Apple to halt royalty payments to Qualcomm until end of ongoing legal battle

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  • Reply 21 of 28
    gatorguygatorguy Posts: 23,652member
    gatorguy said:
    gatorguy said:
    jkichline said:
    There's got to be some reason why not just Apple, but other manufacturers are on the outs with Qualcomm.
    I don't have links to various articles I've read handy. But it is my understanding that besides double-dipping accusations.

    Qualcomm has been charging licensing fees based on the value of the finished product even though the part is the same. Apple has stated that every time they add new tech to their products (3D touch, AR, oled etc) that adds value or higher selling price, Qualcomm wants more licensing fees.

    Apple has been paying more for a 7+ than a $200 commodity phone even if they have the exact same chips. This would be like other manufacturers charging you more for your furniture, appliances, tv's etc if your house was worth $1 million instead of $100,000.
    Like property tax? 
    Yeah. I guess it's like a property tax in some sense. That the more value the device has the more you pay. Except with property taxes, they are based on the land, size and configuration of the buildings. Not so much what's inside. This extends that concept to your Sony tv  "taxing" you more as a royalty for you have a nicer house.
    Phone=House
    Property tax=royalties

    Seems like a closer comparison than talking about the furniture which is optional and not integral. 
    But property taxes are based on the house. Not what's inside. Your house isn't worth for tax purposes the value of the land, house and furnishings added together. The Qualcomm chip is closer to a furnishing in the house than it is to the roof, pool or sq footage.
    Now you get it! Qualcomm's argument would be that the house (phone) couldn't be built without the assets of Qualcomm as an integral part of it, much as the building on the land would be far less valuable and livable without the government-provided services that allow it to happily operate as a home. While neither argument might stand up to a major well-funded legal challenge they both have a fairly lengthy history of acceptable quid-pro-quo behind them. 

    EDIT: This link is the equivalent of "Royalties for Dummies", a quick and to the point explanation of common patent monetizing methods and the reasons behind them.
     http://www.referenceforbusiness.com/small/Qu-Sm/Royalties.html

    In reality Qualcomm isn't doing anything at all unusual. It has a very familiar face to anyone involved in government taxation. Government agencies derive revenue (taxes) from the wood and bricks and concrete that built your home. They got revenue when the land under your home was purchased. They got revenue from the people whose hands built your home. They got revenue from all the manufacturing and sale of plumbing and electrical wire and roofing materials that became part of your home. 

    Then they "double-dip", taking taxes (royalties) every year based on the value of that home when taxes (royalties) were already already paid on the components that made it a home.
    edited April 2017
  • Reply 22 of 28
    StrangeDaysStrangeDays Posts: 12,469member
    saltyzip said:
    This will backfire on Apple long term. They are punishing the company's and indirectly their employees and those associated further down the food chain, because they have a direct spat with one component supplier. I would like all those suppliers and their employees and Qualcomm to sue Apple for withholding payments.

    Apple have become too big and too powerful, and are using their dominating position to try and screw everyone else to keep them in their ivory tower.
    Cry us a river, man.
    ronn
  • Reply 23 of 28
    gatorguy said:
    But property taxes are based on the house. Not what's inside. Your house isn't worth for tax purposes the value of the land, house and furnishings added together. The Qualcomm chip is closer to a furnishing in the house than it is to the roof, pool or sq footage.
    Now you get it! Qualcomm's argument would be that the house (phone) couldn't be built without the assets of Qualcomm as an integral part of it, much as the building on the land would be far less valuable and livable without the government-provided services that allow it to happily operate as a home. While neither argument might stand up to a major well-funded legal challenge they both have a fairly lengthy history of acceptable quid-pro-quo behind them. 
    You're still not getting it. If Qualcomm's tech is essential, then it's like plumbing. You can't charge more for the each piece of pipe, connector, valve, etc. into a $100,000,000 building compared with a $50,000 house. Yes, the quantity and total price will be higher, but the piece price should be the same.
    ronn
  • Reply 24 of 28
    gatorguy said:
    gatorguy said:
    jkichline said:
    There's got to be some reason why not just Apple, but other manufacturers are on the outs with Qualcomm.
    I don't have links to various articles I've read handy. But it is my understanding that besides double-dipping accusations.

    Qualcomm has been charging licensing fees based on the value of the finished product even though the part is the same. Apple has stated that every time they add new tech to their products (3D touch, AR, oled etc) that adds value or higher selling price, Qualcomm wants more licensing fees.

