Apple claims Motorola discriminated on tech licensing, charged 12 times going rate

Posted:
in General Discussion edited January 2014
In a new filing lodged with the U.S. Court of Appeals for the Federal Circuit this week, Apple claims Google's Motorola demanded unreasonable rates for tech based on deemed standard essential patents, with fees 12 times higher than what Motorola charged other companies.

US Appeals Court
U.S. Court of Appeals for the Federal Circuit. | Source: U.S. Courts


The CAFC filing, an opening brief from Apple regarding the dismissal of a FRAND-related action from Wisconsin, is one of the first developments in the case likely to be heard by the court in early 2014, reports FOSS Patents' Florian Mueller.

Motorola is appealing the partial summary judgment win for Apple over a FRAND contract and antitrust case leveled in Wisconsin, which was ultimately dismissed without prejudice in 2012 by Judge Barbara Crabb.

A portion of Apple's brief states Motorola "demand[ed] that Apple take a license at a rate that was more than 12 times what Motorola was charging other licensees for the same technology--a rate that was unfair, unreasonable, and decidedly discriminatory." At the time, Motorola was asking Apple for 2.25 percent, a rate unsupported by previous deals. Apple says the demand would represent approximately $12 per iPhone, or "12 times what Apple was already paying to license Motorola's SEPs," possibly referencing the indirect licensing of technology used in baseband chips and other components.

On that point, Apple notes that a previous proposal to pay Motorola $1 per iPhone was meant to "buy litigation peace and move on." The company says Google's leveraging of Motorola patents has been wholly unsuccessful.

From Apple's opening brief:
Motorola has sued Apple in various forums for infringement of eight SEPs (presumably, its eight strongest SEPs) and is batting 0-for-8 in establishing liability in U.S. actions.
In light of this information, Mueller points out that Apple's proposal was perhaps reasonable, especially considering Motorola's litigation track record. Barring that deal, Apple wants Motorola to actually offer a FRAND rate, a bone of contention that has so far been largely avoided due to the possible negative repercussions of a court rate-setting decision.

While a hearing date has yet to be set for the Wisconsin appeal, Apple is scheduled to begin another CAFC hearing as part of a cross-appeal with Motorola. That hearing, slated for Sept. 11, is in regard to Judge Richard Posner's dismissal of a patent infringement case in 2012.

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Comments

  • Reply 1 of 53
    runbuhrunbuh Posts: 315member
    Something is confusing or wrong with the logic in the article. It says Apple is claiming it was being asked to pay 12 times what *other* licensees were paying, then goes on to say that Apple was being asked to pay $12 per iPhone, which is 12 times what Apple was already paying for Motorola SEP's.

    Hunh?
  • Reply 2 of 53
    philboogiephilboogie Posts: 7,438member
    runbuh wrote: »
    Something is confusing or wrong with the logic in the article. It says Apple is claiming it was being asked to pay 12 times what *other* licensees were paying, then goes on to say that Apple was being asked to pay $12 per iPhone, which is 12 times what Apple was already paying for Motorola SEP's.

    Hunh?

    After your post almost the entire text got a strike through.
  • Reply 3 of 53
    sockrolidsockrolid Posts: 2,788member
    So why, again, did Google blow $12.5 billion on Motorola Mobility?
    I can think of a few reasons:

    1. Patent panic
    2. Lack of vertical integration
    3. Lack of due diligence
    4. All of the above
  • Reply 4 of 53
    mikhailtmikhailt Posts: 37member
    I think one of the things the US Congress needs to do is establish a nation-wide FRAND database that's open to everybody. That way, when Apple get offered a rate, they can tell the company that on the FRAND database, it is not the same rate as they're offering to Apple.

    Any companies found to offering a rate that's higher than FRAND database should be fined. The fine should be high enough that it'd cost the company more to pay it than decreasing the FRAND rate to match the database price.
  • Reply 5 of 53
    tundraboytundraboy Posts: 1,614member
    Apple is lying; Google can't possibly be doing what they are being accused of because their motto is "don't be evil".
  • Reply 6 of 53
    jragostajragosta Posts: 10,473member
    runbuh wrote: »
    Something is confusing or wrong with the logic in the article. It says Apple is claiming it was being asked to pay 12 times what *other* licensees were paying, then goes on to say that Apple was being asked to pay $12 per iPhone, which is 12 times what Apple was already paying for Motorola SEP's.

    Hunh?

    It explains that:
    "possibly referencing the indirect licensing of technology used in baseband chips and other components."

    So Apple was paying $1 when they were getting the license via the component manufacturers. However, Motorola stopped licensing the component manufacturers and wanted Apple to have its own license - and asked for an 1100% increase.
  • Reply 7 of 53
    ankleskaterankleskater Posts: 1,287member

    Quote:

    Originally Posted by SockRolid View Post



    So why, again, did Google blow $12.5 billion on Motorola Mobility?

