Qualcomm CEO Steve Mollenkopf: "Apple's complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property."
No, it's not, as I'm sure Mollenkopf knows very well. When Qualcomm (like many other companies, including Apple) allowed certain of their patents to be included in a telecom standard that is now unavoidable by any company that makes working mobile phones at all, they specifically agreed to a per-device, FRAND-contract-stipulated fee for those patents. This suit is about how Qualcomm has been charging much more than that fee, charging different amounts to different phone makers and for different phones, and in general trampling all over the terms of the contract they willingly entered.
This is hardly "frivolous" (Thinkman); it cuts to the very core of how telecom standards can function without everyone in the business being held hostage by any one company that doesn't care what it signed. It is also not a "zero sum game" (Thinkman); if Apple buys these chips from Intel, then Intel can simply send the FRAND-contract-stipulated royalty to Qualcomm, and Qualcomm can scream for more, but not receive more. That is perfectly legal under the terms to which Qualcomm agreed.
Have you read the agreement they entered into with IEEE as a condition of including their patents in the 3G/4G standards? Do you know the IEEE position regarding patent royalties? I suspect not. I have and they don't make the all the kinds of stipulations and restrictions you may presume they do even if it might be good if they did, or at least good if you are a buyer of the rights and not a seller. There's that issue with "fair"
It was only February of 2015 when they finally got around to better defining what they considered to be "fair" licensing terms, long after the patents were committed and the standards agreed on.
IEEE members contributing to the standards pool:
must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees (ie, cannot exclude Apple even if they might like to for whatever reason)
may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses (this is why they were allowed to file for an import ban, sometimes inaccurately called an injunction, at the ITC last month. Apple is presumably no longer willing to negotiate for a license, at least not outside court)
may insist that licensees offer them reciprocal licenses under their own patents (aka cross-licensing, and yeah I know some don't think that's fair but it's a common industry practice and not just in tech)
may arbitrate disputes over FRAND terms
may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product (there's that ill-defined smallest salable component thing again and coupled with an equally ill-defined value to the overall product)
should ensure that subsequent purchasers of these patents (example would be another modem maker) agree to abide by the same commitments.
BTW, the IEEE cleared these terms thru the US DOJ before approving them.
The ITU which also handles standards necessary for wireless communications on our smartphones has not yet issued any clarity on what constitutes FRaND and based on their application form prefers to stay hands-off. Negotiations for a license are specifically mentioned as being between the licensor and licensee. If you are really interested you can access their forms and patent license terms here: http://www.itu.int/en/ITU-T/ipr/Pages/default.aspx
And do you know for sure that Qualcomm had kept their end of the deal when they accepted SEP status on their patents? All this means nothing if you can't prove Qualcomm negotiated their licenses, even by their own FRAND terms, when negotiating with Apple or any other entity that needs to use their SEP's. Have you read the license contract between Qualcomm and Apple? Does that contract meet the FRAND standards that Qualcomm is obligated to oblige by? Or you don't know?
I'm sure Apple must have read what you posted and they for sure would know if Qualcomm negotiated in good faith and FRAND under Qualcomm own terms. China and S. Korea has already determined that Qualcomm did not negotiate their SEP licenses under FRAND terms. You think China "FTC" and S. Korea "FTC" didn't have access to what you posted, so they made up their own FRAND standards, just so that each of them can fine Qualcomm nearly $1B?
Two things: I don't have to prove anything to Apple, a court or to you. In this particular instance NO ONE knows yet, which is why it's set to go to court unless the parties settle in the meantime as Nokia and Apple did a few years back and LG and Apple more recently. If it settles then no one outside of the two parties involved still will know. At some point in the past it's should be plainly obvious to you that Apple at least begrudgingly considered Qualcomm's terms and royalty rates "fair" since they signed a negotiated contract with them rather than suing. Now today they don't think it's "fair" and decided to file a lawsuit that could determine whether it is or is not.
Secondly, rather than guessing I actually quoted for you what the IEEE requires as a condition of including a companies IP in a standard, their definition of what constitutes FRaND as far as that standards body is concerned. China and Qualcomm settled on a limited set of rules for Qualcomm and the Chinese manufacturers needing a license rather than finishing out the process with a ruling on Qualcomm general licensing policies, declining to decide whether they are legal or illegal (which in effect left it legal).
Don't get upset and seemingly be so resistant to learning something you did not already know.
And keep in mind that lawsuits can be used as part of a business negotiation, with no intent of the filing party to actually complete the process thru to the end if they can come a mutually agreeable contract in the meantime, perhaps meeting somewhere in the middle. That's what happened in the Nokia/Apple dispute.
Qualcomm CEO Steve Mollenkopf: "Apple's complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property."
No, it's not, as I'm sure Mollenkopf knows very well. When Qualcomm (like many other companies, including Apple) allowed certain of their patents to be included in a telecom standard that is now unavoidable by any company that makes working mobile phones at all, they specifically agreed to a per-device, FRAND-contract-stipulated fee for those patents. This suit is about how Qualcomm has been charging much more than that fee, charging different amounts to different phone makers and for different phones, and in general trampling all over the terms of the contract they willingly entered.
This is hardly "frivolous" (Thinkman); it cuts to the very core of how telecom standards can function without everyone in the business being held hostage by any one company that doesn't care what it signed. It is also not a "zero sum game" (Thinkman); if Apple buys these chips from Intel, then Intel can simply send the FRAND-contract-stipulated royalty to Qualcomm, and Qualcomm can scream for more, but not receive more. That is perfectly legal under the terms to which Qualcomm agreed.
Have you read the agreement they entered into with IEEE as a condition of including their patents in the 3G/4G standards? Do you know the IEEE position regarding patent royalties? I suspect not. I have and they don't make the all the kinds of stipulations and restrictions you may presume they do even if it might be good if they did, or at least good if you are a buyer of the rights and not a seller. There's that issue with "fair"
It was only February of 2015 when they finally got around to better defining what they considered to be "fair" licensing terms, long after the patents were committed and the standards agreed on.
IEEE members contributing to the standards pool:
must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees (ie, cannot exclude Apple even if they might like to for whatever reason)
may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses (this is why they were allowed to file for an import ban, sometimes inaccurately called an injunction, at the ITC last month. Apple is presumably no longer willing to negotiate for a license, at least not outside court)
may insist that licensees offer them reciprocal licenses under their own patents (aka cross-licensing, and yeah I know some don't think that's fair but it's a common industry practice and not just in tech)
may arbitrate disputes over FRAND terms
may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product (there's that ill-defined smallest salable component thing again and coupled with an equally ill-defined value to the overall product)
should ensure that subsequent purchasers of these patents (example would be another modem maker) agree to abide by the same commitments.
BTW, the IEEE cleared these terms thru the US DOJ before approving them.
The ITU which also handles standards necessary for wireless communications on our smartphones has not yet issued any clarity on what constitutes FRaND and based on their application form prefers to stay hands-off. Negotiations for a license are specifically mentioned as being between the licensor and licensee. If you are really interested you can access their forms and patent license terms here: http://www.itu.int/en/ITU-T/ipr/Pages/default.aspx
I have some very simple questions for you, based on your points above:
- Do you agree with China and SK fining Qualcomm? - Do you think Apple will win or lose their case against Qualcomm? - Do you think Qualcomm with win or lose against the FTC?
