Ericsson unloads legal barrage against Apple in ongoing patent licensing dispute

Posted:
in General Discussion edited July 2015
Mobile systems heavyweight Ericsson plans to escalate its patent licensing case against Apple with a salvo of federal lawsuits and U.S. International Trade Commission complaints, requesting both damages and injunctions against the Cupertino company's devices.



Ericsson on Friday announced it filed seven lawsuits against Apple in the U.S. District Court for the Eastern District of Texas, as well as two ITC complaints, over 41 separate patents covering a variety of wireless standards and technology. Along with two U.S. exclusion orders, Ericsson is seeking damages with the complaints that were lodged yesterday.

The Swedish telecom giant claims many of the patents-in-suit are deemed standard essential IP relating to 2G, 3G and 4G LTE wireless network technology, while others are "critical" to certain aspects of Apple's products.

Kasim Alfalahi, Ericsson's chief intellectual property officer, said Apple device features like livestreaming and app functions rely on patented Ericsson technology. In addition to standard essential patents, the company alleges Apple is in infringement of non-essential inventions related to semiconductor component design, user interface software, location services and applications. Apple's iOS operating system is also a target.

Until January, Apple was paying Ericsson for a global license covering mobile technology inked in 2008 , but the iPhone maker refused to re-sign the contract after it expired last month. Ericsson asserts that the new license was offered on fair, reasonable and non-discriminatory (FRAND) terms, and said it made numerous attempts to find a fair solution, but Apple refused.

For its part, Apple in January filed a lawsuit against Ericsson for charging excessive royalty rates for 4G LTE technology, arguing the Swedish firm's IP is non-essential. Following Apple's legal move, Ericsson quickly countered with its own complaint in Texas.

The specifics of Ericsson's licensing terms are unknown, but the number could be substantial considering Apple was paying out royalties as a percentage of total device cost.

According to Bloomberg, only one of Ericsson's new Texas lawsuits assert standard essential patents, while that case and another overlap the ITC complaints. This means the two suits will likely be put on ice while the commission conducts its inquiry.
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Comments

  • Reply 1 of 110
    entropysentropys Posts: 1,424member
    Well, if there are FRAND, then Ericsson charges apple the same as everyone else, and apple is in the wrong, or they charge apple more than others, and Ericsson is in the wrong.
  • Reply 2 of 110
    And, as usual, the lawyers, judges and the court system are the only real winners. Win or loose, they all get paid.
  • Reply 3 of 110
    saareksaarek Posts: 1,097member
    Charging a flat rate for every device manufacture sounds right, based on the details above Ericsson was trying to charge based on handset sale value so Apple would be paying far more than anyone else.

    If this is the case I hope they lose.
  • Reply 4 of 110
    gatorguygatorguy Posts: 19,684member
    entropys wrote: »
    Well, if there are FRAND, then Ericsson charges apple the same as everyone else, and apple is in the wrong, or they charge apple more than others, and Ericsson is in the wrong.
    Ericsson claims to have a standard royalty rate that everyone pays, tho it can be mitigated somewhat if the licensee is willing to license some of their own patents back to Ericsson. That makes sense doesn't it?

    What some will take exception to is the rate is tied to a percentage of the device cost (wholesale not retail).. Whether you think that's fair or not it is standard procedure for many of the big IP holders including companies like Qualcomm, Motorola and Nokia. It's not at all uncommon to tie royalties to the device cost.
  • Reply 5 of 110
    You have to ask yourself why Apple, knowing it was using the patents, decided to stop paying two months ago. This leads me to believe that Erricson was looking for a larger payday from Apple than it previously got (think about how the iPhone has exploded since 2008). Also, specifically choosing that Texas court, as opposed to one near Apple? While I wouldn't call them patent trolls, the sure are exhibiting troll-like behavior.
  • Reply 6 of 110
    tbelltbell Posts: 3,146member
    gatorguy wrote: »
    Ericsson claims to have a standard royalty rate that everyone pays, tho it can be mitigated somewhat if the licensee is willing to license some of their own patents back to Ericsson. That makes sense doesn't it?

    What some will take exception to is the rate is tied to a percentage of the device cost (wholesale not retail).. Whether you think that's fair or not it is standard procedure for many of the big IP holders including companies like Qualcomm, Motorola and Nokia. It's not at all uncommon to tie royalties to the device cost.


