As I suspected would happen if FRAND licensing became a revenue issue for the patent holders some are now declining to play. Recently the IEEE, the standards-bearer for wi-fi standards and licensing policy, indicated they would be changing their rules to the benefit of licensees. That prompted Qualcomm to announce they would no longer issue licenses under the IEEE's new rules, instead going to a case-by-case negotiation with individual implementers.
InterDigital has now made that same decision, determining it's in their best interests to bypass the IEEE when it comes time for new licensing contracts. Those two companies are unlikely to be the only ones deciding to go their own way.
The InterDigital letter explaining their decision is well worth the read.
These companies need to be aware that they might ultimately turn customers into competitors, and there are certainly competitors that will take advantage of this.
Doesn't in the least change my mind on basis being the device, not the finished product, and I find that the IEEE is on the right track.
You probably don't agree.
We will get to see how it plays out down the road.
These companies need to be aware that they might ultimately turn customers into competitors, and there are certainly competitors that will take advantage of this.
Doesn't in the least change my mind on basis being the device, not the finished product, and I find that the IEEE is on the right track.
You probably don't agree.
We will get to see how it plays out down the road.
The "F" in FRAND doesn't apply only to licensees, but to the licensors as well in the opinion of the patent holders.
Actually I agree with the IEEE rules changes. Those who did the actual work and made the investment are the ones that may not agree and thus choose not to play in the first place. Qualcomm is one of those that even Apple would be hesitant to challenge IMHO.
The "F" in FRAND doesn't apply only to licensees, but to the licensors as well in the opinion of the patent holders.
Actually I agree with the IEEE rules changes. Those who did the actual work and made the investment are the ones that may not agree and thus choose not to play in the first place. Qualcomm is one of those that even Apple would be hesitant to challenge IMHO.
Change the rate, not the basis. That is very defendable and fair.
Change the rate, not the basis. That is very defendable and fair.
Qualcomm would disagree and in their particular case their patents (or the IP they control) covers a whole lotta components, in essence the basic ability to act as both a phone and a computing device, and not just some specific chipset. Without a license to Qualcomm properties I doubt there's any smartphone that could legally be sold in the marketplace, so separating a piece of hardware from the device functionality is tough. In addition they've always tied licensing to the device cost, and very successfully done so throughout their existence. They've aggressively covered their bases using licensing rather than hardware is their primary revenue model and won't willingly give away income opportunities anymore than Apple or anyone else would.
Most every company will defend their turf instead of rolling over without a fight. Even China who has no qualms about making demands of Western companies couldn't rein Qualcomm in entirely. They'll still get away with charging Chinese companies royalties based on 65% of the total device cost and even then only if the sale is absolutely restricted to China only. Otherwise it's still the entire device cost (wholesale) as the royalty basis same as it is elsewhere in the world.
Qualcomm would disagree and in their particular case their patents (or the IP they control) covers a whole lotta components, in essence the basic ability to act as both a phone and a computing device, and not just some specific chipset. Without a license to Qualcomm properties I doubt there's any smartphone that could legally be sold in the marketplace, so separating a piece of hardware from the device functionality is tough. In addition they've always tied licensing to the device cost, and very successfully done so throughout their existence. They've aggressively covered their bases using licensing rather than hardware is their primary revenue model and won't willingly give away income opportunities anymore than Apple or anyone else would.
Most every company will defend their turf instead of rolling over without a fight. Even China who has no qualms about making demands of Western companies couldn't rein Qualcomm in entirely. They'll still get away with charging Chinese companies royalties based on 65% of the total device cost and even then only if the sale is absolutely restricted to China only. Otherwise it's still the entire device cost (wholesale) as the royalty basis same as it is elsewhere in the world.
Qualcomm has a problem in that they sell into a market that is rife with low cost devices, yet the same processor is specced in high end devices as well. It would be easy to dispute the "fair" in basis in that case, as the high end user is penalized for having a superior product, build, OS or ecosystem. In Apple's case, they do not use the processor, so again, the basis would be only the communication abilities, and in this case, they are purchasing a Broadcom device for WiFi and a Qualcomm device only for cellular capabilities. Intel, or even Samsung, may turn out to provide a better deal to Apple in the future than Qualcomm; i.e., the competitive aspect of all of this.
