carnegie

gatorguy said:

carnegie said:

Defendants are sometimes successful in having particular claims deemed invalid - e.g., by the PTAB or by the Federal Circuit on appeal of a PTAB decision or appeal of an infringement decision. They also sometimes get infringement decisions themselves overturned with regard to particular claims. If the jury just found that at least one claim was infringed (without deciding and indicating which claims were infringed), and one of the claims is latter invalidated... then you might need a new trial to determine whether one of the remaining claims was infringed.

If a patent claim is deemed invalid at some later time, sometime after a final judgment has been rendered, does the infringer get their money back or the infringement judgment is then reversed? I didn't think it did, so if not what practical difference would it make if a claim is later deemed invalid? Just trying to understand your post. 

EDIT: Found that the procedural question whether the Federal Court of Appeals could consider was already put to SCOTUS
 https://www.supremecourt.gov/DocketPDF/18/18-1397/98180/20190501124836955_Prism Technologies Petition.pdf

It looks like that case involves a different procedural issue that I won't get lost in.

As for your question: Once an infringement judgment becomes final, it likely wouldn't matter that an infringed claim was found to be invalid - e.g., by the PTAB or in a different infringement action. I wasn't referring to such a situation. Sometimes a claim is effectively invalidated before there's a final judgment in a given infringement action. On appeal, the Federal Circuit can overrule a trial court's decision that a given claim isn't invalid which effectively moots the finding of infringement of that claim. The PTAB can also invalidate a given claim and the Federal Circuit can uphold the PTAB's invalidation. Those things can happen before an infringement judgment becomes final.

There's still some gray relating to this legal issue. But in broad strokes, if an invalidation becomes final before an infringement finding becomes final, courts can give effect to that invalidation and effectively throw out the infringement finding. Sometimes it takes a long time for infringement cases to become final. They can go back and forth between the Federal Circuit and district courts for many years. This has been an issue with the VIrnetX and Apple litigation. Apple generally wanted to drag those cases out so that invalidations became final before the infringement findings did. VirnetX generally wanted the reverse. It's still a question which will happen first when it comes to one of the cases.

With the present case, the Federal Circuit could effectively decide that some - but not all - of the asserted patent claims are invalid. If it does, then they'll probably need to be a new trial on infringement because we won't know whether the jury's infringement finding was based only on those claims. It might be worth noting that the jury was asked to rule on each claim separately when it came to validity. But when it came to infringement, it was only asked to rule whether any of the claims were infringed.

Now that I've looked at the verdict form in this case more carefully, I'd say that it's particularly problematic. It doesn't seem to account for the possibility that the jury found infringement on the first question but then invalidity of some (but not all) of the claims on the second. What would have happened then? The verdict form doesn't ask the jury to indicate whether the infringement finding was based on at least one claim that wasn't found to be invalid. 

Juries in patent infringement cases should be asked to decide whether infringement was proven for each asserted claim. Often the claims are similar (or even dependent claims), so it wouldn't necessarily a lot of additional consideration.

Defendants are sometimes successful in having particular claims deemed invalid - e.g., by the PTAB or by the Federal Circuit on appeal of a PTAB decision or appeal of an infringement decision. They also sometimes get infringement decisions themselves overturned with regard to particular claims. If the jury just found that at least one claim was infringed (without deciding and indicating which claims were infringed), and one of the claims is latter invalidated... then you might need a new trial to determine whether one of the remaining claims was infringed. We don't know whether the jury's infringement finding was based solely on that claim. We also don't know whether the damages award depended in part on that claim.

gatorguy said:

carnegie said:

gatorguy said:

davidw said:

gatorguy said:

davidw said:

gatorguy said:

foregoneconclusion said:

gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.

Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.

 I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so? 

Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all. 

According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?

FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue. 

The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.

Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.

That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.

Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful. 

EDIT:
Ah, found it, so no citations needed Carnegie:
"For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.

For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.

For third party applications sold through the App Store ® , Mac App Store, TV App Store and Watch App Store and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.

The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."

So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect,  but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir. 

BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV+ services, which are bundled in the sales price of certain products." 

You're welcome.

Yeah, all of Apple's 10-Qs and 10-Ks would report that Apple accounts for third-party app sales this way - i.e., on a net revenue basis. Apple also provided some supplemental reporting a few years back that shed some light on gross app store revenue.

As for accounting for revenues in the way you describe in the first paragraph, that would be more likely when we're talking about a reseller model. Walmart, e.g., would generally count all of the revenue it receives from sales of third-party products. What it paid third parties for those products would then be deducted, as part of cost of sales, to leave gross margins. But as I indicated, Apple isn't really acting as a reseller when it comes to third-party apps. It's acting as an agent seller. It's collecting the money for the developers and then taking out what it's owed (as well as, e.g., taxes) before passing the remaining proceeds along to the developers.

22july2013 said:

carnegie said:

22july2013 said:

carnegie said:

That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.

