Apple wanted Samsung to license patents for $30 per smartphone, $40 per tablet

Posted:
in General Discussion edited January 2014
According to court documents made public on Friday, Apple in 2010 offered Samsung a $30 per smartphone/$40 per tablet license deal for use of the Cupertino company's patents.

The numbers, outlined in an October 2010 offer, estimate that Samsung would have owed Apple about $250 million for the year, much was less than what the iPhone maker was spending on components, reports All Things D.

In addition to the license fees, Apple offered a 20 percent discount if Samsung were to cross-license its own patent portfolio to Apple which would have brought royalties down to $24 and $32 for smartphones and tablets, respectively.

Non-Android royalties requested by Apple included $30 for smartphones running Windows Mobile 7 and another $30 for all other mobile operating systems like Bada. The discounted rate for these devices would have been more substantial as they didn't use Apple's "proprietary features."

Apple License Offer
Source: All Things D


Negotiations were obviously ineffective, or non-existent, as the Apple v. Samsung trial is already well underway.
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Comments

  • Reply 1 of 68
    Why licence when you can steal?
  • Reply 2 of 68


    Grammar police.


     


     


    Quote:


    much was less than what the iPhone maker was spending on components, reports All Things D.



     


    I think you mean "was much less"

  • Reply 3 of 68
    MacProMacPro Posts: 17,382member
    I was just reading on CNET the details of Apple's original attempt to get Samsung to see reason. The bulk of the problem then was Android not hardware design. So I assume Apple are not going to let Google off the hook so this hardware design fight is just phase one in a larger thermo nuclear war it seems.
  • Reply 4 of 68


    Foolish Samsung. They could easily have increased their ASP by $30 and not worried about looking as bad as they currently do.

  • Reply 5 of 68
    mac_128mac_128 Posts: 3,042member
    This has ALWAYS been about getting Google.

    Samsung didn't back down because Google promised to support their licensees.

    Apple intends to force Google to back up their promise, thus coming to blows directly with Apple, or destroy their business model by scaring all of their licensees away thus achieving the same goal ...
  • Reply 6 of 68
    kreshkresh Posts: 379member


    Wow if Samsung paid Apple $30, and pays Microsoft a little less, this would make Android expensive indeed.


     


    Since this is from 2010, I wonder if Nokia is paying a patent royalty for each WinPhone sold?  Does Apple and Microsoft have a cross license deal?  This document raises even more questions.

  • Reply 7 of 68
    macarenamacarena Posts: 348member


    This offer could come back to bite Apple.


     


    Firstly, offering 20% discount for cross licensing Samsung's patents means that the value of Samsung's patents is set at approximately $6 to $8 per device - a lot higher than the numbers Apple is offering now.


     


    Secondly, it looks like these numbers could be looked at as being way too high - remember, Samsung prices its devices about 15-20% cheaper than Apple - so a $30 fee could be as high as 7-8% of the device cost.


     


    Thirdly, though Apple's patents are non-SEP, these prices make it look like Motorola's 2.25% for SEP patents are not ALL THAT EXCESSIVE. They are excessive, but not as excessive as they looked at first glance.


     


    Most importantly, I believe it is these prices that make Samsung believe that it has lesser exposure at a legal trial - a jury is unlikely to cost them much more than agreeing to Apple's rates. Even though the numbers for 2010 look low at just $250 million, the numbers for today will be a lot higher - at 50 million phones a year, the cost for Samsung would be $1.5 Billion for just the last 12 months! Apple is just asking for $2.5 Billion today, which means Samsung is not exposed to much risk. I think even if ALL of Samsung's profits from mobiles and tablets are disgorged, it would be less than $30 per device - remember, not all manufacturers have the kind of profit margins Apple has! Samsung is probably making only 10% margins on its devices.


     


    Of course, if they get hit with treble damages for wilful infringement, then the math could be totally different for Samsung. I think Samsung would be smarter to just pay Apple $2.5 Billion today, and get back about $0.5 Billion in their own licensing. At a net cost of $2 Billion, it is quite cheap for Samsung on a per device basis.

  • Reply 8 of 68

    Quote:

    Originally Posted by macarena View Post


    This offer could come back to bite Apple.