You see the problem that the courts would have? Using basis of the product sale price, or even build price, adds no additional value to a premium build, so a potential licensee would have standing to sue just on those facts.
Qualcomm has a problem in that they sell into a market that is rife with low cost devices, yet the same processor is specced in high end devices as well. It would be easy to dispute the "fair" in basis in that case, as the high end user is penalized for having a superior product, build, OS or ecosystem. In Apple's case, they do not use the processor, so again, the basis would be only the communication abilities, and in this case, they are purchasing a Broadcom device for WiFi and a Qualcomm device only for cellular capabilities. Intel, or even Samsung, may turn out to provide a better deal to Apple in the future than Qualcomm; i.e., the competitive aspect of all of this.
You see the problem that the courts would have? Using basis of the product sale price, or even build price, adds no additional value to a premium build, so a potential licensee would have standing to sue just on those facts.
Yes I can certainly understand your opinion but if the basis percentage is openly published and available for review, and consistently applied across the board including how cross licensing credits are determined I personally think it will pass legal muster just fine. In the case of Qualcomm it is AFAIK.
Even Samsung, Intel and Broadcomm are subject to paying Qualcomm royalties for the applicable IP that runs their chipset. Buying from one of them instead won't avoid paying Qualcomm their due. This was pretty much settled several years ago when Broadcomm and Qualcomm had their little spat.
Where Qualcomm had allowed licensees to deduct the price of the Qualcomm-supplied chipset from the patent royalties due, undercutting Broadcomm who had to pay the entire undiscounted royalty for their chips, when the dust settled the ground was level. Broadcomm now pays no higher royalties than those buying Qualcomm chips and in fact collected a few hundred million from Qualcomm licensing of Broadcomm IP.
Yes I can certainly understand your opinion but if the basis percentage openly published and consistently applied across the board I personally think it will pass legal muster just fine. In the case of Qualcomm it is.
My position, in the U.S. at least, is that the Courts are moving away from basis on finished product, and the IEEE's position is acknowledging that.
As I previously stated, Qualcomm might need to change its rates to generate equivalent earnings, but of course, that would have an adverse effect on selling massive volumes of its devices, and would further open their current markets to competition from other parties, such as Samsung and MediaTek.
My position, in the U.S. at least, is that the Courts are moving away from basis on finished product, and the IEEE's position is acknowledging that
As I previously stated, Qualcomm might need to change its rates to generate equivalent earnings, but of course, that would have an adverse effect on selling massive volumes of its devices, and would further open their current markets to competition from other parties, such as Samsung and MediaTek.
Now Nokia and Ericsson have also published notice that they will not be offering licensing under the IEEE FRAND standards any longer, joining Qualcomm and Interdigital. That's four of the larger entities that contributed to the standard deciding not to play if the rules are going to change after the fact.
“Nokia believes that the new IEEE patent policy removes incentives for companies to make their patents available for licensing under IEEE standards in the future, and the lack of compatibility with other standards organisations sets IEEE apart from the standardisation community.” The statement ended: “Nokia notified IEEE before the changes were adopted that it would not be prepared to make licences available under the new patent policy, but that it would continue to honour commitments already given under the previous policy. Nokia will stick to that position and is prepared to offer licences under its future SEPs on the previous patent policy terms.”
The new IEEE patent policy significantly shifts the balance of power in licensing negotiations over SEPs between companies contributing to a standard and those implementing the patents. Among a range of changes, it reduces the chances of patent owners obtaining injunctive relief against potential licensees who say they are willing to negotiate deals but then fail to agree terms and shifts the basis for royalty payments so that they relate to a patent’s contribution to a standard rather than to the value of an overall device. "
Now Nokia and Ericsson have also published notice that they will not be offering licensing under the IEEE FRAND standards any longer, joining Qualcomm and Interdigital. That's four of the larger entities that contributed to the standard deciding not to play if the rules are going to change after the fact.