I presume you meant there to include apps sold through non-Apple app stores. Okay, and what is the mechanism for developers to pay Apple if it's not through a percentage of their sales? Does Apple have to read through the binaries of each of the 2 million apps available to iOS to figure out which ones are using Apple's IP and then send them a letter containing a bill even though Apple doesn't have access to their address because they may have registered only through a third party app store?

By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."

So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.

Straddling the fence on what?

I generally think Apple should be able to charge developers what it wants for the use of its IP and, of course, for the use of its services.

As for the mechanism for developers paying Apple if they sell apps through other stores: That's one of the problems with this proposed legislation. Regardless of who processes the payments, Apple should be entitled (if it wants it) to some portion of the sales from developers who sell apps which use Apple's IP. Apple should of course be able to charge for the various services it provides to developers. But at a minimum, a developer developing iOS apps is using Apple's IP. And Apple should generally get to decide the terms under which it is willing to license the us of that IP.

I'm glad you agree developers should pay, but I asked the question "what is the mechanism for developers to pay Apple if it isn't through a percentage of their sales". I've read your answer several times and didn't see any response. How does Apple know who the developers even are? Do they rely on the honesty of the developer to pay? This is what you aren't answering. I can't figure out how you want Apple to be able to figure out which developers are using which of Apple's IPs. Apple can't see the source code... do you want Apple to decode the app's binary and then do a google search to try to figure out the phone number of the app developer? This is my point, and I don't see any response from you.

I'm not sure how Apple would collect what it would be owed on such sales. That was part of my point: This kind of legislation would (if it went into effect) complicate the tracking and collecting of fees due based on such sales.

That said, there are ways of collecting such fees. This kind of thing happens a lot with intellectual property. IP owners grant licenses which require licensees to report certain, e.g., sales information and then based on what's reported licensing fees are calculated. Sometimes the licensing agreements give the IP owners rights to audit reports in certain ways. But that, of course, leaves IP owners relying to some extent on licensees' reporting their use of the IP. Court orders can also require IP users to make periodic reports to IP owners and allow for audits.

Relying on licensees to report how much they use certain IP isn't ideal. But that's often what has to happen. As it is, it's much easier for Apple to track who owes what based on app sales. But if it were no longer allowed to require certain kinds of sales to go through the App Store, Apple could offer licensees that required the reporting of certain information and the paying of certain fees. Could developers cheat? Of course. Again, that was part of my point. To the extent Apple became aware of cheating, it might be able to block the use of its IP or it might have to file lawsuits.

22july2013 said:

carnegie said:

22july2013 said:

avon b7 said:

22july2013 said:

avon b7 said:

Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store. 

If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition. 

Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.

By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.

(1) On App Store revenue. A quick Google returned this:
https://www.cnbc.com/2021/01/08/apples-app-store-had-gross-sales-around-64-billion-in-2020.html
No one knows for sure as Apple doesn't reveal that information. I'd guess there's a good reason for that and it's profit related. 

(2) The different 'kits' are in iOS. 
Apps are made using Apple's IDE. Developers pay for that. 
It has nothing to do with the App Store per se. 

(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.

(1) I would rather believe Apple's quarterly reports than a contradictory report from CNBC. https://www.apple.com/newsroom/pdfs/FY21 Q1 Consolidated Financial Statements.pdf says that Apple's total revenues from all online services was only $12 billion in the last quarter. 

That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.

Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.

I think you are trying to argue that I'm misinterpreting "gross revenue" with "net revenue" (profits). No I'm not confusing these two terms. The annual report and the numbers that I cited for you was talking only about net sales (gross revenue). 

I wasn't saying anything other than that the CNBC report doesn't contradict Apple's financial reporting (to include the quarterly report you linked to).

I'm not sure where you got the $12 billion revenue number for all online services in the last quarter from. Apple doesn't report total online services, it reports Services - which includes things such as Apple Card and Apple Care. And the number for Services in the last quarter was about $16 billion, not $12 billion. Regardless, to the extent App Store revenues are included in that number they are counted on a net basis. Apple doesn't, e.g., report as Services revenue the total amount that people pay for apps on the App Store. It only counts the 30% (or, e.g., 15%) that it keeps from those sales. (It, of course, counts the total for sales of its own apps.) The CNBC report referred to gross App Store revenues. IOW, the estimate was for the total amount spent through the App Store, not the portion which Apple kept.

To be clear though, when I referred to reporting revenue on a net basis, I wasn't talking about reporting profits. I wasn't distinguishing between gross revenue and profit. I was talking about only reporting, from certain kinds of sales, the portion of revenues which Apple keeps.  That isn't profit. In this context there's revenue reported on a gross basis - that would be the case if Apple counted all of the revenue it received from the sale of third-party apps, which it doesn't do - and then there's revenue reported on a net basis - that's what Apple does when it comes to sales of third-party apps, it only counts as revenue the portion of those sales which it keeps.