     



     


    Pun intended? image

  • Reply 9 of 68


    Good catch - no, though I would like to believe I thought of that one before!!

  • Reply 10 of 68
    jungmarkjungmark Posts: 6,544member

    Quote:

    Originally Posted by macarena View Post


    This offer could come back to bite Apple.


     


    Firstly, offering 20% discount for cross licensing Samsung's patents means that the value of Samsung's patents is set at approximately $6 to $8 per device - a lot higher than the numbers Apple is offering now.


     


    Secondly, it looks like these numbers could be looked at as being way too high - remember, Samsung prices its devices about 15-20% cheaper than Apple - so a $30 fee could be as high as 7-8% of the device cost.


     


    Thirdly, though Apple's patents are non-SEP, these prices make it look like Motorola's 2.25% for SEP patents are not ALL THAT EXCESSIVE. They are excessive, but not as excessive as they looked at first glance.


     


    Most importantly, I believe it is these prices that make Samsung believe that it has lesser exposure at a legal trial - a jury is unlikely to cost them much more than agreeing to Apple's rates. Even though the numbers for 2010 look low at just $250 million, the numbers for today will be a lot higher - at 50 million phones a year, the cost for Samsung would be $1.5 Billion for just the last 12 months! Apple is just asking for $2.5 Billion today, which means Samsung is not exposed to much risk. I think even if ALL of Samsung's profits from mobiles and tablets are disgorged, it would be less than $30 per device - remember, not all manufacturers have the kind of profit margins Apple has! Samsung is probably making only 10% margins on its devices.


     


    Of course, if they get hit with treble damages for wilful infringement, then the math could be totally different for Samsung. I think Samsung would be smarter to just pay Apple $2.5 Billion today, and get back about $0.5 Billion in their own licensing. At a net cost of $2 Billion, it is quite cheap for Samsung on a per device basis.



     


    I don't think the offer of 20% was just for Sammy's FRAND patents but additional patents Apple may look at without stealing like Sammy does.


     


    yes, but Moto's 2.25% is more, on a monetary scale, than what Moto charges LG or others. 2.25% of Apple's $600 > 2.25% of LG's $200 phone. That is discriminatory.

  • Reply 11 of 68

    Quote:

    Originally Posted by kresh View Post


    Wow if Samsung paid Apple $30, and pays Microsoft a little less, this would make Android expensive indeed.



    Life isn't free. 


     


    Of course, they could have chosen the alternate path: innovating.

  • Reply 12 of 68
    mcrsmcrs Posts: 172member


    Duh....!! Of course they do. They are the best frenemies on the planet. What we never know is the extend of the cross licensing deals. I don't know what will happen to the "friendship" post W8-WP8 releases, If you are talking about the patent-crazed Apple which basically files patent for every single one of their designers' wet dreams, well Microsoft is so full of this madness too. A bunch of features and software implementations found in UNIX and miraculously showed up in Windows had been patented by Microsoft, and the best example is sudo.


    Quote:

    Originally Posted by kresh View Post


    Wow if Samsung paid Apple $30, and pays Microsoft a little less, this would make Android expensive indeed.


     


    Since this is from 2010, I wonder if Nokia is paying a patent royalty for each WinPhone sold?  Does Apple and Microsoft have a cross license deal?  This document raises even more questions.


  • Reply 13 of 68
    doh123doh123 Posts: 323member


    $30 only sounds like a lot if you were looking at the price someone was paying... subsidized with a 2 year contract and not the full phone price.  $30 per phone does not mean an increase of $30 to buy the phone... it would be partially increase, and Mobile Networks would end up covering it probably by adding some other hidden little fee over the life of a 2 year contract making it barely noticeable.

  • Reply 14 of 68
    tbelltbell Posts: 3,146member

    Quote:

    Originally Posted by kresh View Post


    Does Apple and Microsoft have a cross license deal?  This document raises even more questions.



     


     


    Yes. 

  • Reply 15 of 68
    solipsismxsolipsismx Posts: 19,566member
    To be clear, the only evidence of there being an "Apple Tax" only applies to vendors, not customers, and doesn't apply to any Apple products.
  • Reply 16 of 68
    hill60hill60 Posts: 6,989member

    Quote:

    Originally Posted by macarena View Post


    Secondly, it looks like these numbers could be looked at as being way too high - remember, Samsung prices its devices about 15-20% cheaper than Apple - so a $30 fee could be as high as 7-8% of the device cost.


