thinking you couldn't possibly be serious that Samsung doesn't shamelessly copy apple. Their galaxy line doesn't closely resemble iPhone currently, but they have been unapologetically classless when its come to directly copying apple in the past. Seriously. Google this

 

[tongxinshe]

The fact that their rates apply to smartphones as well, is well documented in Apple's previously attempted lawsuits against Nokia, Ericsson, etc.

Even casual readers here can remember Apple complaining about Motorola's rate of 2.25% of device value. And complaining about Samsung using the same method, before the ITC banned iPhones for non-payment.

Are you sure you don't want to withdraw your claim and salvage some credibility?

Just do your own math on your own. If those other companies kept the same rates, the royalties Apple pays to those other companies altogether would be a lot more than 5 times to the amount it pays to Qualcomm. On the contrary, the royalties Apple pays to all other cellular standard patent holders are only 1/5 of what it pays to Qualcomm. You didn't get the inner information doesn't mean that you cannot do SIMPLE math to get correct estimation.

 

[kdarling]

Just do your own math on your own. If those other companies kept the same rates, the royalties Apple pays to those other companies altogether would be a lot more than 5 times to the amount it pays to Qualcomm.

Okay, here's some helpful basic info:

Published ETSI rates are a starting point for negotiations. They can often be greatly lessened or even eliminated with enough valuable cross licensing. In fact, Nokia is infamous for paying almost nothing in royalties because their patent portfolio is so strong.

However, people keep forgetting that Apple does NOT even have a license with Qualcomm. Only Foxconn et al does, and Foxconn don't have any patents to cross license for a cheaper rate. So they pay the base rate.

But even if Apple were to get their own license in the future, their UI etc. patents are pretty worthless to Qualcomm. That's because, unlike some other big cellular patent holders, Qualcomm does not make phones itself and thus does not need Apple's patents to protect itself from Apple. Moreover, Apple has contributed almost nothing to cellular standards. So Apple's patents won't help lower QCOM royalties much if at all.

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As for Apple's PR department's claim that they pay Qualcomm "at least five times more in payments than all the other cellular patent licensors we have agreements with combined", that reeks of typical clever Apple wordsmithing.

For instance, they surely pay patent licensors that they do NOT have agreements with, via third party patent aggregators. And perhaps others take royalties via cross licensing or rebates or credits or other options rather than cash "payments".

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The upshot is this: absolutely positively without any question whatsoever, charging by device price is a common way for cellular patent holders to price their licenses, even for smartphones. Your idea otherwise is incorrect.

 

[tongxinshe]

charging by device price is a common way for cellular patent holders to price their licenses,

which was established when phones were only dumb phones, in which the cellular standards is the **ONLY** core technology.

even for smartphones.

not necessarily wrong, as long as the rates are adjusted to a reasonable level, so that there are room left for the products to accommodate other CORE TECHNOLOGIES inside the smartphones.

Again, just simple math, at the rates announced by the cellular standard patent holders, with a similar (fair) amount giving to the patent holders of the OTHER CORE TECHNOLOGIES, absolutely no smartphone producers can exist, as over 100% of the unit price will have to be given to these various patent holders. Not even to mention the complicated manufacturing required by the smartphones.

 

[kdarling]

Again, just simple math, at the rates announced by the cellular standard patent holders, with a similar (fair) amount giving to the patent holders of the OTHER CORE TECHNOLOGIES, absolutely no smartphone producers can exist, as over 100% of the unit price will have to be given to these various patent holders.

Oh, you're right about that. If a smartphone maker actually had to pay all the stacked royalties at their starting negotiation rate, the amount would be ridiculous. Apple's lawyers often bring this up as "proof" that the rates are too high.

However, reality is quite different from theory. In real life deals are made and the total is pretty reasonable, as demonstrated by all the existing smartphone makers.

Judges have even pointed this out to Apple before - that not only does stacking not happen in real life, but also that Apple should not run straight to courts just because the first offer to them seems high, as further negotiation is expected from any potential licensee.