I suspect it was a simple choice of ROI. Somebody said 'how long are we going to flog this dead horse' and all parties met with something they could live with. Isn't the definition of a compromise when all parties leave with an agreement that none are completely happy with?
You honestly believe Steve Jobs would have listened to accountants and to save a few bucks agreed to license his iPhone patents to a competitor for an SEP license if he didn't have to? As I recall he was dang proud of those patents (boy have we patented it)
I can't imagine you believe that. No, It's much more likely it wasn't an illegal Nokia licensing condition in the first place rather than Mr Jobs willingly doing so to save a few dollars. IMO there's no way in hell he would have done so if it could have been avoided.
You honestly believe Steve Jobs would have listened to accountants and to save a few bucks agreed to license his iPhone patents to a competitor for an SEP license if he didn't have to? As I recall he was dang proud of those patents (boy have we patented it)
I can't imagine you believe that.
And yet Apple allowed HTC to license non SEP.
You seem to be pushing a biased meme. As I stated, Apple is a tough negotiator, but in good faith. That is the basis of pragmatism, isn't it, and for the record, Nokia was not able to leverage what little IP they obtained from Apple to be a competitor were they.
It is now illegal in the EU to force a licensee to negotiate non-SEP as a means of obtaining SEP licensing. Do you agree with that?
It is now illegal in the EU to force a licensee to negotiate non-SEP as a means of obtaining SEP licensing. Do you agree with that?
No I don't agree. That's why nearly an hour ago I asked you for a link to where the EU says that. It could well be true but you seem to be unable to prove it with some reliable source for the claim.
No I don't agree. That's why nearly an hour ago I asked you for a link to where the EU says that. It could well be true but you seem to be unable to prove it with some reliable source for the claim.
"This gives companies the potential to behave in anti-competitive ways, for example by "holding up" users after the adoption of the standard by excluding competitors from the market, extracting excessive royalty fees, setting cross-licence terms which the licensee would not otherwise agree to, or forcing the licensee to give up their invalidity or non-infringement claims against SEPs."
"This gives companies the potential to behave in anti-competitive ways, for example by "holding up" users after the adoption of the standard by excluding competitors from the market, extracting excessive royalty fees, setting cross-licence terms which the licensee would not otherwise agree to, or forcing the licensee to give up their invalidity or non-infringement claims against SEPs."
Thank you sir. I had already read that particular document as well as another outlining specific circumstances where it could be illegal (and not necessarily with only SEP's). That doc still not say it is not allowed. It instead says it could be potentially be an anti-competitive practice. No where does it say it's not permitted/illegal under any circumstances, at least as far as I can see.
Thank you sir. I had already read that particular document as well as another outlining specific circumstances where it could be illegal and not necessarily with only SEP's). That doc still not say it is not allowed. It instead says it could be potentially be an anti-competitive practice. No where does it say it's not permitted/illegal under any circumstances, at least as far as I can see.
It is possible that a court could rule otherwise, but as the Commission is legally enabled, I will argue that the Commission would have the role of promulgating regulation that would have the effect of law if the Courts deviate from the intended standard.
More to the point, you are arguing the exception, not the standard.
It is possible that a court could rule otherwise, but as the Commission is legally enabled, I will argue that the Commission would have the role of promulgating regulation that would have the effect of law if the Courts deviate from the intended standard.
More to the point, you are arguing the exception, not the standard.
The EU has already codified circumstances where cross-licensing agreements are illegal, for example when two competing companies enter into a licensing agreement in order to block other companies market access. As a condition of SEP licensing was not one of those AFAIK.
Anyway, I do appreciate the time you took to search out sources and the respectful manner in which you offered the results. i wish more here would do their own research as well. Thanks!
The EU has already codified circumstances where cross-licensing agreements are illegal. As a condition of SEP licensing was not one of those AFAIK.
And yet the commission is quite aware of this as being anti-competitive, which would be an indication for SEP holders to tread carefully. At any rate, I doubt that potential licensees would willingly capitulate to an unfavorable deal if they could petition the Court to intervene in an anti-competitive behavior of the SEP holder.
And yet the commission is quite aware of this as being (potentially) anti-competitive, which would be an indication for SEP holders to tread carefully. At any rate, I doubt that potential licensees would willingly capitulate to an unfavorable deal if they could petition the Court to intervene in an anti-competitive behavior of the SEP holder.
If it is forced, it is by definition anti-competitive, so you agree with that as well?