    Motorola tried doing that to Microsoft seeking billions. The court said a percentage of component costs was the way to go, and awarded Motorola only a few million.
  • Reply 7 of 110
    Quote:
    Originally Posted by Gatorguy View Post





    Ericsson claims to have a standard royalty rate that everyone pays, tho it can be mitigated somewhat if the licensee is willing to license some of their own patents back to Ericsson. That makes sense doesn't it?



    What some will take exception to is the rate is tied to a percentage of the device cost (wholesale not retail).. Whether you think that's fair or not it is standard procedure for many of the big IP holders including companies like Qualcomm, Motorola and Nokia. It's not at all uncommon to tie royalties to the device cost.



    If I'm not mistaken Samsung tried to force reciprocation on use of Apple's patents through a rate reduction and got their hand slapped in court.

  • Reply 8 of 110
    gatorguygatorguy Posts: 19,684member

    If I'm not mistaken Samsung tried to force reciprocation on use of Apple's patents through a rate reduction and got their hand slapped in court.
    I think you'd be mistaken if you think there's anything illegal about cross-licensing.
  • Reply 9 of 110
    gatorguygatorguy Posts: 19,684member
    tbell wrote: »
    Motorola tried doing that to Microsoft seeking billions. The court said a percentage of component costs was the way to go, and awarded Motorola only a few million.
    That's correct, one judge in one specific case. In that instance the patents were applicable to a single component of a larger device, the smallest salable unit doctrine. It was the wi-fi chip in that instance IIRC.

    In the case of Ericsson v. Apple they would claim that the completed product/device is the applicable unit since the patents apply to several features of the iPhone and not one specific component of it. That position is supported by several court rulings, one of the more recent being Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268, from the Federal Circuit in 2013.

    Quote: “‘patentee(s) may assess damages based on the entire market value of the accused product only where the patented feature creates the basis for customer demand or substantially creates the value of the component parts.'”

    EDIT: If you'll think back Apple themselves use that same damage argument in their royalty assessments for damages against Samsung. It should works both ways for Apple shouldn't it? Their lawyers certainly understand the smallest salable unit argument because they use it to support Apple's damages theories when it benefits them.
  • Reply 10 of 110
    richlrichl Posts: 2,213member
    Quote:

    Originally Posted by Gatorguy View Post



    What some will take exception to is the rate is tied to a percentage of the device cost (wholesale not retail).. Whether you think that's fair or not it is standard procedure for many of the big IP holders including companies like Qualcomm, Motorola and Nokia. It's not at all uncommon to tie royalties to the device cost.

     

    Ericsson does this to help those producing low-cost handsets rather than to hinder the premium manufacturers. When this licensing scheme was introduced, there wasn't a large manufacturer producing only high-end devices. As such, it wasn't considered unfair to anyone.

     

    Times have changed.

  • Reply 11 of 110
    gatorguygatorguy Posts: 19,684member
    richl wrote: »
    Ericsson does this to help those producing low-cost handsets rather than to hinder the premium manufacturers. When this licensing scheme was introduced, there wasn't a large manufacturer producing only high-end devices. As such, it wasn't considered unfair to anyone.

    Times have changed.

    ... but it may still be fair.
  • Reply 12 of 110
    gatorguy wrote: »
    ... but it may still be fair.

    Unless it was like, Samsung that was involved, in which case the costs should be non existent, right?


    Ericcson is another failed company, Sony should have just thrown the mobile division at them rather than buy it. It's proven to be utterly worthless.
  • Reply 13 of 110
    gatorguygatorguy Posts: 19,684member
    Unless it was like, Samsung that was involved, in which case the costs should be non existent, right?