1. Based on what I've read yes I do 2. 50/50 chance IMHO 3. Neither win nor lose. They'll settle, tho may agree to some fine in doing so. That's what they did in China.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
That's common industry practice, taking a percentage of the value. It's not specific to Qualcomm.
Fair? That depends on whether Ericthehalfbee developed the tech and is licensing the patents for as much as can be deemed reasonable, or whether Ericthehalfbee needs a license to use it in order to sell something for profit. Which Ericthehalfbee is asking, Eric-the-inventor or Eric-the-marketer?
That's not what I asked. It's not common industry practice. It does occur in some industries, but that doesn't make it common or standard across all industries.
I want to to provide a simple answer on if you think it's appropriate for Apple to pay 3x and Vertu to pay 20x the royalty rate for the same part just because it goes into a more expensive device. Yes or no will do.
Qualcomm CEO Steve Mollenkopf: "Apple's complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property."
No, it's not, as I'm sure Mollenkopf knows very well. When Qualcomm (like many other companies, including Apple) allowed certain of their patents to be included in a telecom standard that is now unavoidable by any company that makes working mobile phones at all, they specifically agreed to a per-device, FRAND-contract-stipulated fee for those patents. This suit is about how Qualcomm has been charging much more than that fee, charging different amounts to different phone makers and for different phones, and in general trampling all over the terms of the contract they willingly entered.
This is hardly "frivolous" (Thinkman); it cuts to the very core of how telecom standards can function without everyone in the business being held hostage by any one company that doesn't care what it signed. It is also not a "zero sum game" (Thinkman); if Apple buys these chips from Intel, then Intel can simply send the FRAND-contract-stipulated royalty to Qualcomm, and Qualcomm can scream for more, but not receive more. That is perfectly legal under the terms to which Qualcomm agreed.
Have you read the agreement they entered into with IEEE as a condition of including their patents in the 3G/4G standards? Do you know the IEEE position regarding patent royalties? I suspect not. I have and they don't make the all the kinds of stipulations and restrictions you may presume they do even if it might be good if they did, or at least good if you are a buyer of the rights and not a seller. There's that issue with "fair"
It was only February of 2015 when they finally got around to better defining what they considered to be "fair" licensing terms, long after the patents were committed and the standards agreed on.
IEEE members contributing to the standards pool:
must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees (ie, cannot exclude Apple even if they might like to for whatever reason)
may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses (this is why they were allowed to file for an import ban, sometimes inaccurately called an injunction, at the ITC last month. Apple is presumably no longer willing to negotiate for a license, at least not outside court)
may insist that licensees offer them reciprocal licenses under their own patents (aka cross-licensing, and yeah I know some don't think that's fair but it's a common industry practice and not just in tech)
may arbitrate disputes over FRAND terms
may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product (there's that ill-defined smallest salable component thing again and coupled with an equally ill-defined value to the overall product)
should ensure that subsequent purchasers of these patents (example would be another modem maker) agree to abide by the same commitments.
BTW, the IEEE cleared these terms thru the US DOJ before approving them.
The ITU which also handles standards necessary for wireless communications on our smartphones has not yet issued any clarity on what constitutes FRaND and based on their application form prefers to stay hands-off. Negotiations for a license are specifically mentioned as being between the licensor and licensee. If you are really interested you can access their forms and patent license terms here: http://www.itu.int/en/ITU-T/ipr/Pages/default.aspx
I have some very simple questions for you, based on your points above:
- Do you agree with China and SK fining Qualcomm? - Do you think Apple will win or lose their case against Qualcomm? - Do you think Qualcomm with win or lose against the FTC?
1. Based on what I've read yes I do 2. 50/50 chance IMHO 3. Neither win nor lose. They'll settle, tho may agree to some fine in doing so. That's what they did in China.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
That's common industry practice, taking a percentage of the value. It's not specific to Qualcomm.
Fair? That depends on whether Ericthehalfbee developed the tech and is licensing the patents for as much as can be deemed reasonable, or whether Ericthehalfbee needs a license to use it in order to sell something for profit. Which Ericthehalfbee is asking, Eric-the-inventor or Eric-the-marketer?
That's not what I asked. It's not common industry practice. It does occur in some industries, but that doesn't make it common or standard across all industries.
I want to to provide a simple answer on if you think it's appropriate for Apple to pay 3x and Vertu to pay 20x the royalty rate for the same part just because it goes into a more expensive device. Yes or no will do.
It is ABSOLUTELY a common practice as you could discover for yourself with a bit of research. Don't try to twist that into standard practice as you tried to sneak in there. You know the difference.The largest contributors to major communications standard pools, Alcatel-Lucent, Ericsson, InterDigital, Nokia and Qualcomm, all base their royalties at least in part on a percentage of the device value. Yes, that makes it common.
...and I gave you my answer to exactly what you asked: Whether it should be seen as fair. You just don't like the answer and obviously have no intention in taking part in a proper and honest discussion of it. From Apple's viewpoint they would like to show it is not fair. It reduces their profit. In the case of patent owners they would like to show that it is fair. It earns them money for engineering work they've put in, and like most companies they like high margins. In the view of a small independent inventor they would be more likely to agree that it's a fair royalty basis too even if they can't get it themselves. It's pays them for their inventiveness and creativity which might come around just once in their lives.
So "Fair" isn't one-sided as you would like to portray it and cannot be pigeon-holed into a simple yes or no. You knew that when you wrote it. Nice try at wordplay tho. BTW do you still steal from your co-workers? A simple yes or no will do.
Qualcomm CEO Steve Mollenkopf: "Apple's complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property."
No, it's not, as I'm sure Mollenkopf knows very well. When Qualcomm (like many other companies, including Apple) allowed certain of their patents to be included in a telecom standard that is now unavoidable by any company that makes working mobile phones at all, they specifically agreed to a per-device, FRAND-contract-stipulated fee for those patents. This suit is about how Qualcomm has been charging much more than that fee, charging different amounts to different phone makers and for different phones, and in general trampling all over the terms of the contract they willingly entered.
This is hardly "frivolous" (Thinkman); it cuts to the very core of how telecom standards can function without everyone in the business being held hostage by any one company that doesn't care what it signed. It is also not a "zero sum game" (Thinkman); if Apple buys these chips from Intel, then Intel can simply send the FRAND-contract-stipulated royalty to Qualcomm, and Qualcomm can scream for more, but not receive more. That is perfectly legal under the terms to which Qualcomm agreed.
Have you read the agreement they entered into with IEEE as a condition of including their patents in the 3G/4G standards? Do you know the IEEE position regarding patent royalties? I suspect not. I have and they don't make the all the kinds of stipulations and restrictions you may presume they do even if it might be good if they did, or at least good if you are a buyer of the rights and not a seller. There's that issue with "fair"
It was only February of 2015 when they finally got around to better defining what they considered to be "fair" licensing terms, long after the patents were committed and the standards agreed on.
IEEE members contributing to the standards pool:
must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees (ie, cannot exclude Apple even if they might like to for whatever reason)
may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses (this is why they were allowed to file for an import ban, sometimes inaccurately called an injunction, at the ITC last month. Apple is presumably no longer willing to negotiate for a license, at least not outside court)
may insist that licensees offer them reciprocal licenses under their own patents (aka cross-licensing, and yeah I know some don't think that's fair but it's a common industry practice and not just in tech)
may arbitrate disputes over FRAND terms
may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product (there's that ill-defined smallest salable component thing again and coupled with an equally ill-defined value to the overall product)
should ensure that subsequent purchasers of these patents (example would be another modem maker) agree to abide by the same commitments.