Not always IMO. In the case of Apple and Samsung there's evidence that Samsung required Apple to offer back a license to their own essential UMTS patents (probably acquired in the Rockstar deal), something I don't think the EU would have issue with, nor did Apple in all likelihood. If it's a requirement to license back non-essential IP to get an SEP license I think I'd agree with you.
Not always IMO. In the case of Apple and Samsung there's evidence that Samsung required Apple to offer back a license to their own essential UMTS patents (probably acquired in the Rockstar deal), something I don't think the EU would have issue with, nor did Apple in all likelihood. If it's a requirement to license back non-essential IP to get an SEP license I think I'd agree with you.
In the case of the UMTS patents, if they were essential, then they were SEP, and would have been covered independent of Apple's SEP deal anyway, though they certainly might have been negotiated at the same time, and that may have been the desire of Samsung. Nothing incorrect about that at all.
The requirement to license back non-essential IP to get a SEP license it exactly what I am speaking of. The fact that Apple and Nokia were able to negotiate both SEP and non-essential IP without any anti-competitive behavior (and without court intervention?) and come up with a working resolution is exactly how the Commission and the Courts prefer it.
I believe that the EU model and precedence will be the direction that the U.S. Court has/will be working towards, in a motion to create a more standard patent licensing environment worldwide. You might have a better idea on that than I.
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.
Actually, it's very uncommon - in fact, it hasn't been done at all, to charge a percentage of the device's cost for stadards-essential patents. That's what the whole Apple vs. Motorola suit was about, and Motorola lost. It was also Samsung vs. Apple with the ITC, and Samsung eventually also lost. Nokia also tried, and failed as well. What Qualcomm has done at times is charged a percentage of the cost of the part that the Qualcomm chip is installed in, not even close to a percentage of the cost of the entire device.
It's also not fair - there are hundreds of patents that go into a device. If a device is only a phone, then the phone patents are more important to the overall device than if the device were a computer that is able to make phone calls. So charging x% of the device's cost is wholly unfair. That's not even mentioning that these are standard-essential patents, so that even if you've invented a better technology yourself, you can't use it because everyone is required to use the standards (and the companies who got approval of those standards have to be fair about licensing).
Two other things: Apple has been licensing Ericsson patents for years now, at standard rates. Now all of a sudden Ericsson is demanding much higher fees, and Apple won't pay them. Ericsson should have learned from Nokia, Samsung and Motorola that it's not going to win this case.
And the fact that Ericsson filed in Marshall, Texas is a definite sign that this is totally bogus.
Actually, it's very uncommon - in fact, it hasn't been done at all, to charge a percentage of the device's cost for stadards-essential patents.
You've no idea what you're talking about apparently. It's very common.
Here's the base royalty rates charged by contributors to the 3G/4G standards as published by IEEE:
Alcatel/Lucent - 2%
Ericsson - 1.5%
Huawei - 1.5%
Nokia - 1.5% plus another .8% from their partnership with Seimans
Motorola - 2.25%
Qualcomm - 3.25%
ZTE- 1%
And yes every one of those rates are based on either the finished smartphone build cost or the retail selling price.
EDIT: Here's a good single page where most of these rates are detailed.
echipm-innovationfrontline.blogspot.com/2009/07/lte-ipr-royalty-rates.html
EDIT 2: This paper covers most of the common elements of essential patent licensing including how base rates are usually computed, methods for mitigating the out-of-pocket royalties including cross-licensing, how patent privateering is now affecting SEP licensing, and the legality of some of the rates/practices. You should read it before commenting further if you wish to be accurate.
You are referencing past practice, and that is certainly changing.
I think you are losing focus on the overall picture of licensing:
Apportionment is now jurisprudence. These royalty licensing practices based on total device cost will be challenged and for the most part eliminated over time by he courts.
From your second document:
"Further, the available data demonstrate a need for licensees to advocate and courts to rigorously apply methodologies for calculating royalties that focus on the actual value of a claimed invention put in context of the myriad other technologies in a smartphone and the components in which the technologies are implemented. Our research shows a common thread where many of the largest royalty demands rely on the methodology of seeking a royalty based on a percentage of the sales price of the entire smartphone, as opposed to the modest price of the component in which the accused functionality is implemented. That methodology often stems from licensing practices that conflict with the Federal Circuit’s more recent apportionment jurisprudence and it is increasingly being rejected by the courts.