“Nokia believes that the new IEEE patent policy removes incentives for companies to make their patents available for licensing under IEEE standards in the future, and the lack of compatibility with other standards organisations sets IEEE apart from the standardisation community.” The statement ended: “Nokia notified IEEE before the changes were adopted that it would not be prepared to make licences available under the new patent policy, but that it would continue to honour commitments already given under the previous policy. Nokia will stick to that position and is prepared to offer licences under its future SEPs on the previous patent policy terms.”
The new IEEE patent policy significantly shifts the balance of power in licensing negotiations over SEPs between companies contributing to a standard and those implementing the patents. Among a range of changes, it reduces the chances of patent owners obtaining injunctive relief against potential licensees who say they are willing to negotiate deals but then fail to agree terms and shifts the basis for royalty payments so that they relate to a patent’s contribution to a standard rather than to the value of an overall device. "
There's going to be a lot of difficulty before the dust finally settles.
This is another "watershed moment" IMO. The European High Court has finally offered guidance on what steps are required before considering an injunction over SEP claims.
http://www.essentialpatentblog.com/
First Step – Prior Notice to Infringer. The court thus ruled that, before bringing suit for injunctive relief, an SEP owner must “first … alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed.” One reason for this is that, because there are a large number of patents that may be essential to a standard, the accused infringer may not “necessarily be aware that it is using the teaching of an SEP that is both valid and essential to a standard.”
Second Step – Written FRAND Terms. If, after notice, the alleged infringer “expressed its willingness to conclude” a FRAND license, the SEP owner must then provide “a specific, written offer for a licence on FRAND terms … specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated.” The court explained it was proper to have the SEP owner make such an offer, who may have nonpublic agreements with other licensees, since the patent owner “is better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer.”
Accused Infringer’s Obligation. An accused infringer has its own obligations before it can take advantage of a FRAND defense.
First, if an accused infringer objects to the proferred license offer, it must submit, “promptly and in writing, a specific counter-offer that corresponds to FRAND terms.” This response must be in “good faith” with “no delaying tactics”:
t is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.
Second, if its counter-offer is rejected, an accused infringer who already has been selling or otherwise using the technology before a license is entered must provide “appropriate security” for the past use of the technology and render an account of same (meaning set aside money i a separate account to pay for possible royalties):
The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.
Third-Party Royalty Determination. If the parties do not reach agreement, they can seek a “royalty determined by an independent third party, by decision without delay.”
Can Challenge Patent. The court ruled that, because the standard setting body did not determine essentiality or validity, the accused infringer should be allowed to challenge whether the patent is infringed, essential or valid during the negotiations or to reserve the right to do so in the future.
No Abuse If Seeking Past Money Damages. The court ruled that “seeking the rendering of accounts in relation to past acts of use of [an] SEP or an award of damages in respect of those acts” are not an abuse of dominance, because such actions “do not have a direct impact on products complying with the standard … appearing or remaining on the market.”
Comments
As I suspected would happen if FRAND licensing became a revenue issue for the patent holders some are now declining to play. Recently the IEEE, the standards-bearer for wi-fi standards and licensing policy, indicated they would be changing their rules to the benefit of licensees. That prompted Qualcomm to announce they would no longer issue licenses under the IEEE's new rules, instead going to a case-by-case negotiation with individual implementers.
http://www.bloomberg.com/news/articles/2015-02-11/qualcomm-says-new-wi-fi-standard-rules-unfair-may-not-take-part
InterDigital has now made that same decision, determining it's in their best interests to bypass the IEEE when it comes time for new licensing contracts. Those two companies are unlikely to be the only ones deciding to go their own way.
The InterDigital letter explaining their decision is well worth the read.
http://www.iam-media.com/blog/Detail.aspx?g=8c9676dd-6bbd-4d6c-b3e5-9a5ddeb36581
These companies need to be aware that they might ultimately turn customers into competitors, and there are certainly competitors that will take advantage of this.
Doesn't in the least change my mind on basis being the device, not the finished product, and I find that the IEEE is on the right track.
You probably don't agree.
We will get to see how it plays out down the road.