BTW, the IEEE cleared these terms thru the US DOJ before approving them.
The ITU which also handles standards necessary for wireless communications on our smartphones has not yet issued any clarity on what constitutes FRaND and based on their application form prefers to stay hands-off. Negotiations for a license are specifically mentioned as being between the licensor and licensee. If you are really interested you can access their forms and patent license terms here: http://www.itu.int/en/ITU-T/ipr/Pages/default.aspx
I have some very simple questions for you, based on your points above:
- Do you agree with China and SK fining Qualcomm? - Do you think Apple will win or lose their case against Qualcomm? - Do you think Qualcomm with win or lose against the FTC?
1. Based on what I've read yes I do 2. 50/50 chance IMHO 3. Neither win nor lose. They'll settle, tho may agree to some fine in doing so. That's what they did in China.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
That's common industry practice, taking a percentage of the value. It's not specific to Qualcomm.
Fair? That depends on whether Ericthehalfbee developed the tech and is licensing the patents for as much as can be deemed reasonable, or whether Ericthehalfbee needs a license to use it in order to sell something for profit. Which Ericthehalfbee is asking, Eric-the-inventor or Eric-the-marketer?
That's not what I asked. It's not common industry practice. It does occur in some industries, but that doesn't make it common or standard across all industries.
I want to to provide a simple answer on if you think it's appropriate for Apple to pay 3x and Vertu to pay 20x the royalty rate for the same part just because it goes into a more expensive device. Yes or no will do.
It is ABSOLUTELY a common practice as you could discover for yourself with a bit of research. Don't try to twist that into standard practice as you tried to sneak in there. You know the difference.The largest contributors to major communications standard pools, Alcatel-Lucent, Ericsson, InterDigital, Nokia and Qualcomm, all base their royalties at least in part on a percentage of the device value. Yes, that makes it common.
...and I gave you my answer to exactly what you asked: Whether it should be seen as fair. You just don't like the answer and obviously have no intention in taking part in a proper and honest discussion of it. From Apple's viewpoint they would like to show it is not fair. It reduces their profit. In the case of patent owners they would like to show that it is fair. It earns them money for engineering work they've put in, and like most companies they like high margins. In the view of a small independent inventor they would be more likely to agree that it's a fair royalty basis too even if they can't get it themselves. It's pays them for their inventiveness and creativity which might come around just once in their lives.
So "Fair" isn't one-sided as you would like to portray it and cannot be pigeon-holed into a simple yes or no. You knew that when you wrote it. Nice try at wordplay tho. BTW do you still beat your co-workers? A simple yes or no will do.
So typical of your responses. Instead of saying what you think is right or wrong you obfuscate the issue by talking about what some other companies think is right or wrong.
Why is it so hard for you tell us what YOU think? I asked a very simple question and you had to turn it into several paragraphs of nonsense to avoid it.
You're the one who doesn't want to take part in an honest question because you refuse to give us your viewpoints on the issue. Been that way for as many years as I can remember.
Edited: BTW, if you think royalty rates should be based on the product value then you must agree that Samsung infringing design patents should allow Apple to collect monies based on the entire cost of a Samsung phone. Oh dear, don't you just hate those inconvenient truths?
Qualcomm CEO Steve Mollenkopf: "Apple's complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property."
No, it's not, as I'm sure Mollenkopf knows very well. When Qualcomm (like many other companies, including Apple) allowed certain of their patents to be included in a telecom standard that is now unavoidable by any company that makes working mobile phones at all, they specifically agreed to a per-device, FRAND-contract-stipulated fee for those patents. This suit is about how Qualcomm has been charging much more than that fee, charging different amounts to different phone makers and for different phones, and in general trampling all over the terms of the contract they willingly entered.
This is hardly "frivolous" (Thinkman); it cuts to the very core of how telecom standards can function without everyone in the business being held hostage by any one company that doesn't care what it signed. It is also not a "zero sum game" (Thinkman); if Apple buys these chips from Intel, then Intel can simply send the FRAND-contract-stipulated royalty to Qualcomm, and Qualcomm can scream for more, but not receive more. That is perfectly legal under the terms to which Qualcomm agreed.
Have you read the agreement they entered into with IEEE as a condition of including their patents in the 3G/4G standards? Do you know the IEEE position regarding patent royalties? I suspect not. I have and they don't make the all the kinds of stipulations and restrictions you may presume they do even if it might be good if they did, or at least good if you are a buyer of the rights and not a seller. There's that issue with "fair"
It was only February of 2015 when they finally got around to better defining what they considered to be "fair" licensing terms, long after the patents were committed and the standards agreed on.
IEEE members contributing to the standards pool:
must offer to license those patents to all applicants requesting licenses, and cannot pick and choose among licensees (ie, cannot exclude Apple even if they might like to for whatever reason)
may not seek, or threaten to seek, injunctions against potential licensees who are willing to negotiate for licenses (this is why they were allowed to file for an import ban, sometimes inaccurately called an injunction, at the ITC last month. Apple is presumably no longer willing to negotiate for a license, at least not outside court)
may insist that licensees offer them reciprocal licenses under their own patents (aka cross-licensing, and yeah I know some don't think that's fair but it's a common industry practice and not just in tech)
may arbitrate disputes over FRAND terms
may charge a reasonable royalty that is based, among other things, on the value that the patented technology contributes to the smallest salable component of the overall product (there's that ill-defined smallest salable component thing again and coupled with an equally ill-defined value to the overall product)
should ensure that subsequent purchasers of these patents (example would be another modem maker) agree to abide by the same commitments.
BTW, the IEEE cleared these terms thru the US DOJ before approving them.
The ITU which also handles standards necessary for wireless communications on our smartphones has not yet issued any clarity on what constitutes FRaND and based on their application form prefers to stay hands-off. Negotiations for a license are specifically mentioned as being between the licensor and licensee. If you are really interested you can access their forms and patent license terms here: http://www.itu.int/en/ITU-T/ipr/Pages/default.aspx
I have some very simple questions for you, based on your points above:
- Do you agree with China and SK fining Qualcomm? - Do you think Apple will win or lose their case against Qualcomm? - Do you think Qualcomm with win or lose against the FTC?
1. Based on what I've read yes I do 2. 50/50 chance IMHO 3. Neither win nor lose. They'll settle, tho may agree to some fine in doing so. That's what they did in China.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
That's common industry practice, taking a percentage of the value. It's not specific to Qualcomm.
Fair? That depends on whether Ericthehalfbee developed the tech and is licensing the patents for as much as can be deemed reasonable, or whether Ericthehalfbee needs a license to use it in order to sell something for profit. Which Ericthehalfbee is asking, Eric-the-inventor or Eric-the-marketer?
That's not what I asked. It's not common industry practice. It does occur in some industries, but that doesn't make it common or standard across all industries.
I want to to provide a simple answer on if you think it's appropriate for Apple to pay 3x and Vertu to pay 20x the royalty rate for the same part just because it goes into a more expensive device. Yes or no will do.
It is ABSOLUTELY a common practice as you could discover for yourself with a bit of research. Don't try to twist that into standard practice as you tried to sneak in there. You know the difference.The largest contributors to major communications standard pools, Alcatel-Lucent, Ericsson, InterDigital, Nokia and Qualcomm, all base their royalties at least in part on a percentage of the device value. Yes, that makes it common.