    I can think of a few reasons:



    1. Patent panic

    2. Lack of vertical integration

    3. Lack of due diligence

    4. All of the above


    Possibly. After all, many of us have done billion dollar acquisitions many more times than Google, and are well qualified to second guess.

  • Reply 8 of 53
    jragosta wrote: »
    It explains that:
    "possibly referencing the indirect licensing of technology used in baseband chips and other components."

    So Apple was paying $1 when they were getting the license via the component manufacturers. However, Motorola stopped licensing the component manufacturers and wanted Apple to have its own license - and asked for an 1100% increase.

    Yeah, most likely the manufacturer was charging Apple $140 or some odd dollars for the iPhone, so Motorola was getting the 2.25 percent of that, while Apple was turning around and selling the device for $650 or what not. So Motorola was actually getting screwed, as Apple was making extra money/profit on Motorola IP.
  • Reply 9 of 53
    rob53rob53 Posts: 2,032member
    I found an article from 2009 showing the component cost of an iPhone 3GS. The Infineon Technologies AG broadband chip only cost $13 (even if they used a Qualcomm it won't be that different) so Google/Motorola wants 1/13th the cost of the chip in licensing fees. That would be a little over $1/phone. From what I've read previously, Google wants 2.25% of the cost of the entire phone, which is insane. For Apple to play the mobile phone game, they had to use a 3G chip, otherwise it wouldn't work. Forcing someone to license a standards technology should be against the law.
  • Reply 10 of 53
    quinneyquinney Posts: 2,525member
    sockrolid wrote: »
    So why, again, did Google blow $12.5 billion on Motorola Mobility?
    I can think of a few reasons:

    1. Patent panic
    2. Lack of vertical integration
    3. Lack of due diligence
    4. All of the above

    I thought Motorola was threatening to file patent suits against other Android handset companies and Google wanted to prevent that.
  • Reply 11 of 53
    qamfqamf Posts: 87member

    Quote:

    Originally Posted by SockRolid View Post



    So why, again, did Google blow $12.5 billion on Motorola Mobility?

    I can think of a few reasons:



    1. Patent panic

    2. Lack of vertical integration

    3. Lack of due diligence

    4. All of the above


    Well, I think the newest line of Droid phone Motorola released a short while ago explain why.  If I was shopping for a phone the Droid Razr Maxx might tempt me, up to 48Hr battery life..... Even if that probably is inflated, I could count on at least 24Hr..... Amazing :)



    At the same time, the 12.5 Billion was far to much to pay.  I would say half of that money was blown, probably more.


    Quote:

    Originally Posted by tundraboy View Post



    Apple is lying; Google can't possibly be doing what they are being accused of because their motto is "don't be evil".


    right... Totally....


    Quote:

    Originally Posted by mrrodriguez View Post





    Yeah, most likely the manufacturer was charging Apple $140 or some odd dollars for the iPhone, so Motorola was getting the 2.25 percent of that, while Apple was turning around and selling the device for $650 or what not. So Motorola was actually getting screwed, as Apple was making extra money/profit on Motorola IP.


    We don't know.  :S


    Quote:

    Originally Posted by rob53 View Post



    I found an article from 2009 showing the component cost of an iPhone 3GS. The Infineon Technologies AG broadband chip only cost $13 (even if they used a Qualcomm it won't be that different) so Google/Motorola wants 1/13th the cost of the chip in licensing fees. That would be a little over $1/phone. From what I've read previously, Google wants 2.25% of the cost of the entire phone, which is insane. For Apple to play the mobile phone game, they had to use a 3G chip, otherwise it wouldn't work. Forcing someone to license a standards technology should be against the law.


    Well, I don't know which of you is right, but if the quote above yours is, then I think Google's 2.25% is perfectly fair (2.25% of 140 is approx 3... to lazy to actually calculate) in my eyes.



    If what you are saying is right, it is a complete rip off.



    -QAMF

  • Reply 12 of 53
    cash907cash907 Posts: 893member


    Boo hoo. At least they are actually licensing the tech, unlike apple which would have patented it and sat on it refusing to share like a greedy toddler. 

  • Reply 13 of 53
    kdarlingkdarling Posts: 1,640member


    Apple is no stranger to high asking prices.  


     


    They offered to license non-essential patents like rubber banding to Samsung for "only" $30 per phone, or $40 per tablet... the equivalent of about 5% to 10% of the price.


     



     


     


    Of course, if you cross-licensed, you got a better rate.  Exactly the same kind of deals that most SEP holders ask for.


     



     


    Notice that if you didn't use a touchscreen, you got another 20% discount.  

  • Reply 14 of 53
    jragostajragosta Posts: 10,473member
    kdarling wrote: »
    Apple is no stranger to high asking prices.  

    They offered to license non-essential patents like rubber banding to Samsung for "only" $30 per phone, or $40 per tablet... the equivalent of about 5% to 10% of the price.