Actually I agree with the IEEE rules changes. Those who did the actual work and made the investment are the ones that may not agree and thus choose not to play in the first place. Qualcomm is one of those that even Apple would be hesitant to challenge IMHO.
The "F" in FRAND doesn't apply only to licensees, but to the licensors as well in the opinion of the patent holders.
Actually I agree with the IEEE rules changes. Those who did the actual work and made the investment are the ones that may not agree and thus choose not to play in the first place. Qualcomm is one of those that even Apple would be hesitant to challenge IMHO.
Change the rate, not the basis. That is very defendable and fair.
Most every company will defend their turf instead of rolling over without a fight. Even China who has no qualms about making demands of Western companies couldn't rein Qualcomm in entirely. They'll still get away with charging Chinese companies royalties based on 65% of the total device cost and even then only if the sale is absolutely restricted to China only. Otherwise it's still the entire device cost (wholesale) as the royalty basis same as it is elsewhere in the world.
Qualcomm would disagree and in their particular case their patents (or the IP they control) covers a whole lotta components, in essence the basic ability to act as both a phone and a computing device, and not just some specific chipset. Without a license to Qualcomm properties I doubt there's any smartphone that could legally be sold in the marketplace, so separating a piece of hardware from the device functionality is tough. In addition they've always tied licensing to the device cost, and very successfully done so throughout their existence. They've aggressively covered their bases using licensing rather than hardware is their primary revenue model and won't willingly give away income opportunities anymore than Apple or anyone else would.
Most every company will defend their turf instead of rolling over without a fight. Even China who has no qualms about making demands of Western companies couldn't rein Qualcomm in entirely. They'll still get away with charging Chinese companies royalties based on 65% of the total device cost and even then only if the sale is absolutely restricted to China only. Otherwise it's still the entire device cost (wholesale) as the royalty basis same as it is elsewhere in the world.
Qualcomm has a problem in that they sell into a market that is rife with low cost devices, yet the same processor is specced in high end devices as well. It would be easy to dispute the "fair" in basis in that case, as the high end user is penalized for having a superior product, build, OS or ecosystem. In Apple's case, they do not use the processor, so again, the basis would be only the communication abilities, and in this case, they are purchasing a Broadcom device for WiFi and a Qualcomm device only for cellular capabilities. Intel, or even Samsung, may turn out to provide a better deal to Apple in the future than Qualcomm; i.e., the competitive aspect of all of this.
You see the problem that the courts would have? Using basis of the product sale price, or even build price, adds no additional value to a premium build, so a potential licensee would have standing to sue just on those facts.
Even Samsung, Intel and Broadcomm are subject to paying Qualcomm royalties for the applicable IP that runs their chipset. Buying from one of them instead won't avoid paying Qualcomm their due. This was pretty much settled several years ago when Broadcomm and Qualcomm had their little spat.
Where Qualcomm had allowed licensees to deduct the price of the Qualcomm-supplied chipset from the patent royalties due, undercutting Broadcomm who had to pay the entire undiscounted royalty for their chips, when the dust settled the ground was level. Broadcomm now pays no higher royalties than those buying Qualcomm chips and in fact collected a few hundred million from Qualcomm licensing of Broadcomm IP.
Yes I can certainly understand your opinion but if the basis percentage openly published and consistently applied across the board I personally think it will pass legal muster just fine. In the case of Qualcomm it is.
My position, in the U.S. at least, is that the Courts are moving away from basis on finished product, and the IEEE's position is acknowledging that.
As I previously stated, Qualcomm might need to change its rates to generate equivalent earnings, but of course, that would have an adverse effect on selling massive volumes of its devices, and would further open their current markets to competition from other parties, such as Samsung and MediaTek.
“Nokia believes that the new IEEE patent policy removes incentives for companies to make their patents available for licensing under IEEE standards in the future, and the lack of compatibility with other standards organisations sets IEEE apart from the standardisation community.” The statement ended: “Nokia notified IEEE before the changes were adopted that it would not be prepared to make licences available under the new patent policy, but that it would continue to honour commitments already given under the previous policy. Nokia will stick to that position and is prepared to offer licences under its future SEPs on the previous patent policy terms.”