     



     


    Bullshit, model for model i.e. 16, 32 & 64GB the SIII is exactly the same RRP as the equivalent iPhone 4S.


     


    Quit with the myths.

  • Reply 17 of 68

    Quote:

    Originally Posted by macarena View Post


    This offer could come back to bite Apple.


     


    Firstly, offering 20% discount for cross licensing Samsung's patents means that the value of Samsung's patents is set at approximately $6 to $8 per device - a lot higher than the numbers Apple is offering now.


     


    Secondly, it looks like these numbers could be looked at as being way too high - remember, Samsung prices its devices about 15-20% cheaper than Apple - so a $30 fee could be as high as 7-8% of the device cost.


     


    Thirdly, though Apple's patents are non-SEP, these prices make it look like Motorola's 2.25% for SEP patents are not ALL THAT EXCESSIVE. They are excessive, but not as excessive as they looked at first glance.


     


    Most importantly, I believe it is these prices that make Samsung believe that it has lesser exposure at a legal trial - a jury is unlikely to cost them much more than agreeing to Apple's rates. Even though the numbers for 2010 look low at just $250 million, the numbers for today will be a lot higher - at 50 million phones a year, the cost for Samsung would be $1.5 Billion for just the last 12 months! Apple is just asking for $2.5 Billion today, which means Samsung is not exposed to much risk. I think even if ALL of Samsung's profits from mobiles and tablets are disgorged, it would be less than $30 per device - remember, not all manufacturers have the kind of profit margins Apple has! Samsung is probably making only 10% margins on its devices.


     


    Of course, if they get hit with treble damages for wilful infringement, then the math could be totally different for Samsung. I think Samsung would be smarter to just pay Apple $2.5 Billion today, and get back about $0.5 Billion in their own licensing. At a net cost of $2 Billion, it is quite cheap for Samsung on a per device basis.



    THe only problem with your train of thought is if Apple was only interested in licensing the patents that they are currently said to be using from Samsung.  The deal might have been for every mobile patent (both SEP and non SEP) that Samsung has.  Which changes that rate for currently used patents dramatically.

  • Reply 18 of 68
    solipsismxsolipsismx Posts: 19,566member
    hill60 wrote: »
    Bullshit, model for model i.e. 16, 32 & 64GB the SIII is exactly the same RRP as the equivalent iPhone 4S.

    Quit with the myths.

    True, Samsung does match their flagship models the same to the public but when it comes to what Apple sells their devices to carriers Samsung et al. can't command the same wholesale prices. The problem comes down to the desirably of the devices. Consider that carriers pay a huge premium to get the iPhone and then spend all that effort to deter customers from buying it.

    It seems backwards but it does make sense when you consider that the iPhone has such a huge mindshare that just having them for sale will bring in those customers will are not on the fence, and when you look at the US numbers for sales the iPhone is doing phenomenally well despite the attempts by carriers to make up the wildest claims against. If they can get you to buy a Samsung phone you'll probably buy a new phone within a year and that carrier will save at least an additional $100 on the subsidization cost of the handset. it's a win-win. Some of the trolls here should take some pointers from the Verizon, Sprint and AT&T retailer staff.
  • Reply 19 of 68
    pendergastpendergast Posts: 1,358member
    Can we get a prediction of how many posts there are going to be in this thread about how it is hypocritical for Apple to bemoan a 2.25% licensing fee when they're asking for 30%, all the while completely missing the difference between standards-essential patents and regular patents? Any guess?
  • Reply 20 of 68
    solipsismxsolipsismx Posts: 19,566member
    pendergast wrote: »
    Can we get a prediction of how many posts there are going to be in this thread about how it is hypocritical for Apple to bemoan a 2.25% licensing fee when they're asking for 30%, all the while completely missing the difference between standards-essential patents and regular patents? Any guess?

    It's not 30% it's $30. It's fair across the board. There is no scale based on the retail price, just a Non-Disrimatory cost for using certain patents. I won't say Fair or Reasonable because I don't think there is enough to know if Apple ever expected the vendors to take it or if it was just a starting point for what would be a lengthy legal battle.
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