...and I gave you my answer to exactly what you asked: Whether it should be seen as fair. You just don't like the answer and obviously have no intention in taking part in a proper and honest discussion of it. From Apple's viewpoint they would like to show it is not fair. It reduces their profit. In the case of patent owners they would like to show that it is fair. It earns them money for engineering work they've put in, and like most companies they like high margins. In the view of a small independent inventor they would be more likely to agree that it's a fair royalty basis too even if they can't get it themselves. It's pays them for their inventiveness and creativity which might come around just once in their lives.
So "Fair" isn't one-sided as you would like to portray it and cannot be pigeon-holed into a simple yes or no. You knew that when you wrote it. Nice try at wordplay tho. BTW do you still beat your co-workers? A simple yes or no will do.
So typical of your responses. Instead of saying what you think is right or wrong you obfuscate the issue by talking about what some other companies think is right or wrong.
Why is it so hard for you tell us what YOU think? I asked a very simple question and you had to turn it into several paragraphs of nonsense to avoid it.
You're the one who doesn't want to take part in an honest question because you refuse to give us your viewpoints on the issue. Been that way for as many years as I can remember.
Why are you trying to make this personal, and putting so much effort into playing a "Gotcha" game. It's not adding to the thread and really is counter-productive. There's nothing personal that should enter the conversation. Neither of us are either buying or selling IP so both of us can and should be honest enough to recognize the legitimate interests of both suppliers and manufacturers if you actually want to have a discussion about it.
We know that like other companies Apple would love to reduce expenses and maintain high margins. Using legal means to pressure suppliers into reducing fees is absolutely fair, and a common occurrence. In this case particularly since we're talking $Billions.
What only one of us is so far willing, or perhaps unbiased, enough to be able to address is : From an IP owner's perspective could basing royalties on a percentage of the value a licensee sees from using your inventions be considered fair? Traditionally many of them have. It has been a common royalty basis since well before Apple ever built the first iPhone. It wasn't created to get rich off Apple nor are they being singled out now that they've joined in the mobile phone market.
So dig deep and try to put together a comment about what you believe can be seen as "fair" for an inventor or patent owner and not just Apple. I thought I remembered you mentioning you were an inventor with patents in your name at one point, but I could be mistaken.
Anyway, that's a truly easy discussion to have (and I encourage you to) and doesn't even require that you see Apple as being in the wrong. They aren't. It simply requires a bit of thought and reflection on your part.(And note that I already clearly answered you that I believe Qualcomm deserved the fines they got so I've not got feet planted on their sidelines)
We already BOTH are of the opinion that a buyer of IP (ie Apple) could absolutely and legitimately see it as "unfair". Are buyers the only party with a dog in the fight? I know neither of us is directly affected one way or the other so it should be easier for us to see the difficulty in defining "fair", not harder. It won't cost either of us a single cent whether Apple wins or loses.
So take off the glasses you're wearing that make it look like Apple is being attacked and let's talk about it. How do you suggest determining "fair" to all when the different companies have different interests and different investments to protect even tho all the companies have the same goal: Maximizing profits.
Edited: BTW, if you think royalty rates should be based on the product value then you must agree that Samsung infringing design patents should allow Apple to collect monies based on the entire cost of a Samsung phone. Oh dear, don't you just hate those inconvenient truths?
Yes I do agree, and I've consistently said so. Apple has a perfect right to go after every single penny of profit that Samsung got from selling those design-patent infringing devices here in the US. I also completely expect them to attempt to do so too. They're allowed to and the SCOTUS ruling did not change that.You apparently paid too little attention to what I had to say on the matter when it came up a few times this past fall so did not realize we actually agree! Besides that it's the law. That's your inconvenient truth.
The lawsuits are meaningless. The monetary wins would make little difference to Apple with the cash hoard they have.
The bigger issue is that Apple is moving away from QCOM as a supplier. Samsung will do the same.
QCOM stands to lose 40% of their revenues with no way to make it up. It will have a devastating effect on their ability to remain at the forefront of baseband and CPU technology going forward. The lawsuits themselves are meaningless other than signaling that Apple plans to move off of QCOM as a supplier.
For those that think Intel's modems are inferior to QCOM they had better think again. Intel is currently manufacturing their modems on an older TSMC node. Their 5G modem will be built on Intel's upcoming 10 nm node which is more advanced than Samsung's 10 nm node that QCOM will be using.
It will become difficult for QCOM to keep up with Intel in modems and Apple in CPUs with the crippling loss of revenues they will be experiencing in the near future. Samsung stands to gain immensely as they are still capable of building Exynos CPUs and integrating the modem. This will give Samsung an opportunity to move their customer base off of Android and onto Tizen. Huawei makes their own CPUs also and can negotiate tough terms with Google regarding Google Play. Huawei is already putting Alexa on the upcoming Mate 9. LG can advance WebOS also. All made possible by the loss of QCOM's inability to produce competitive Snapdragon SOCs.
Apple stands to rout Google and Android all together. Working closely with Intel, Apple can integrate the modem into the SOC and SIP while having access to Intel's upcoming Optane memory product. A product that promises to be a total game changer.
Perhaps Apple is truly going thermonuclear. Jobs would be pleased.
Herbivore2 said: Huawei makes their own CPUs also and can negotiate tough terms with Google regarding Google Play. Huawei is already putting Alexa on the upcoming Mate 9. LG can advance WebOS also. All made possible by the loss of QCOM's inability to produce competitive Snapdragon SOCs.
Apple stands to rout Google and Android all together. Working closely with Intel, Apple can integrate the modem into the SOC and SIP while having access to Intel's upcoming Optane memory product. A product that promises to be a total game changer.
Not sure why you're convinced issues at Qualcomm puts any Android licensees in a better negotiating position, but in a bit of a surprise Google too is reportedly in tests of their own in-house designed CPU. Likely not ready yet for the next Pixel phones but added confirmation for the reports from last year that Google was working on their own chipsets.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
You weren't asking me, but I'll offer an answer if you don't mind. Legally, they should not - though, of course, the parties are free to agree to such entire-device-value-based royalties if they wish to (and there are, btw, reasons why some license seekers would want to). If, however, the license seeker doesn't want to agree to such terms they would be on solid legal ground in refusing to do so (particularly when it comes to SEPs, and at least in the U.S.) and the license offerer would not be on solid legal ground in demanding that they do.
I don't want to get too far into the weeds of the reasoning of the legal decisions (though I can give you some cites to get started on if you want to read up on such issues yourself - I apologize if you already have and I'm incorrectly presuming otherwise). But, broad strokes... In most cases where a patent is incorporated into a component which is itself part of a multi-component device (which a smartphone most certainly is), it is not appropriate to base royalties on the entire value of the device. There's an exception, but it wouldn't apply in the case you refer to as the entire value of the device couldn't fairly be said to be attributable to the modem-related patents. That's especially true when we're talking about SEPs because, when it comes to such patents, you have to look at the intrinsic value of the patents and not at the value created by their being essential to a standard. I can't stress enough the importance of that concept when it comes to figuring out what fair licensing fees (for SEPs) would be.
That said, the problem you're referring to is probably a ways down the list when it comes to the problematic licensing practices that Qualcomm is accused of. If the factual allegations are true, it has violated FRAND terms (and, in particular jurisdictions, perhaps the law) in a number of other ways - even if it could somehow justify demanding royalties based on the entire value of smartphones.