    Apple has been paying more for a 7+ than a $200 commodity phone even if they have the exact same chips. This would be like other manufacturers charging you more for your furniture, appliances, tv's etc if your house was worth $1 million instead of $100,000.
    Like property tax? 
    Yeah. I guess it's like a property tax in some sense. That the more value the device has the more you pay. Except with property taxes, they are based on the land, size and configuration of the buildings. Not so much what's inside. This extends that concept to your Sony tv  "taxing" you more as a royalty for you have a nicer house.
    Phone=House
    Royalties=Property Tax

    Seems like a more appropriate comparison than talking about the furniture which is optional and not integral to the home.
    It is only like a property tax in the sense that you can't move away to avoid it.  Qualcomm owns a standard patent used industry-wide by smartphone makers, so any royalty-price it sets is nearly impossible to avoid -- just as it would be impossible to avoid a doubling or tripling of the property tax on your home.  (Both the excess royalties by Qualcomm and the excess tax revenue of your local government would be referred to as "economic rents" by economists.)
    edited April 2017
  • Reply 25 of 28
    gatorguygatorguy Posts: 23,652member
    gatorguy said:
    But property taxes are based on the house. Not what's inside. Your house isn't worth for tax purposes the value of the land, house and furnishings added together. The Qualcomm chip is closer to a furnishing in the house than it is to the roof, pool or sq footage.
    Now you get it! Qualcomm's argument would be that the house (phone) couldn't be built without the assets of Qualcomm as an integral part of it, much as the building on the land would be far less valuable and livable without the government-provided services that allow it to happily operate as a home. While neither argument might stand up to a major well-funded legal challenge they both have a fairly lengthy history of acceptable quid-pro-quo behind them. 
    You're still not getting it. If Qualcomm's tech is essential, then it's like plumbing. You can't charge more for the each piece of pipe, connector, valve, etc. into a $100,000,000 building compared with a $50,000 house. Yes, the quantity and total price will be higher, but the piece price should be the same.
    I absolutely get it. It's you who I suspect isn't quite there yet. It's certainly not "like plumbing" in the view of the companies who use a percentage of the profit as a basis for intellectual property licensing. In their view the applicable product could not exist without them. You should read up on legal explanations for why a per-component or instead a per-finished-device royalty is more appropriate depending on the industry, product, and importance of your IP.  

    I'm not commenting on whether it's FAIR to base royalties on the profits a third party makes from using your inventions. I lean towards the NOT fair side but not firmly and not in all cases. But it's a very common, and until recent loud tech complaints, an accepted and legal royalty basis in many business segments,. It's not unlike you and your neighbor paying different $ taxes even if the tax-rate is identical simply because one of your homes has a higher sale value. It's just the way it works and accepted as such. So IMHO both the business and government monetizing practices are more alike than different.

    Anyway,  it's not a royalty scheme created by Qualcomm even tho they have certainly used it to their advantage and profit. It also won't be the first time that royalty basis has been challenged in court, and if found to be legal the first time that's happened either.  I suspect Qualcomm will have to reign it in but that's what the lawyers and negotiations-by-press-release will now tasked with arguing. 
    edited April 2017
  • Reply 26 of 28
    brakkenbrakken Posts: 687member
    I'm sure QC is an octopus - it keeps finding new feet to shoot itself in! Are they trying to go out of business?
  • Reply 27 of 28
    iushnt1iushnt1 Posts: 12member
    adm1 said:
    saltyzip said:
    This will backfire on Apple long term. They are punishing the company's and indirectly their employees and those associated further down the food chain, because they have a direct spat with one component supplier. I would like all those suppliers and their employees and Qualcomm to sue Apple for withholding payments.

    Apple have become too big and too powerful, and are using their dominating position to try and screw everyone else to keep them in their ivory tower.
    backfire how, are all those companies really going to turn down the multi-year, multi-million (sometimes billion) dollar contracts that apple offer? many of these companies rely on apple, almost entirely. There are other manufacturers to step in, there is no other customer to step in.
    There can be other customers to step in. In future if not now. Remember, the situation is not the same always. 
  • Reply 28 of 28
    charlitunacharlituna Posts: 7,217member
    jkichline said:
    There's got to be some reason why not just Apple, but other manufacturers are on the outs with Qualcomm.  Is this monies that Qualcomm is claiming over FRAND IP for cellular connectivity? Are Qualcomm products being used in these products any longer, or are they trying to still milk royalties from devices that have less and less of their IP in them?  They state that they have been under the same contract with Apple for over a decade... technology changes. Perhaps your patents are no longer that valuable as a proportion of the product?

    what I recall reading was that the chip makers were paying the FRAND royalties to the patent holders in a manner that should have 'exhausted' the issue. In other words, the users of the chips owed nothing for royalties because the payments had been covered. But the chipmakers were demanding additional payments from the users (Apple, Samsung etc) when they bought the chips. And they sued to collect. The buyers countersued saying that their contracts said that all payments had been made and the chip makers had included any appropriate payback in the costs of the chips and thus they shouldn't be having to pay for the costs plus something to cover the patents. It would be like a store listing "cost + sales tax" on the shelf and then trying to add sales tax again at the register. 

    And if this is the situation I can't say that I disagree with these companies not making such payments until the issue is settled and they are told they have to pay it. 
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