    Ericcson is another failed company, Sony should have just thrown the mobile division at them rather than buy it. It's proven to be utterly worthless.
    Why do you think the costs should be non-existent? AFAIK there's been no finding of that has there? Samsung is still on the hook for damages. The amount hasn't been finalized, but that's due to appeals and/or patent office actions. Apple will make full use of all avenues for appeal too if they come out on the losing end of this one, as well they should.
  • Reply 14 of 110
    radarthekatradarthekat Posts: 2,897moderator
    It's clear that the value of some patents should not be tied to the price of the handset. Two handsets, each using the same patented LTE technology, for example, that sell at significantly different prices, sell at those different prices based upon differences in the OS, design, build quality, associated ecosystem, brand cache, etc, not because the Patented technology common to both somehow delivers more intrinsic value in one versus the other. Apple should ultimately prevail with its argument.
  • Reply 15 of 110
    rob53rob53 Posts: 1,949member
    As soon as I saw the article said Texas I knew Ericsson had nothing to stand on or not enough money to use a real court. The eastern court of Texas should be shut down permanently.
  • Reply 16 of 110
    gatorguygatorguy Posts: 19,684member
    It's clear that the value of some patents should not be tied to the price of the handset. Two handsets, each using the same patented LTE technology, for example, that sell at significantly different prices, sell at those different prices based upon differences in the OS, design, build quality, associated ecosystem, brand cache, etc, not because the Patented technology common to both somehow delivers more intrinsic value in one versus the other. Apple should ultimately prevail with its argument.

    You are right that some patents can't be tied to the price of the handset, ie the Motorola patents asserted against Microsoft that an earlier poster mentioned. Ericsson is not asserting only patents that can be tied to a specific component. They are claiming their developmental work, codified in several US patents, are applicable to the basic functionality of the iPhone itself and not simply one component of it.

    Apple realizes more value from the patents than most other handset makers. Their products bring in billions of profit and those patents are much more valuable to them because of it. Ericsson would argue that without the hard and expensive ground work laid by them to make the iPhone possible Apple could not realize those profits. What is specifically unfair, much less illegal, about being asked to pay for the value realized from those patents.
  • Reply 17 of 110
    richlrichl Posts: 2,213member
    gatorguy wrote: »
    ... but it may still be fair.

    Absolutely. It's very easy to look at this story without the proper context and instantly decide that the terms are unfair. It's a more complex situation than it first appears.
  • Reply 18 of 110
    Quote:

    Originally Posted by Gatorguy View Post





    I think you'd be mistaken if you think there's anything illegal about cross-licensing.

     

    And you'd be mistaken if you think it's OK to demand cross-licensing in exchange for access to SEP's.

  • Reply 19 of 110
    gatorguygatorguy Posts: 19,684member
    And you'd be mistaken if you think it's OK to demand cross-licensing in exchange for access to SEP's.
    Where is your evidence that Ericsson is demanding cross-licensing as a condition for their SEP IP, and otherwise refuses to offer Apple a license?

    In addition you seem to be conveniently ignoring that many of the patents Ericsson is asserting, and that Apple was apparently licensing until a few months ago, are not FRAND pledged. Ericsson is under no obligation to make that patented technology available to Apple in the first place. Compulsory licensing for access to those would not be illegal AFAIK. Do you have a different understanding?
  • Reply 20 of 110
    radarthekatradarthekat Posts: 2,897moderator
    Quote:
    Originally Posted by Gatorguy View Post





    You are right that some patents can't be tied to the price of the handset, ie the Motorola patents asserted against Microsoft that an earlier poster mentioned. Ericsson is not asserting only patents that can be tied to a specific component. They are claiming their developmental work, codified in several US patents, are applicable to the basic functionality of the iPhone itself and not simply one component of it.



    Apple realizes more value from the patents than most other handset makers. Their products bring in billions of profit and those patents are much more valuable to them because of it. Ericsson would argue that without the hard and expensive ground work laid by them to make the iPhone possible Apple could not realize those profits. What is specifically unfair, much less illegal, about being asked to pay for the value realized from those patents.

     

    Your argument can be applied to the price of fish at the local fish monger.  Should each chef who buys fish be required to pay a price for fish based upon their intended use and skill at preparing the fish for resale as a restaurant meal, such that a highly ranked chef at a five star restaurant should pay significantly higher for the same fish because she knows how to better prepare it and charges significantly more when she sells it on to her restaurant patrons?  

     

    Again, the reason an Apple handset sells for a higher price is not because Ericsson's patented technology, when sold to Apple, has some higher intrinsic value, it's because Apple adds so much value to the handset not specifically related to the basic patented technology that is essential to all handsets.  This value is created by Apple's engineers and designers and brand managers, not by Ericsson.  Why should Ericsson benefit from the value added by those others?  Why should the fish monger be able to cash in on the years of a chef's training; years of training not paid for by the fish monger, but rather by the chef.

     

    Fair, reasonable, and non-discriminatory (FRAND) licensing implies you should be allowed to extract the value you create.  No more. 

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