Qualcomm appears quite desperate. It's trying to hold on to a flawed business model or, perhaps recognizing that it is now inevitable that such business model will fall apart, trying to appear as though it hasn't (and still doesn't) recognized that such business model was doomed eventually to fall apart. In other words, Qualcomm may be trying to credibly pretend that it thought that business model was sustainable (even though Qualcomm perhaps realized itself that it was not). I wouldn't be surprised if we eventually see shareholder lawsuits over this. I'm going to try to go back over the last 5 years or so of Qualcomm's annual reports to see to what extent Qualcomm has been warning shareholders about these kinds of problems in its risk factors identification.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
You weren't asking me, but I'll offer an answer if you don't mind. Legally, they should not - though, of course, the parties are free to agree to such entire-device-value-based royalties if they wish to (and there are, btw, reasons why some license seekers would want to). If, however, the license seeker doesn't want to agree to such terms they would be on solid legal ground in refusing to do so (particularly when it comes to SEPs, and at least in the U.S.) and the license offerer would not be on solid legal ground in demanding that they do.
Apple very recently sued Ericsson in part over the same issue: Claiming that charging SEP royalties as a percentage of a total device price as Ericcson uses as their stated their royalty basis was not fair.
After a couple of back and forth legal salvos Apple ended up renewing the licensing afterall sometime if the past few months. The presumption would be the royalties are still based on the total device price since changing the basis for Apple alone would plainly violate the spirit of (F)RAND, correct?
've not read that royalties on end-product pricing have ever been deemed illegal as a monitizing method, not even in the highly publicized Moto v.Microsoft case from a couple years ago where some might think it was ruled as such. Do you have citations showing the clear illegality of that commonly-used licensing basis? Perhaps there is and I'd appreciate getting reading about the cases if you could provide links to them.
The closest I'm personally aware of is Ericsson v. D-Link from Dec/2014 where the Federal Circuit found that contracts terms requiring royalties to be based on prices of total end-products are legally permissible within the following guidelines:
– The SEP patent holder presents expert testimony explaining why the claims read on the entire end product or
– It presents expert testimony explaining how the royalties in those licenses are apportioned to exclude the value of non-patented features.
By the way, your passing mention that rules regarding the specific legality of any particular royalty agreement may vary country to country is a good one. There is no world-wide authority outside of the standards-setting organizations themselves, and only a very few of them (the IEEE for example) have been willing to tackle the issue of what constitutes a (F)RAND licensing offer.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
You weren't asking me, but I'll offer an answer if you don't mind. Legally, they should not - though, of course, the parties are free to agree to such entire-device-value-based royalties if they wish to (and there are, btw, reasons why some license seekers would want to). If, however, the license seeker doesn't want to agree to such terms they would be on solid legal ground in refusing to do so (particularly when it comes to SEPs, and at least in the U.S.) and the license offerer would not be on solid legal ground in demanding that they do.
Apple very recently sued Ericsson in part over the same issue: Claiming that charging SEP royalties as a percentage of a total device price as Ericcson uses as their stated their royalty basis was not fair.
After a couple of back and forth legal salvos Apple ended up renewing the licensing afterall sometime if the past few months. The presumption would be the royalties are still based on the total device price since changing the basis for Apple alone would plainly violate the spirit of (F)RAND, correct?
've not read that royalties on end-product pricing have ever been deemed illegal as a monitizing method, not even in the highly publicized Moto v.Microsoft case from a couple years ago where some might think it was ruled as such. Do you have citations showing the clear illegality of that commonly-used licensing basis? Perhaps there is and I'd appreciate getting reading about the cases if you could provide links to them.
The closest I'm personally aware of is Ericsson v. D-Link from Dec/2014 where the Federal Circuit found that contracts terms requiring royalties to be based on prices of total end-products are legally permissible within the following guidelines:
– The SEP patent holder presents expert testimony explaining why the claims read on the entire end product or
– It presents expert testimony explaining how the royalties in those licenses are apportioned to exclude the value of non-patented features.
I've read the Ericsson v D-Link decision, it's among those that I alluded to in the previous post. There are a number of moving parts in Ericsson, but relevant here (emphasis added):
Our cases have added to that governing legal rule an important evidentiary principle. The point of the evidentiary principle is to help our jury system reliably implement the substantive statutory requirement of apportionment of royalty damages to the invention’s value. The principle, applicable specifically to the choice of a royalty base, is that, where a multi-component product is at issue and the patented feature is not the item which imbues the combination of the other features with value, care must be taken to avoid misleading the jury by placing undue emphasis on the value of the entire product. It is not that an appropriately apportioned royalty award could never be fashioned by starting with the entire market value of a multi-component product—by, for instance, dramatically reducing the royalty rate to be applied in those cases—it is that reliance on the entire market value might mislead the jury, who may be less equipped to understand the extent to which the royalty rate would need to do the work in such instances. See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67, 68 (Fed. Cir. 2012) (barring the use of too high a royalty base—even if mathematically offset by a “‘low enough royalty rate’”—because such a base “carries a considerable risk” of misleading a jury into overcompensating, stating that such a base “‘cannot help but skew the damages horizon for the jury’” and “make a patentee’s proffered damages amount appear modest by comparison” (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011))). Thus, where the entire value of a machine as a marketable article is “properly and legally attributable to the patented feature,” the damages owed to the patentee may be calculated by reference to that value. Id. Where it is not, however, courts must insist on a more realistic starting point for the royalty calculations by juries—often, the smallest salable unit and, at times, even less.VirnetX, 767 F.3d at 1327–28.
And:
In other words, the patent holder should only be compensated for the approximate incremental benefit derived from his invention.
This is particularly true for SEPs. When a technology is incorporated into a standard, it is typically chosen from among different options. Once incorporated and widely adopted, that technology is not always used because it is the best or the only option; it is used because its use is necessary to comply with the standard. In other words, widespread adoption of standard essential technology is not entirely indicative of the added usefulness of an innovation over the prior art. Id. This is not meant to imply that SEPs never claim valuable technological contributions. We merely hold that the royalty for SEPs should reflect the approximate value of that technological contribution, not the value of its widespread adoption due to standardization.
The reasoning in Ericsson relies in part on the VirnetX v Cisco decision which, relevant here, says:
No matter what the form of the royalty, a patentee must take care to seek only those damages attributable to the infringing features. Indeed, the Supreme Court long ago observed that a patentee must "in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative; or he must show, by equally reliable and satisfactory evidence, that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature." Garretson v. Clark, 111 U.S. 120, 121 (1884).
Thus, when claims are drawn to an individual component of a multi-component product, it is the exception, not the rule, that damages may be based upon the value of the multi-component product. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67–68 (Fed. Cir. 2012). Indeed, we recently reaffirmed that “[a] patentee 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.” Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir. 2013) (emphasis added) (quoting SynQor, 709 F.3d at 1383). In the absence of such a showing, principles of apportionment apply.
The entire market value rule is a narrow exception to this general rule. If it can be shown that the patented feature drives the demand for an entire multi-component product, a patentee may be awarded damages as a percentage of revenues or profits attributable to the entire product. Rite–Hite, 56 F.3d at 1549, 1551. In other words, “[t]he entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand.” Lucent, 580 F.3d at 1336 (quoting TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 901 (Fed.Cir.1986)). The entire market value rule is derived from Supreme Court precedent requiring that “the patentee ․ must in every case give evidence tending to separate or apportion the defendant's profits and the patentee's damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative.” Garretson v. Clark, 111 U.S. 120, 121 (1884). The Court explained that “the entire value of the whole machine, as a marketable article, [must be] properly and legally attributable to the patented feature.” Id.