The need for apportionment and rigorous valuation of claimed inventions when calculating royalties is especially acute for standardized technologies, where a patent holder may have just a small slice of the declared essential patents for a particular standard and where that standard may be just one of many supported by the device. Indeed, when courts have rigorously applied methodologies that account for royalty stacking concerns and make a meaningful assessment of the value of the patented technology to the accused devices, the results have been royalties that appear far more economically sustainable for device suppliers. That is the case in both the Innovatio and Microsoft v. Motorola decisions, where the court set RAND royalties at a fraction of what the patent holders had sought. Data such as that presented herein may further crystallize the need for such nuanced analyses of rate-setting.
I have stated consistently that device based royalty rates are unfair, and this is how the U.S. Courts now sees them, for the most part.
Actually, it's very uncommon - in fact, it hasn't been done at all, to charge a percentage of the device's cost for stadards-essential patents. That's what the whole Apple vs. Motorola suit was about, and Motorola lost. It was also Samsung vs. Apple with the ITC, and Samsung eventually also lost. Nokia also tried, and failed as well. What Qualcomm has done at times is charged a percentage of the cost of the part that the Qualcomm chip is installed in, not even close to a percentage of the cost of the entire device.
It's also not fair - there are hundreds of patents that go into a device. If a device is only a phone, then the phone patents are more important to the overall device than if the device were a computer that is able to make phone calls. So charging x% of the device's cost is wholly unfair. That's not even mentioning that these are standard-essential patents, so that even if you've invented a better technology yourself, you can't use it because everyone is required to use the standards (and the companies who got approval of those standards have to be fair about licensing).
Two other things: Apple has been licensing Ericsson patents for years now, at standard rates. Now all of a sudden Ericsson is demanding much higher fees, and Apple won't pay them. Ericsson should have learned from Nokia, Samsung and Motorola that it's not going to win this case.
And the fact that Ericsson filed in Marshall, Texas is a definite sign that this is totally bogus.
I don't know what Ericsson is up to, but if nothing else, Apple should challenge the fees based on device cost basis in favor of apportionment. If it loses in Texas, it will certainly appeal and as jurisprudence favors apportionment, it has very good odds of being successful.
I think you might be incorrect (in that this has in fact been all too common in the past), but those times are ending.
You are referencing past practice, and that is certainly changing.
I think you are losing focus on the overall picture of licensing
I have stated consistently that device based royalty rates are unfair, and this is how the U.S. Courts now sees them, for the most part.
I've not lost focus and specifically pointed out that the second doc discussed the legality of some of the licensing practices. Up until now you and I have been discussing whether or not it's legal, not the fairness of it or what other options would work as well for both the IP owner and the licensee.
You are correct that there have been a few recent cases that have challenged this common SEP royalty basis, not just in consumer electronics but in other product lines where standards have been set and patent pools established. As of today tho nearly every licensing pool that bases royalties on a finished product cost still continues to offer those same contracts, and licensees continue to be bound by them.
Personally I don't agree with it. I think it's been sometimes used to create entry barriers to industries rather than being an effort to make the tech openly available to all companies new and old. With that said. there may be certain patent pools where it 's the proper and perhaps only sensical business method of determining royalties. Dunno, but I suspect for a long time to come the appropriateness of device cost basis will be handled case by case rather than a wholesale (pun intended) banning of the practice.
In any event in today's world it is all-too-common and perfectly legal for the most part. As with many business practices expect it will change over time, but the basic desire of businessmen to maximize profit and disadvantage competitors won't. There will be other creative ways devised to monetize their patents. If SEP's become problematic then they simply decline to play in FRAND-land at all in some cases, maybe choosing to license on an individual basis where they can make their own rules or deny patent use to certain competing companies entirely if they wish. Worse they could turn to privateering as Nokia has done. If that happens you'll see courts getting involved with compulsory licensing which many won't like any better and that creates new issues. Note the EU Commission has mentioned compulsory licensing as a possible cure for private companies using their IP in competitive blocking efforts, another of their perceived potentially illegal unfair-competition problems. If that becomes a focus it could impact companies like Apple who traditionally do not license their patents to others. The EU 's new Unified Patent Court could mandate licensing of privately-held IP in certain cases. http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2489006
So if device cost ends up someday being held improper as a royalty basis it will probably create even more of a patent thicket and new barriers to entry for start-ups and smaller less wealthy competitors. Inventors and businessmen are going to get their money one way or another. Something to think about anyway before the baby gets tossed out with the bathwater.
I've not lost focus and specifically pointed out that the second doc discussed the legality of some of the licensing practices. Up until now you and I have been discussing whether or not it's legal, not the fairness of it or what other options would work as well for both the IP owner and the licensee.