    So you don't get the concept of FRAND, either. Not surprising.

    The idea of FRAND is that your patent is made a standard and you agree to a lower licensing fee. So there's nothing at all surprising about Apple charging more for a non-essential patent. That's how it's supposed to work.
  • Reply 15 of 53
    qamfqamf Posts: 87member

    Quote:

    Originally Posted by jragosta View Post





    So you don't get the concept of FRAND, either. Not surprising.



    The idea of FRAND is that your patent is made a standard and you agree to a lower licensing fee. So there's nothing at all surprising about Apple charging more for a non-essential patent. That's how it's supposed to work.


    Exactly.



    provided all the Motorola cases are FRAND (which I think they are) I hope Apple has better luck then they have had in the past month or so in cases.



    -QAMF

  • Reply 16 of 53
    ipilyaipilya Posts: 190member

    Quote:

    Originally Posted by MikhailT View Post



    I think one of the things the US Congress needs to do is establish a nation-wide FRAND database that's open to everybody. That way, when Apple get offered a rate, they can tell the company that on the FRAND database, it is not the same rate as they're offering to Apple.



    Any companies found to offering a rate that's higher than FRAND database should be fined. The fine should be high enough that it'd cost the company more to pay it than decreasing the FRAND rate to match the database price.


    Better yet, there should be a clearing-house where you go to get your licensing. This independent entity would be transparent in its data and offer a single rate.


     


    This way.. if you are not paying to the clearing-house then you are liable... and no company can charge different rates to different licensees.


     


    (that could be a good business)

  • Reply 17 of 53
    kdarlingkdarling Posts: 1,640member

    Quote:

    Originally Posted by jragosta View Post



    The idea of FRAND is that your patent is made a standard and you agree to a lower licensing fee. 


     


    You don't agree in writing to do that when you join an SSO like ETSI, but yes, courts can decide that lower fees make sense in return for higher numbers of licenses, so that the total compensation is at least as much as if it were a non-SEP.


     


    In other words, there is nothing inherently less valuable about a FRAND patent.  


     


    (In fact, they beat out non-SEPs over the long term, because people often find ways around those, but bypassing a standards essential patent is usually impossible once validated.)


     


    Quote:


    So there's nothing at all surprising about Apple charging more for a non-essential patent.



     


    Which still doesn't negate the fact that Apple wanted a ridiculously high license fee for patents that can be worked around.


     


    And their value has diminished because of that, and because of being invalidated.


    Apple finally got smart and made deals for much lower fees with companies like HTC.

  • Reply 18 of 53

    Quote:

    Originally Posted by jragosta View Post





    So you don't get the concept of FRAND, either. Not surprising.



    The idea of FRAND is that your patent is made a standard and you agree to a lower licensing fee. So there's nothing at all surprising about Apple charging more for a non-essential patent. That's how it's supposed to work.


     


    Beat me to it. Of course, what else would you expect from KD but his usual garbage posts.


     


    Remember when he claimed that Motorola's asking prices were "fair" based on what they were charging other companies? How'd that turn out? Motorola is getting a fraction of what they tried to extort from MS which proves unequivocally they were asking an exorbitant amount. Now he doesn't talk about it anymore and would rather we all forget what he said.


     


    Apple will prevail on this one. Motorola is a known patent abuser and lost a huge case against MS for trying the exact same thing (charging higher than normal rates to harm your competitors). Now Apple has precedent on its side. It's taken awhile, but soon Google/Motorola/Samsung will be exposed for what they are - thieves who don't respect others IP and who abuse their patents. Eventually they'll be ponying up.

  • Reply 19 of 53
    jragostajragosta Posts: 10,473member
    qamf wrote: »
    Exactly.


    provided all the Motorola cases are FRAND (which I think they are) I hope Apple has better luck then they have had in the past month or so in cases.


    -QAMF

    Maybe you missed this in the article:
    "Motorola has sued Apple in various forums for infringement of eight SEPs (presumably, its eight strongest SEPs) and is batting 0-for-8 in establishing liability in U.S. actions."

    How can they do better than that?
  • Reply 20 of 53
    qamfqamf Posts: 87member

    Quote:

    Originally Posted by KDarling View Post


     


    Which still doesn't negate the fact that Apple wanted a ridiculously high license fee for patents that can be worked around.


     


    They'd have been better off to have come to a decent deal with Samsung like they later did with HTC (  ~ $5 per phone ?).



    It does, because FRAND patents are things phones general "need"



    "extra" stuff that a company makes they are free to set whatever they feel is a fair price.  To be honest, I am surprised Apple set the price so "low" considering their relationship with Samsung...



    There is no reason why Apple should not change such high prices for their own non-FRAND patents.  Absolutely no reason.



    I WISH they would not charge such a high price per use, and I wish that most patents for phones were free for everyone to use.  But I see nothing wrong with a Company exercising their rights.  Even if I do not believe the right(s) being exercised should exist.



    -QAMF

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