In effect, the entire market value rule acts as a check to ensure that the royalty damages being sought under 35 U.S.C. § 284 are in fact “reasonable” in light of the technology at issue. We have consistently maintained that “a reasonable royalty analysis requires a court to hypothesize, not to speculate․ [T]he trial court must carefully tie proof of damages to the claimed invention's footprint in the market place.” ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed.Cir.2010). A damages theory must be based on “sound economic and factual predicates.” Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1311 (Fed.Cir.2002). The entire market value rule arose and evolved to limit the permissible scope of patentees' damages theories.
Importantly, the requirement to prove that the patented feature drives demand for the entire product may not be avoided by the use of a very small royalty rate. We recently rejected such a contention, raised again in this case by LaserDynamics, and clarified that “[t]he Supreme Court and this court's precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.” Uniloc, 632 F.3d at 1319–20 (explaining that statements in Lucent suggesting otherwise were taken out of context). We reaffirm that in any case involving multi-component products, patentees may not calculate damages based on sales of the entire product, as opposed to the smallest salable patent-practicing unit, without showing that the demand for the entire product is attributable to the patented feature.
A plaintiff absolutely can offer evidence to the effect that the entire market value rule applies. I've not disputed that, indeed I referred to that exception in my previous post. The point is, absent the conditions which call for that exception, it isn't proper to demand royalties based on the entire value of a multi component device such as a smartphone. The Federal Circuit has been pretty clear on that point. And I don't think it can reasonably be claimed that those conditions would exist with regard to ericthehalfbee's hypothetical or that they do exist with regard to, e.g., Qualcomm's CDMA SEPs - especially considering that, as court decisions indicate and I pointed out before, the proper value of SEPs is only considered as that which is intrinsic to the patents themselves, not that which is attributable to their being essential to a standard.
I have another question I forgot. There are 3 phones that all use the exact same cellular modem (the smallest salable part. A $200 Android phone, a $600 iPhone and a $4,000 Vertu.
The Android phone pays $5 royalty. Should Apple Pay $15 and Vertu pay $100 because the same chip is being used in a higher priced phone?
You weren't asking me, but I'll offer an answer if you don't mind. Legally, they should not - though, of course, the parties are free to agree to such entire-device-value-based royalties if they wish to (and there are, btw, reasons why some license seekers would want to). If, however, the license seeker doesn't want to agree to such terms they would be on solid legal ground in refusing to do so (particularly when it comes to SEPs, and at least in the U.S.) and the license offerer would not be on solid legal ground in demanding that they do.
Apple very recently sued Ericsson in part over the same issue: Claiming that charging SEP royalties as a percentage of a total device price as Ericcson uses as their stated their royalty basis was not fair.
After a couple of back and forth legal salvos Apple ended up renewing the licensing afterall sometime if the past few months. The presumption would be the royalties are still based on the total device price since changing the basis for Apple alone would plainly violate the spirit of (F)RAND, correct?
've not read that royalties on end-product pricing have ever been deemed illegal as a monitizing method, not even in the highly publicized Moto v.Microsoft case from a couple years ago where some might think it was ruled as such. Do you have citations showing the clear illegality of that commonly-used licensing basis? Perhaps there is and I'd appreciate getting reading about the cases if you could provide links to them.
The closest I'm personally aware of is Ericsson v. D-Link from Dec/2014 where the Federal Circuit found that contracts terms requiring royalties to be based on prices of total end-products are legally permissible within the following guidelines:
– The SEP patent holder presents expert testimony explaining why the claims read on the entire end product or
– It presents expert testimony explaining how the royalties in those licenses are apportioned to exclude the value of non-patented features.
I've read the Ericsson v D-Link decision, it's among those that I alluded to in the previous post. There are a number of moving parts in Ericsson, but relevant here (emphasis added):
Our cases have added to that governing legal rule an important evidentiary principle. The point of the evidentiary principle is to help our jury system reliably implement the substantive statutory requirement of apportionment of royalty damages to the invention’s value. The principle, applicable specifically to the choice of a royalty base, is that, where a multi-component product is at issue and the patented feature is not the item which imbues the combination of the other features with value, care must be taken to avoid misleading the jury by placing undue emphasis on the value of the entire product. It is not that an appropriately apportioned royalty award could never be fashioned by starting with the entire market value of a multi-component product—by, for instance, dramatically reducing the royalty rate to be applied in those cases—it is that reliance on the entire market value might mislead the jury, who may be less equipped to understand the extent to which the royalty rate would need to do the work in such instances. See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67, 68 (Fed. Cir. 2012) (barring the use of too high a royalty base—even if mathematically offset by a “‘low enough royalty rate’”—because such a base “carries a considerable risk” of misleading a jury into overcompensating, stating that such a base “‘cannot help but skew the damages horizon for the jury’” and “make a patentee’s proffered damages amount appear modest by comparison” (quoting Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011))). Thus, where the entire value of a machine as a marketable article is “properly and legally attributable to the patented feature,” the damages owed to the patentee may be calculated by reference to that value. Id. Where it is not, however, courts must insist on a more realistic starting point for the royalty calculations by juries—often, the smallest salable unit and, at times, even less.VirnetX, 767 F.3d at 1327–28.
And:
In other words, the patent holder should only be compensated for the approximate incremental benefit derived from his invention.
This is particularly true for SEPs. When a technology is incorporated into a standard, it is typically chosen from among different options. Once incorporated and widely adopted, that technology is not always used because it is the best or the only option; it is used because its use is necessary to comply with the standard. In other words, widespread adoption of standard essential technology is not entirely indicative of the added usefulness of an innovation over the prior art. Id. This is not meant to imply that SEPs never claim valuable technological contributions. We merely hold that the royalty for SEPs should reflect the approximate value of that technological contribution, not the value of its widespread adoption due to standardization.
The reasoning in Ericsson relies in part on the VirnetX v Cisco decision which, relevant here, says:
No matter what the form of the royalty, a patentee must take care to seek only those damages attributable to the infringing features. Indeed, the Supreme Court long ago observed that a patentee must "in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative; or he must show, by equally reliable and satisfactory evidence, that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature." Garretson v. Clark, 111 U.S. 120, 121 (1884).
Thus, when claims are drawn to an individual component of a multi-component product, it is the exception, not the rule, that damages may be based upon the value of the multi-component product. LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67–68 (Fed. Cir. 2012). Indeed, we recently reaffirmed that “[a] patentee 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.” Versata Software, Inc. v. SAP Am., Inc., 717 F.3d 1255, 1268 (Fed. Cir. 2013) (emphasis added) (quoting SynQor, 709 F.3d at 1383). In the absence of such a showing, principles of apportionment apply.
The entire market value rule is a narrow exception to this general rule. If it can be shown that the patented feature drives the demand for an entire multi-component product, a patentee may be awarded damages as a percentage of revenues or profits attributable to the entire product. Rite–Hite, 56 F.3d at 1549, 1551. In other words, “[t]he entire market value rule allows for the recovery of damages based on the value of an entire apparatus containing several features, when the feature patented constitutes the basis for customer demand.” Lucent, 580 F.3d at 1336 (quoting TWM Mfg. Co. v. Dura Corp., 789 F.2d 895, 901 (Fed.Cir.1986)). The entire market value rule is derived from Supreme Court precedent requiring that “the patentee ․ must in every case give evidence tending to separate or apportion the defendant's profits and the patentee's damages between the patented feature and the unpatented features, and such evidence must be reliable and tangible, and not conjectural or speculative.” Garretson v. Clark, 111 U.S. 120, 121 (1884). The Court explained that “the entire value of the whole machine, as a marketable article, [must be] properly and legally attributable to the patented feature.” Id.