You are correct that there have been a few recent cases that have challenged this common SEP royalty basis, not just in consumer electronics but in other product lines where standards have been set and patent pools established. As of today tho nearly every licensing pool that bases royalties on a finished product cost still continues to offer those same contracts, and licensees continue to be bound by them.
Personally I don't agree with it. I think it's been sometimes used to create entry barriers to industries rather than being an effort to make the tech openly available to all companies new and old. With that said. there may be certain patent pools where it 's the proper and perhaps only sensical business method of determining royalties. Dunno, but I suspect for a long time to come the appropriateness of device cost basis will be handled case by case rather than a wholesale (pun intended) banning of the practice.
In any event in today's world it is all-too-common and perfectly legal for the most part. As with many business practices expect it will change over time, but the basic desire of businessmen to maximize profit and disadvantage competitors won't. There will be other creative ways devised to monetize their patents. If SEP's become problematic then they simply decline to play in FRAND-land at all in some cases, maybe choosing to license on an individual basis where they can make their own rules or deny patent use to certain competing companies entirely if they wish. Worse they could turn to privateering as Nokia has done. If that happens you'll see courts getting involved with compulsory licensing which many won't like any better and that creates new issues. Note the EU Commission has mentioned compulsory licensing as a possible cure for private companies using their IP in competitive blocking efforts, another of their perceived potentially illegal unfair-competition problems. If that becomes a focus it could impact companies like Apple who traditionally do not license their patents to others. The EU 's new Unified Patent Court could mandate licensing of privately-held IP in certain cases.
So if device cost ends up someday being held improper as a royalty basis it will probably create even more of a patent thicket and new barriers to entry for start-ups and smaller less wealthy competitors. Inventors and businessmen are going to get their money one way or another. Something to think about anyway before the baby gets tossed out with the bathwater.
If it is unfair as is, the Courts will have to fix it, and I'm not sorry for NPE's if they don't get their paydays. There are multiple billions of devices out there, so a massive shift in royalty payments to apportionment isn't going to impact new SEP creation. It's still a beneficial tool for Corporations to drive standards and create new products. Companies with specific IP that they will not license have always been at risk of having to distribute IP for public benefit, by the Courts or through legislation, but it is uncommon, and apportionment has nothing to do with that.
Either way, entire markets are bypassing royalties, something that the few global players don't have an option to do.
I suspect it was a simple choice of ROI. Somebody said 'how long are we going to flog this dead horse' and all parties met with something they could live with. Isn't the definition of a compromise when all parties leave with an agreement that none are completely happy with?
You honestly believe Steve Jobs would have listened to accountants and to save a few bucks agreed to license his iPhone patents to a competitor for an SEP license if he didn't have to? As I recall he was dang proud of those patents (boy have we patented it)
I can't imagine you believe that. No, It's much more likely it wasn't an illegal Nokia licensing condition in the first place rather than Mr Jobs willingly doing so to save a few dollars. IMO there's no way in hell he would have done so if it could have been avoided.
As I recall there was a lot of (undue) pressure from more than one whacked out judge to settle these things. (BTW: I strongly disagree with the tactics that a couple of US Federal Judges have taken about scope of the law suits and feel that at least one is due to be censured for her uncalled for behavior to narrow this down.) I never said "Steve Jobs would have listened to accountants ... to save a few bucks" but when you get down to it that is one of the kind of decisions a CEO ends up making for the company they are steering. We have zero input from the Apple board members one way or another except that he never got a no confidence vote.
Again we find ourselves flogging a dead horse only to go nowhere. Believe what you like.
One point I feel compelled to point out is that he loved and was proud of the iPhone and this accomplishment. I remember him quite well saying so but not that he was dang proud of those patents (boy have we patented it).
As I recall there was a lot of (undue) pressure from more than one whacked out judge to settle these things. (BTW: I strongly disagree with the tactics that a couple of US Federal Judges have taken about scope of the law suits and feel that at least one is due to be censured for her uncalled for behavior to narrow this down.) I never said "Steve Jobs would have listened to accountants ... to save a few bucks" but when you get down to it that is one of the kind of decisions a CEO ends up making for the company they are steering. We have zero input from the Apple board members one way or another except that he never got a no confidence vote.
Again we find ourselves flogging a dead horse only to go nowhere. Believe what you like.
One point I feel compelled to point out is that he loved and was proud of the iPhone and this accomplishment. I remember him quite well saying so but not that he was dang proud of those patents (boy have we patented it).