The new IEEE patent policy significantly shifts the balance of power in licensing negotiations over SEPs between companies contributing to a standard and those implementing the patents. Among a range of changes, it reduces the chances of patent owners obtaining injunctive relief against potential licensees who say they are willing to negotiate deals but then fail to agree terms and shifts the basis for royalty payments so that they relate to a patent’s contribution to a standard rather than to the value of an overall device. "
There's going to be a lot of difficulty before the dust finally settles.
http://www.iam-media.com/blog/Detail.aspx?g=d07d0bde-ebd6-495a-aa72-4eecb9dac67d
Now Nokia and Ericsson have also published notice that they will not be offering licensing under the IEEE FRAND standards any longer, joining Qualcomm and Interdigital. That's four of the larger entities that contributed to the standard deciding not to play if the rules are going to change after the fact.
“Nokia believes that the new IEEE patent policy removes incentives for companies to make their patents available for licensing under IEEE standards in the future, and the lack of compatibility with other standards organisations sets IEEE apart from the standardisation community.” The statement ended: “Nokia notified IEEE before the changes were adopted that it would not be prepared to make licences available under the new patent policy, but that it would continue to honour commitments already given under the previous policy. Nokia will stick to that position and is prepared to offer licences under its future SEPs on the previous patent policy terms.”
The new IEEE patent policy significantly shifts the balance of power in licensing negotiations over SEPs between companies contributing to a standard and those implementing the patents. Among a range of changes, it reduces the chances of patent owners obtaining injunctive relief against potential licensees who say they are willing to negotiate deals but then fail to agree terms and shifts the basis for royalty payments so that they relate to a patent’s contribution to a standard rather than to the value of an overall device. "
There's going to be a lot of difficulty before the dust finally settles.
http://www.iam-media.com/blog/Detail.aspx?g=d07d0bde-ebd6-495a-aa72-4eecb9dac67d
So this is a watershed moment. Good.
Lets see what happens.
http://www.essentialpatentblog.com/
First Step – Prior Notice to Infringer. The court thus ruled that, before bringing suit for injunctive relief, an SEP owner must “first … alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed.” One reason for this is that, because there are a large number of patents that may be essential to a standard, the accused infringer may not “necessarily be aware that it is using the teaching of an SEP that is both valid and essential to a standard.”
Second Step – Written FRAND Terms. If, after notice, the alleged infringer “expressed its willingness to conclude” a FRAND license, the SEP owner must then provide “a specific, written offer for a licence on FRAND terms … specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated.” The court explained it was proper to have the SEP owner make such an offer, who may have nonpublic agreements with other licensees, since the patent owner “is better placed to check whether its offer complies with the condition of non-discrimination than is the alleged infringer.”
Accused Infringer’s Obligation. An accused infringer has its own obligations before it can take advantage of a FRAND defense.
First, if an accused infringer objects to the proferred license offer, it must submit, “promptly and in writing, a specific counter-offer that corresponds to FRAND terms.” This response must be in “good faith” with “no delaying tactics”:
t is for the alleged infringer diligently to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics.
Second, if its counter-offer is rejected, an accused infringer who already has been selling or otherwise using the technology before a license is entered must provide “appropriate security” for the past use of the technology and render an account of same (meaning set aside money i a separate account to pay for possible royalties):
The calculation of that security must include, inter alia, the number of the past acts of use of the SEP, and the alleged infringer must be able to render an account in respect of those acts of use.
Third-Party Royalty Determination. If the parties do not reach agreement, they can seek a “royalty determined by an independent third party, by decision without delay.”
Can Challenge Patent. The court ruled that, because the standard setting body did not determine essentiality or validity, the accused infringer should be allowed to challenge whether the patent is infringed, essential or valid during the negotiations or to reserve the right to do so in the future.
No Abuse If Seeking Past Money Damages. The court ruled that “seeking the rendering of accounts in relation to past acts of use of [an] SEP or an award of damages in respect of those acts” are not an abuse of dominance, because such actions “do not have a direct impact on products complying with the standard … appearing or remaining on the market.”