In effect, the entire market value rule acts as a check to ensure that the royalty damages being sought under 35 U.S.C. § 284 are in fact “reasonable” in light of the technology at issue. We have consistently maintained that “a reasonable royalty analysis requires a court to hypothesize, not to speculate․ [T]he trial court must carefully tie proof of damages to the claimed invention's footprint in the market place.” ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869 (Fed.Cir.2010). A damages theory must be based on “sound economic and factual predicates.” Riles v. Shell Exploration & Prod. Co., 298 F.3d 1302, 1311 (Fed.Cir.2002). The entire market value rule arose and evolved to limit the permissible scope of patentees' damages theories.
Importantly, the requirement to prove that the patented feature drives demand for the entire product may not be avoided by the use of a very small royalty rate. We recently rejected such a contention, raised again in this case by LaserDynamics, and clarified that “[t]he Supreme Court and this court's precedents do not allow consideration of the entire market value of accused products for minor patent improvements simply by asserting a low enough royalty rate.” Uniloc, 632 F.3d at 1319–20 (explaining that statements in Lucent suggesting otherwise were taken out of context). We reaffirm that in any case involving multi-component products, patentees may not calculate damages based on sales of the entire product, as opposed to the smallest salable patent-practicing unit, without showing that the demand for the entire product is attributable to the patented feature.
A plaintiff absolutely can offer evidence to the effect that the entire market value rule applies. I've not disputed that, indeed I referred to that exception in my previous post. The point is, absent the conditions which call for that exception, it isn't proper to demand royalties based on the entire value of a multi component device such as a smartphone. The Federal Circuit has been pretty clear on that point. And I don't think it can reasonably be claimed that those conditions would exist with regard to ericthehalfbee's hypothetical or that they do exist with regard to, e.g., Qualcomm's CDMA SEPs - especially considering that, as court decisions indicate and I pointed out before, the proper value of SEPs is only considered as that which is intrinsic to the patents themselves, not that which is attributable to their being essential to a standard.
Excellent clarification sir. Thanks very much for the work you put into it.
One point I didn't see you expand on is that SEP's based on percentage of the end-product price is also acceptable if expert testimony can establish the SEP owner took into account proportioning for the non-patented features of that device. Under that rule an SEP holder might still be allowed to base charges on the end-use device and a company selling at high prices such as Apple, while paying the same "fair" percentage in royalties, would still be paying a higher dollar royalty per device than a low-priced handset would garner even if the end-product is determined to be a particular component. In essence it would be considered (F)RAND friendly for Apple iPhones to be tagged to pay more in SEP royalties than budget devices under any computation based on a percentage of the end-use price.
In any event percentage-based royalties is still a legal, acceptable, and common royalty basis is it not and no court has changed that correct? The devil remains in the details of how it's used. (As an aside it appears the Fed. Circuit accepted a top-down approach to determining fair value of the patents in the Ericsson case?)
Anyway, I won't belabor the points as most forum members probably don't have as much interest in the grubbier details as you or I do. The only important takeaway for casual readers is whether percentage-based royalties can be considered both legal and (F)RAND worthy under the proper circumstances, and I believe it is even if it means one licensee may pay a higher/lower $ price per-device than another. In the eyes of the law it can be fair even if some think it isn't.
Comments
I don't have to prove anything to Apple, a court or to you.
In this particular instance NO ONE knows yet, which is why it's set to go to court unless the parties settle in the meantime as Nokia and Apple did a few years back and LG and Apple more recently. If it settles then no one outside of the two parties involved still will know. At some point in the past it's should be plainly obvious to you that Apple at least begrudgingly considered Qualcomm's terms and royalty rates "fair" since they signed a negotiated contract with them rather than suing. Now today they don't think it's "fair" and decided to file a lawsuit that could determine whether it is or is not.
Secondly, rather than guessing I actually quoted for you what the IEEE requires as a condition of including a companies IP in a standard, their definition of what constitutes FRaND as far as that standards body is concerned. China and Qualcomm settled on a limited set of rules for Qualcomm and the Chinese manufacturers needing a license rather than finishing out the process with a ruling on Qualcomm general licensing policies, declining to decide whether they are legal or illegal (which in effect left it legal).
Don't get upset and seemingly be so resistant to learning something you did not already know.
And keep in mind that lawsuits can be used as part of a business negotiation, with no intent of the filing party to actually complete the process thru to the end if they can come a mutually agreeable contract in the meantime, perhaps meeting somewhere in the middle. That's what happened in the Nokia/Apple dispute.
That's not what I asked. It's not common industry practice. It does occur in some industries, but that doesn't make it common or standard across all industries.
I want to to provide a simple answer on if you think it's appropriate for Apple to pay 3x and Vertu to pay 20x the royalty rate for the same part just because it goes into a more expensive device. Yes or no will do.
...and I gave you my answer to exactly what you asked: Whether it should be seen as fair. You just don't like the answer and obviously have no intention in taking part in a proper and honest discussion of it. From Apple's viewpoint they would like to show it is not fair. It reduces their profit. In the case of patent owners they would like to show that it is fair. It earns them money for engineering work they've put in, and like most companies they like high margins. In the view of a small independent inventor they would be more likely to agree that it's a fair royalty basis too even if they can't get it themselves. It's pays them for their inventiveness and creativity which might come around just once in their lives.
So "Fair" isn't one-sided as you would like to portray it and cannot be pigeon-holed into a simple yes or no. You knew that when you wrote it. Nice try at wordplay tho.
BTW do you still steal from your co-workers? A simple yes or no will do.
So typical of your responses. Instead of saying what you think is right or wrong you obfuscate the issue by talking about what some other companies think is right or wrong.
Why is it so hard for you tell us what YOU think? I asked a very simple question and you had to turn it into several paragraphs of nonsense to avoid it.
You're the one who doesn't want to take part in an honest question because you refuse to give us your viewpoints on the issue. Been that way for as many years as I can remember.
Edited: BTW, if you think royalty rates should be based on the product value then you must agree that Samsung infringing design patents should allow Apple to collect monies based on the entire cost of a Samsung phone. Oh dear, don't you just hate those inconvenient truths?
We know that like other companies Apple would love to reduce expenses and maintain high margins. Using legal means to pressure suppliers into reducing fees is absolutely fair, and a common occurrence. In this case particularly since we're talking $Billions.
What only one of us is so far willing, or perhaps unbiased, enough to be able to address is : From an IP owner's perspective could basing royalties on a percentage of the value a licensee sees from using your inventions be considered fair? Traditionally many of them have. It has been a common royalty basis since well before Apple ever built the first iPhone. It wasn't created to get rich off Apple nor are they being singled out now that they've joined in the mobile phone market.