I think that the Courts are still working their way through this to the new jurisprudence so while I'm not sure which Judge you are referring to, there are more than a few that need some "re-education".
As an aside, and referring to some unnamed click bait websites (cough: BGR) stop using "gorgeous" to describe every frickin new smartphone that comes out. It's overused and more importantly, these descriptions aren't even appropriate; the public appetite allows few smartphone to even reach classic status within their lifetimes, let alone the upgrade cycle (though I would admit my prejudice that the iPhone 4/4s has achieved that status).
Comments
I can't imagine you believe that. No, It's much more likely it wasn't an illegal Nokia licensing condition in the first place rather than Mr Jobs willingly doing so to save a few dollars. IMO there's no way in hell he would have done so if it could have been avoided.
You honestly believe Steve Jobs would have listened to accountants and to save a few bucks agreed to license his iPhone patents to a competitor for an SEP license if he didn't have to? As I recall he was dang proud of those patents (boy have we patented it)
I can't imagine you believe that.
And yet Apple allowed HTC to license non SEP.
You seem to be pushing a biased meme. As I stated, Apple is a tough negotiator, but in good faith. That is the basis of pragmatism, isn't it, and for the record, Nokia was not able to leverage what little IP they obtained from Apple to be a competitor were they.
It is now illegal in the EU to force a licensee to negotiate non-SEP as a means of obtaining SEP licensing. Do you agree with that?
No I don't agree. That's why nearly an hour ago I asked you for a link to where the EU says that. It could well be true but you seem to be unable to prove it with some reliable source for the claim.
http://ec.europa.eu/competition/publications/cpb/2014/008_en.pdf
I should have used "not allowed"
"This gives companies the potential to behave in anti-competitive ways, for example by "holding up" users after the adoption of the standard by excluding competitors from the market, extracting excessive royalty fees, setting cross-licence terms which the licensee would not otherwise agree to, or forcing the licensee to give up their invalidity or non-infringement claims against SEPs."
Thank you sir. I had already read that particular document as well as another outlining specific circumstances where it could be illegal (and not necessarily with only SEP's). That doc still not say it is not allowed. It instead says it could be potentially be an anti-competitive practice. No where does it say it's not permitted/illegal under any circumstances, at least as far as I can see.
Thank you sir. I had already read that particular document as well as another outlining specific circumstances where it could be illegal and not necessarily with only SEP's). That doc still not say it is not allowed. It instead says it could be potentially be an anti-competitive practice. No where does it say it's not permitted/illegal under any circumstances, at least as far as I can see.
It is possible that a court could rule otherwise, but as the Commission is legally enabled, I will argue that the Commission would have the role of promulgating regulation that would have the effect of law if the Courts deviate from the intended standard.
More to the point, you are arguing the exception, not the standard.
Anyway, I do appreciate the time you took to search out sources and the respectful manner in which you offered the results. i wish more here would do their own research as well. Thanks!
The EU has already codified circumstances where cross-licensing agreements are illegal. As a condition of SEP licensing was not one of those AFAIK.
And yet the commission is quite aware of this as being anti-competitive, which would be an indication for SEP holders to tread carefully. At any rate, I doubt that potential licensees would willingly capitulate to an unfavorable deal if they could petition the Court to intervene in an anti-competitive behavior of the SEP holder.
And THAT I agree with.
If it is forced, it is by definition anti-competitive, so you agree with that as well?
Not always IMO. In the case of Apple and Samsung there's evidence that Samsung required Apple to offer back a license to their own essential UMTS patents (probably acquired in the Rockstar deal), something I don't think the EU would have issue with, nor did Apple in all likelihood. If it's a requirement to license back non-essential IP to get an SEP license I think I'd agree with you.
In the case of the UMTS patents, if they were essential, then they were SEP, and would have been covered independent of Apple's SEP deal anyway, though they certainly might have been negotiated at the same time, and that may have been the desire of Samsung. Nothing incorrect about that at all.
The requirement to license back non-essential IP to get a SEP license it exactly what I am speaking of. The fact that Apple and Nokia were able to negotiate both SEP and non-essential IP without any anti-competitive behavior (and without court intervention?) and come up with a working resolution is exactly how the Commission and the Courts prefer it.
I believe that the EU model and precedence will be the direction that the U.S. Court has/will be working towards, in a motion to create a more standard patent licensing environment worldwide. You might have a better idea on that than I.
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.
