Apple, Ericsson end legal battle with new patent licensing agreement

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in iPhone
Swedish telecoms firm Ericsson announced a fresh patent licensing agreement with Apple on Monday, finally resolving a year-long legal fight between the two companies.




Ericsson didn't identify the exact terms of the deal, but the company's revenue from intellectual property in 2015 -- including the new Apple deal -- is expected to reach between 13 to 14 billion crowns, or $1.52 billion to $1.64 billion, Reuters reported. That's an increase from 9.9 billion crowns last year.

An investment bank, ABG Sundal Collier, estimated that Apple is being charged 0.5 percent of the revenue from iPhones and iPads. Since the company pulled in $32.2 billion in revenue from iPhones during the September quarter alone, that could translate into hundreds of millions of dollars per year.

Ericsson's chief intellectual property officer, Kasim Alfalahi, said that the licenses covered 2G, 3G, and LTE cellular connections.

"It means we can continue to work with Apple in areas such as 5G radio network and optimization of the network," he commented to Reuters.

Apple initially sued Ericsson in January, claiming excessive royalties on some of Ericsson's LTE technology. The situation quickly escalated, with Ericsson unleashing lawsuits and U.S. International Trade Commission complaints. By May, Ericsson had opened several European lawsuits as well.

Comments

  • Reply 1 of 12
    tmaytmay Posts: 6,311member
    Probably something like $3 a unit, so $750M - $1B a year for Ericsson as a guesstimate. Both parties should be happy with the deal.
  • Reply 2 of 12
    What stinks with these kinds of licensing deals is that you pay a percentage of the final price of the phone. If you make a cheap phone, you pay less than if you made an expensive phone.
    Used car deals for electronics.
  • Reply 3 of 12
    foggyhillfoggyhill Posts: 4,767member
    tmay said:
    Probably something like $3 a unit, so $750M - $1B a year for Ericsson as a guesstimate. Both parties should be happy with the deal.
    I doubt it's that much at all. That would be ridiculously high: $3-400M a years seems closer to the mark.
    Still good free money for doing nothing really.  good things these patents aren't exactly new so it isn't "eternal".

    Yes, applying this to the margin of the phone is absurd and this has got to the stop in general.

    In what other industry does that happen!! So, if you're brand you built for 100 years allowed you to make 99% margin, the widget maker makes money off that!! Crazy.

    Considering these things should already been covered by buying from Qualcom, this is even more absurd.

    There is no advantage really for staying with Qualcom if they can just take the licenses they need and develop their own and pay the same amount.

    They'll even pay less probably the way this shakedown is occuring.

  • Reply 4 of 12
    How do we know the royalty is being applied to the retail price of the iPhone? It could be a fixed amount on the baseband chip that just HAPPENS to be 0.5% (or similar) of the retail price of an iPhone. It doesn't mean that's how they are calculating it.

    Regardless, it's fair to say Apple won this round. It was Apple who first Ericsson sued over high royalty rates, and if they didn't get a good deal then they would just continue with the court case.
  • Reply 5 of 12
    How do we know the royalty is being applied to the retail price of the iPhone? It could be a fixed amount on the baseband chip that just HAPPENS to be 0.5% (or similar) of the retail price of an iPhone. It doesn't mean that's how they are calculating it.
    Because all iPhones are not the same price. 6 different prices for 6s, 4 different prices for the 6, and 4 for the 5s.
  • Reply 6 of 12
    tmaytmay Posts: 6,311member
    foggyhill said:
    tmay said:
    Probably something like $3 a unit, so $750M - $1B a year for Ericsson as a guesstimate. Both parties should be happy with the deal.
    I doubt it's that much at all. That would be ridiculously high: $3-400M a years seems closer to the mark.
    Still good free money for doing nothing really.  good things these patents aren't exactly new so it isn't "eternal".

    Yes, applying this to the margin of the phone is absurd and this has got to the stop in general.

    In what other industry does that happen!! So, if you're brand you built for 100 years allowed you to make 99% margin, the widget maker makes money off that!! Crazy.

    Considering these things should already been covered by buying from Qualcom, this is even more absurd.

    There is no advantage really for staying with Qualcom if they can just take the licenses they need and develop their own and pay the same amount.

    They'll even pay less probably the way this shakedown is occuring.

    I agree that the component royalty with basis on the finished value is unfair, but overall, this isn't a bad deal for Apple. Figure out the ASP for iPad LTE models and iPhones and it doesn't look as much of a money grab by Ericsson.

    On the other hand, I have zero tolerance for those egregious cases of copying finished products, including the UI. Those cases should be subject to stiff penalties with the finished value being basis for proscribed penalties.
  • Reply 7 of 12
    evilutionevilution Posts: 1,399member
    You just know that Ericsson are just going to waste the money trying to make something to compete with Apple and fail.
  • Reply 8 of 12
    How do we know the royalty is being applied to the retail price of the iPhone? It could be a fixed amount on the baseband chip that just HAPPENS to be 0.5% (or similar) of the retail price of an iPhone. It doesn't mean that's how they are calculating it.
    Because all iPhones are not the same price. 6 different prices for 6s, 4 different prices for the 6, and 4 for the 5s.

    You have any source that shows Apple is paying a different royalty rate for each device? I didn't know the details for the licensing agreement were public.
  • Reply 9 of 12
    gatorguygatorguy Posts: 24,176member
    FWIW Ericsson traditionally collects a percentage of the wholesale selling cost for a finished device rather than on some specific component like a radio chip. In the past it was supposedly set at 1.5% as the initial offer. Negotiations could of course set a lower percentage and in the case of Apple my guess would be that it did. But I would also guess that the royalties are still based on a wholesale finished device price rather than a fixed amount. 
  • Reply 10 of 12
    Because all iPhones are not the same price. 6 different prices for 6s, 4 different prices for the 6, and 4 for the 5s.

    You have any source that shows Apple is paying a different royalty rate for each device? I didn't know the details for the licensing agreement were public.
    It's all guesses and analysis now isn't it?
    Apparently that's how they structured their licenses in the past.
  • Reply 11 of 12
    jfanningjfanning Posts: 3,398member
    evilution said:
    You just know that Ericsson are just going to waste the money trying to make something to compete with Apple and fail.

    You do actually realise what Ericsson does these days?
    Gilliam_Bates
  • Reply 12 of 12
    jfanning said:
    evilution said:
    You just know that Ericsson are just going to waste the money trying to make something to compete with Apple and fail.

    You do actually realise what Ericsson does these days?
    Exactly my thought as well. Didn't know Apple were in the business of making cellular networks these days …but what do I know.
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