So dig deep and try to put together a comment about what you believe can be seen as "fair" for an inventor or patent owner and not just Apple. I thought I remembered you mentioning you were an inventor with patents in your name at one point, but I could be mistaken. Anyway, that's a truly easy discussion to have (and I encourage you to) and doesn't even require that you see Apple as being in the wrong. They aren't. It simply requires a bit of thought and reflection on your part.(And note that I already clearly answered you that I believe Qualcomm deserved the fines they got so I've not got feet planted on their sidelines)
We already BOTH are of the opinion that a buyer of IP (ie Apple) could absolutely and legitimately see it as "unfair". Are buyers the only party with a dog in the fight? I know neither of us is directly affected one way or the other so it should be easier for us to see the difficulty in defining "fair", not harder. It won't cost either of us a single cent whether Apple wins or loses.
So take off the glasses you're wearing that make it look like Apple is being attacked and let's talk about it. How do you suggest determining "fair" to all when the different companies have different interests and different investments to protect even tho all the companies have the same goal: Maximizing profits.
The bigger issue is that Apple is moving away from QCOM as a supplier. Samsung will do the same.
QCOM stands to lose 40% of their revenues with no way to make it up. It will have a devastating effect on their ability to remain at the forefront of baseband and CPU technology going forward. The lawsuits themselves are meaningless other than signaling that Apple plans to move off of QCOM as a supplier.
For those that think Intel's modems are inferior to QCOM they had better think again. Intel is currently manufacturing their modems on an older TSMC node. Their 5G modem will be built on Intel's upcoming 10 nm node which is more advanced than Samsung's 10 nm node that QCOM will be using.
It will become difficult for QCOM to keep up with Intel in modems and Apple in CPUs with the crippling loss of revenues they will be experiencing in the near future. Samsung stands to gain immensely as they are still capable of building Exynos CPUs and integrating the modem. This will give Samsung an opportunity to move their customer base off of Android and onto Tizen. Huawei makes their own CPUs also and can negotiate tough terms with Google regarding Google Play. Huawei is already putting Alexa on the upcoming Mate 9. LG can advance WebOS also. All made possible by the loss of QCOM's inability to produce competitive Snapdragon SOCs.
Apple stands to rout Google and Android all together. Working closely with Intel, Apple can integrate the modem into the SOC and SIP while having access to Intel's upcoming Optane memory product. A product that promises to be a total game changer.
Perhaps Apple is truly going thermonuclear. Jobs would be pleased.
I don't want to get too far into the weeds of the reasoning of the legal decisions (though I can give you some cites to get started on if you want to read up on such issues yourself - I apologize if you already have and I'm incorrectly presuming otherwise). But, broad strokes... In most cases where a patent is incorporated into a component which is itself part of a multi-component device (which a smartphone most certainly is), it is not appropriate to base royalties on the entire value of the device. There's an exception, but it wouldn't apply in the case you refer to as the entire value of the device couldn't fairly be said to be attributable to the modem-related patents. That's especially true when we're talking about SEPs because, when it comes to such patents, you have to look at the intrinsic value of the patents and not at the value created by their being essential to a standard. I can't stress enough the importance of that concept when it comes to figuring out what fair licensing fees (for SEPs) would be.
That said, the problem you're referring to is probably a ways down the list when it comes to the problematic licensing practices that Qualcomm is accused of. If the factual allegations are true, it has violated FRAND terms (and, in particular jurisdictions, perhaps the law) in a number of other ways - even if it could somehow justify demanding royalties based on the entire value of smartphones.
Qualcomm appears quite desperate. It's trying to hold on to a flawed business model or, perhaps recognizing that it is now inevitable that such business model will fall apart, trying to appear as though it hasn't (and still doesn't) recognized that such business model was doomed eventually to fall apart. In other words, Qualcomm may be trying to credibly pretend that it thought that business model was sustainable (even though Qualcomm perhaps realized itself that it was not). I wouldn't be surprised if we eventually see shareholder lawsuits over this. I'm going to try to go back over the last 5 years or so of Qualcomm's annual reports to see to what extent Qualcomm has been warning shareholders about these kinds of problems in its risk factors identification.
After a couple of back and forth legal salvos Apple ended up renewing the licensing afterall sometime if the past few months. The presumption would be the royalties are still based on the total device price since changing the basis for Apple alone would plainly violate the spirit of (F)RAND, correct?
've not read that royalties on end-product pricing have ever been deemed illegal as a monitizing method, not even in the highly publicized Moto v.Microsoft case from a couple years ago where some might think it was ruled as such. Do you have citations showing the clear illegality of that commonly-used licensing basis? Perhaps there is and I'd appreciate getting reading about the cases if you could provide links to them.
The closest I'm personally aware of is Ericsson v. D-Link from Dec/2014 where the Federal Circuit found that contracts terms requiring royalties to be based on prices of total end-products are legally permissible within the following guidelines:
– The SEP patent holder presents expert testimony explaining why the claims read on the entire end product
or
– It presents expert testimony explaining how the royalties in those licenses are apportioned to exclude the value of non-patented features.
Anyone interested in reading a longer explanation of what that case means for SEP licensing can refer to this article at the Essential Patent Blog.
http://www.essentialpatentblog.com/2014/12/federal-circuit-gives-guidance-on-litigating-rand-obligation-ericsson-v-d-link/
By the way, your passing mention that rules regarding the specific legality of any particular royalty agreement may vary country to country is a good one. There is no world-wide authority outside of the standards-setting organizations themselves, and only a very few of them (the IEEE for example) have been willing to tackle the issue of what constitutes a (F)RAND licensing offer.
I've read the Ericsson v D-Link decision, it's among those that I alluded to in the previous post. There are a number of moving parts in Ericsson, but relevant here (emphasis added):
And:
The reasoning in Ericsson relies in part on the VirnetX v Cisco decision which, relevant here, says:
See also LaserDynamics v Quanta Computer (cited above, emphasis added):
A plaintiff absolutely can offer evidence to the effect that the entire market value rule applies. I've not disputed that, indeed I referred to that exception in my previous post. The point is, absent the conditions which call for that exception, it isn't proper to demand royalties based on the entire value of a multi component device such as a smartphone. The Federal Circuit has been pretty clear on that point. And I don't think it can reasonably be claimed that those conditions would exist with regard to ericthehalfbee's hypothetical or that they do exist with regard to, e.g., Qualcomm's CDMA SEPs - especially considering that, as court decisions indicate and I pointed out before, the proper value of SEPs is only considered as that which is intrinsic to the patents themselves, not that which is attributable to their being essential to a standard.
One point I didn't see you expand on is that SEP's based on percentage of the end-product price is also acceptable if expert testimony can establish the SEP owner took into account proportioning for the non-patented features of that device. Under that rule an SEP holder might still be allowed to base charges on the end-use device and a company selling at high prices such as Apple, while paying the same "fair" percentage in royalties, would still be paying a higher dollar royalty per device than a low-priced handset would garner even if the end-product is determined to be a particular component. In essence it would be considered (F)RAND friendly for Apple iPhones to be tagged to pay more in SEP royalties than budget devices under any computation based on a percentage of the end-use price.
In any event percentage-based royalties is still a legal, acceptable, and common royalty basis is it not and no court has changed that correct? The devil remains in the details of how it's used.
(As an aside it appears the Fed. Circuit accepted a top-down approach to determining fair value of the patents in the Ericsson case?)
Anyway, I won't belabor the points as most forum members probably don't have as much interest in the grubbier details as you or I do. The only important takeaway for casual readers is whether percentage-based royalties can be considered both legal and (F)RAND worthy under the proper circumstances, and I believe it is even if it means one licensee may pay a higher/lower $ price per-device than another. In the eyes of the law it can be fair even if some think it isn't.