Actually, it's very uncommon - in fact, it hasn't been done at all, to charge a percentage of the device's cost for stadards-essential patents. That's what the whole Apple vs. Motorola suit was about, and Motorola lost. It was also Samsung vs. Apple with the ITC, and Samsung eventually also lost. Nokia also tried, and failed as well. What Qualcomm has done at times is charged a percentage of the cost of the part that the Qualcomm chip is installed in, not even close to a percentage of the cost of the entire device.
It's also not fair - there are hundreds of patents that go into a device. If a device is only a phone, then the phone patents are more important to the overall device than if the device were a computer that is able to make phone calls. So charging x% of the device's cost is wholly unfair. That's not even mentioning that these are standard-essential patents, so that even if you've invented a better technology yourself, you can't use it because everyone is required to use the standards (and the companies who got approval of those standards have to be fair about licensing).
Two other things: Apple has been licensing Ericsson patents for years now, at standard rates. Now all of a sudden Ericsson is demanding much higher fees, and Apple won't pay them. Ericsson should have learned from Nokia, Samsung and Motorola that it's not going to win this case.
And the fact that Ericsson filed in Marshall, Texas is a definite sign that this is totally bogus.
Here's the base royalty rates charged by contributors to the 3G/4G standards as published by IEEE:
Alcatel/Lucent - 2%
Ericsson - 1.5%
Huawei - 1.5%
Nokia - 1.5% plus another .8% from their partnership with Seimans
Motorola - 2.25%
Qualcomm - 3.25%
ZTE- 1%
And yes every one of those rates are based on either the finished smartphone build cost or the retail selling price.
EDIT: Here's a good single page where most of these rates are detailed.
echipm-innovationfrontline.blogspot.com/2009/07/lte-ipr-royalty-rates.html
This has all been discussed here before.
EDIT 2: This paper covers most of the common elements of essential patent licensing including how base rates are usually computed, methods for mitigating the out-of-pocket royalties including cross-licensing, how patent privateering is now affecting SEP licensing, and the legality of some of the rates/practices. You should read it before commenting further if you wish to be accurate.
https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/The-Smartphone-Royalty-Stack-Armstrong-Mueller-Syrett.pdf
You've no idea what you're talking about apparently. It's very common.
Here's the base royalty rates charged by contributors to the 3G/4G standards as published by IEEE:
Alcatel/Lucent - 2%
Ericsson - 1.5%
Huawei - 1.5%
Nokia - 1.5% plus another .8% from their partnership with Seimans
Motorola - 2.25%
Qualcomm - 3.25%
ZTE- 1%
And yes every one of those rates are based on either the finished smartphone build cost or the retail selling price.
EDIT: Here's a good single page where most of these rates are detailed.
echipm-innovationfrontline.blogspot.com/2009/07/lte-ipr-royalty-rates.html
This has all been discussed here before.
EDIT 2: This paper covers most of the common elements of essential patent licensing including how base rates are usually computed, methods for mitigating the out-of-pocket royalties including cross-licensing, how patent privateering is now affecting SEP licensing, and the legality of some of the rates/practices. You should read it before commenting further if you wish to be accurate.
https://www.wilmerhale.com/uploadedFiles/Shared_Content/Editorial/Publications/Documents/The-Smartphone-Royalty-Stack-Armstrong-Mueller-Syrett.pdf
You are referencing past practice, and that is certainly changing.
I think you are losing focus on the overall picture of licensing:
Apportionment is now jurisprudence. These royalty licensing practices based on total device cost will be challenged and for the most part eliminated over time by he courts.
From your second document:
"Further, the available data demonstrate a need for licensees to advocate and courts to rigorously apply methodologies for calculating royalties that focus on the actual value of a claimed invention put in context of the myriad other technologies in a smartphone and the components in which the technologies are implemented. Our research shows a common thread where many of the largest royalty demands rely on the methodology of seeking a royalty based on a percentage of the sales price of the entire smartphone, as opposed to the modest price of the component in which the accused functionality is implemented. That methodology often stems from licensing practices that conflict with the Federal Circuit’s more recent apportionment jurisprudence and it is increasingly being rejected by the courts.
The need for apportionment and rigorous valuation of claimed inventions when calculating royalties is especially acute for standardized technologies, where a patent holder may have just a small slice of the declared essential patents for a particular standard and where that standard may be just one of many supported by the device. Indeed, when courts have rigorously applied methodologies that account for royalty stacking concerns and make a meaningful assessment of the value of the patented technology to the accused devices, the results have been royalties that appear far more economically sustainable for device suppliers. That is the case in both the Innovatio and Microsoft v. Motorola decisions, where the court set RAND royalties at a fraction of what the patent holders had sought. Data such as that presented herein may further crystallize the need for such nuanced analyses of rate-setting.
I have stated consistently that device based royalty rates are unfair, and this is how the U.S. Courts now sees them, for the most part.
Actually, it's very uncommon - in fact, it hasn't been done at all, to charge a percentage of the device's cost for stadards-essential patents. That's what the whole Apple vs. Motorola suit was about, and Motorola lost. It was also Samsung vs. Apple with the ITC, and Samsung eventually also lost. Nokia also tried, and failed as well. What Qualcomm has done at times is charged a percentage of the cost of the part that the Qualcomm chip is installed in, not even close to a percentage of the cost of the entire device.
It's also not fair - there are hundreds of patents that go into a device. If a device is only a phone, then the phone patents are more important to the overall device than if the device were a computer that is able to make phone calls. So charging x% of the device's cost is wholly unfair. That's not even mentioning that these are standard-essential patents, so that even if you've invented a better technology yourself, you can't use it because everyone is required to use the standards (and the companies who got approval of those standards have to be fair about licensing).
Two other things: Apple has been licensing Ericsson patents for years now, at standard rates. Now all of a sudden Ericsson is demanding much higher fees, and Apple won't pay them. Ericsson should have learned from Nokia, Samsung and Motorola that it's not going to win this case.
And the fact that Ericsson filed in Marshall, Texas is a definite sign that this is totally bogus.
I don't know what Ericsson is up to, but if nothing else, Apple should challenge the fees based on device cost basis in favor of apportionment. If it loses in Texas, it will certainly appeal and as jurisprudence favors apportionment, it has very good odds of being successful.
I think you might be incorrect (in that this has in fact been all too common in the past), but those times are ending.
edited to make it more readable
I've not lost focus and specifically pointed out that the second doc discussed the legality of some of the licensing practices. Up until now you and I have been discussing whether or not it's legal, not the fairness of it or what other options would work as well for both the IP owner and the licensee.
You are correct that there have been a few recent cases that have challenged this common SEP royalty basis, not just in consumer electronics but in other product lines where standards have been set and patent pools established. As of today tho nearly every licensing pool that bases royalties on a finished product cost still continues to offer those same contracts, and licensees continue to be bound by them.
Personally I don't agree with it. I think it's been sometimes used to create entry barriers to industries rather than being an effort to make the tech openly available to all companies new and old. With that said. there may be certain patent pools where it 's the proper and perhaps only sensical business method of determining royalties. Dunno, but I suspect for a long time to come the appropriateness of device cost basis will be handled case by case rather than a wholesale (pun intended) banning of the practice.
In any event in today's world it is all-too-common and perfectly legal for the most part. As with many business practices expect it will change over time, but the basic desire of businessmen to maximize profit and disadvantage competitors won't. There will be other creative ways devised to monetize their patents. If SEP's become problematic then they simply decline to play in FRAND-land at all in some cases, maybe choosing to license on an individual basis where they can make their own rules or deny patent use to certain competing companies entirely if they wish. Worse they could turn to privateering as Nokia has done. If that happens you'll see courts getting involved with compulsory licensing which many won't like any better and that creates new issues. Note the EU Commission has mentioned compulsory licensing as a possible cure for private companies using their IP in competitive blocking efforts, another of their perceived potentially illegal unfair-competition problems. If that becomes a focus it could impact companies like Apple who traditionally do not license their patents to others. The EU 's new Unified Patent Court could mandate licensing of privately-held IP in certain cases.
http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2489006
So if device cost ends up someday being held improper as a royalty basis it will probably create even more of a patent thicket and new barriers to entry for start-ups and smaller less wealthy competitors. Inventors and businessmen are going to get their money one way or another. Something to think about anyway before the baby gets tossed out with the bathwater.
I've not lost focus and specifically pointed out that the second doc discussed the legality of some of the licensing practices. Up until now you and I have been discussing whether or not it's legal, not the fairness of it or what other options would work as well for both the IP owner and the licensee.
You are correct that there have been a few recent cases that have challenged this common SEP royalty basis, not just in consumer electronics but in other product lines where standards have been set and patent pools established. As of today tho nearly every licensing pool that bases royalties on a finished product cost still continues to offer those same contracts, and licensees continue to be bound by them.
Personally I don't agree with it. I think it's been sometimes used to create entry barriers to industries rather than being an effort to make the tech openly available to all companies new and old. With that said. there may be certain patent pools where it 's the proper and perhaps only sensical business method of determining royalties. Dunno, but I suspect for a long time to come the appropriateness of device cost basis will be handled case by case rather than a wholesale (pun intended) banning of the practice.
In any event in today's world it is all-too-common and perfectly legal for the most part. As with many business practices expect it will change over time, but the basic desire of businessmen to maximize profit and disadvantage competitors won't. There will be other creative ways devised to monetize their patents. If SEP's become problematic then they simply decline to play in FRAND-land at all in some cases, maybe choosing to license on an individual basis where they can make their own rules or deny patent use to certain competing companies entirely if they wish. Worse they could turn to privateering as Nokia has done. If that happens you'll see courts getting involved with compulsory licensing which many won't like any better and that creates new issues. Note the EU Commission has mentioned compulsory licensing as a possible cure for private companies using their IP in competitive blocking efforts, another of their perceived potentially illegal unfair-competition problems. If that becomes a focus it could impact companies like Apple who traditionally do not license their patents to others. The EU 's new Unified Patent Court could mandate licensing of privately-held IP in certain cases.
http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2489006
So if device cost ends up someday being held improper as a royalty basis it will probably create even more of a patent thicket and new barriers to entry for start-ups and smaller less wealthy competitors. Inventors and businessmen are going to get their money one way or another. Something to think about anyway before the baby gets tossed out with the bathwater.
If it is unfair as is, the Courts will have to fix it, and I'm not sorry for NPE's if they don't get their paydays. There are multiple billions of devices out there, so a massive shift in royalty payments to apportionment isn't going to impact new SEP creation. It's still a beneficial tool for Corporations to drive standards and create new products. Companies with specific IP that they will not license have always been at risk of having to distribute IP for public benefit, by the Courts or through legislation, but it is uncommon, and apportionment has nothing to do with that.
Either way, entire markets are bypassing royalties, something that the few global players don't have an option to do.
I suspect it was a simple choice of ROI. Somebody said 'how long are we going to flog this dead horse' and all parties met with something they could live with. Isn't the definition of a compromise when all parties leave with an agreement that none are completely happy with?
You honestly believe Steve Jobs would have listened to accountants and to save a few bucks agreed to license his iPhone patents to a competitor for an SEP license if he didn't have to? As I recall he was dang proud of those patents (boy have we patented it)
I can't imagine you believe that. No, It's much more likely it wasn't an illegal Nokia licensing condition in the first place rather than Mr Jobs willingly doing so to save a few dollars. IMO there's no way in hell he would have done so if it could have been avoided.
As I recall there was a lot of (undue) pressure from more than one whacked out judge to settle these things. (BTW: I strongly disagree with the tactics that a couple of US Federal Judges have taken about scope of the law suits and feel that at least one is due to be censured for her uncalled for behavior to narrow this down.) I never said "Steve Jobs would have listened to accountants ... to save a few bucks" but when you get down to it that is one of the kind of decisions a CEO ends up making for the company they are steering. We have zero input from the Apple board members one way or another except that he never got a no confidence vote.
Again we find ourselves flogging a dead horse only to go nowhere. Believe what you like.
One point I feel compelled to point out is that he loved and was proud of the iPhone and this accomplishment. I remember him quite well saying so but not that he was dang proud of those patents (boy have we patented it).
As I recall there was a lot of (undue) pressure from more than one whacked out judge to settle these things. (BTW: I strongly disagree with the tactics that a couple of US Federal Judges have taken about scope of the law suits and feel that at least one is due to be censured for her uncalled for behavior to narrow this down.) I never said "Steve Jobs would have listened to accountants ... to save a few bucks" but when you get down to it that is one of the kind of decisions a CEO ends up making for the company they are steering. We have zero input from the Apple board members one way or another except that he never got a no confidence vote.
Again we find ourselves flogging a dead horse only to go nowhere. Believe what you like.
One point I feel compelled to point out is that he loved and was proud of the iPhone and this accomplishment. I remember him quite well saying so but not that he was dang proud of those patents (boy have we patented it).
I think that the Courts are still working their way through this to the new jurisprudence so while I'm not sure which Judge you are referring to, there are more than a few that need some "re-education".
As an aside, and referring to some unnamed click bait websites (cough: BGR) stop using "gorgeous" to describe every frickin new smartphone that comes out. It's overused and more importantly, these descriptions aren't even appropriate; the public appetite allows few smartphone to even reach classic status within their lifetimes, let alone the upgrade cycle (though I would admit my prejudice that the iPhone 4/4s has achieved that status).