10 ms·

What's Reasonable to Qualcomm Isn't to Apple

90 points by heisenbit 9y ago

Glyptodon 9y ago
So... is obligatory patent licensing subject to patent exhaustion? If so, what prevents a 3rd party factory from building chips and licensing tech, then selling chips and becoming the only party to pay royalties, and only on the cost of the chips, rather than on the final product? Is there some kind of legal differentiation of patent exhaustion based on who the purchaser is?
- dhruvb14 9y ago
  Not a lawyer but thats what i would do too.
- petra 9y ago
  >> what prevent a 3rd party factory from building chips and licensing tech ..? Quallcom. they could dictate the licensing agreement such that the phone maker also has to license it.
  - Glyptodon 9y ago
    Only if that's part of the standard compulsory license agreement, and if any such agreement somehow gets around patent exhaustion. Which is more or less what I was curious about.
- tracker1 9y ago
  That would have definitely improved the state of things for the likes of BluRay software playback... Not to mention most electronics where software is a huge part of interaction. I'm hoping we see some serious reduction in patents in the next few years, including compulsory licensing models for several sectors (namely medical/pharma).
  - Glyptodon 9y ago
    I'm not sure I see how it would have much to do with BluRay at all, at least for playback of encrypted content, as I think that's all about licensing non-patent IP and agreeing to non-patent-related contractual terms.
    - tracker1 9y ago
      If the licensing were done at the component level, than any software could be used with a BR Drive... no patent royalties on top of the existing implementations in hardware... though, who knows. It's the Patent IP that is the problem... you don't license non-patent IP.
cbanek 9y ago
So this article talks all about pricing, and how the case might affect the price of an iPhone, but gives no numbers. Have to give it to them on mentioning 5G posturing though, which I think is what this is. From another recent article (https://www.cnet.com/news/qualcomm-apple-iphone-patents-royalties-manufacturers-chips/ https://www.cnet.com/news/qualcomm-apple-iphone-patents-roya...): In Apple's case, the iPhone maker pays Qualcomm's licensing fee through its manufacturers. Apple doesn't have a direct license of its own. The fee is based on the total value of the device ($650 in the case of the iPhone) versus the value of the chip (closer to $20), but it's capped at a certain level. Neither company has disclosed the limit, but it's lower than the actual $650 price of the iPhone.
- cbanek 9y ago
  Here's another article that says the royalty is about $15 per phone. http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-siege/ http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-s...
  - tooltalk 9y ago
    is that after rebate or before?
- tooltalk 9y ago
  Are you saying that if Apple wins, we are going to pay less for iPhones? ;) Apple's manufacturer Foxconn pays Qualcomm on their manufacturing costs (selling price to Apple), or $250-$300? Qualcomm's baseband is sold separately. Of course, Qualcomm would love to charge based on Apple's retail price $600+.
Declanomous 9y ago
Given how important standards are in the realm of computers, I think the degree of protection patents provide is ludicrous. Patents ostensibly exist to benefit society while allowing the inventor to benefit from their invention. I feel like in the digital world the balance has tipped too far in favor of the inventor. If we look to the industrial revolution for example, we have the conversion of linear motion to reciprocating motion. This is an incredibly important development for getting useful work out of steam engines. The most common solution is the crank and flywheel, but when James Watt was designing his steam engines he found that the crank was patented by James Pickard. Rather than license the crank, he invented the Sun and Planet gear[1]. The Sun and Planet gear was less efficient than the crank, but it was a suitable workaround which allowed Watt's engines to be competitive. When it comes to computers, you either have the ability to interact or you don't. If you don't have the right radio, you cannot build a cell phone. If you don't have the right codec, you cannot build a web browser. Functionally, these patents are effectively more like patenting the concept of changing linear motion into rotational motion than patenting a particular mechanism for doing so. I'm glad Apple is forcing Qualcomm's hand on this one. [1] https://en.wikipedia.org/wiki/Sun_and_planet_gear https://en.wikipedia.org/wiki/Sun_and_planet_gear
- esMazer 9y ago
  this is an excellent analogy!
  - newusertoday 9y ago
    so when apple uses its patents to sue samsung or get import ban it is alright but when the company that invented the tech before apple even sold phones asks for royalties it's theft?
- logicallee 9y ago
  >Functionally, these patents are effectively more like patenting the concept of changing linear motion into rotational motion than patenting a particular mechanism for doing so. And one thing is clear: if the industrial revolution had started 20 years later due to some over-broad patent on a whole class of devices, then today we would be lawless cavepeople without electricity. I mean just think it through! Surely whatever incentives the patent system created - including for Watt, or, for that matter, the wright brothers, pales in comparison to the fact that as a species we came this close >< to losing it all. There was a race against time and we won that race. If the hundred thousand year old history of science had been delayed by just twenty years, surely we would have lost it all. The fact that the industrial revolution happened under a broad patent system that produced Watt, the wright brothers, and others, is the purest coincidence. If the patent regime had been even slightly broader, the twentieth century would have been one very long, very boring appendix to Archemedes' screw. Thank God that it happened to be just right! And alas, that nothing has been invented in the digital domain since 1997, since, alas, this system simply does not work there. :( :( :( Can you imagine if things had been invented since 1997? Imagine if people could communicate or innovate without patents coming and beating them up like a school bully. one can dream. . . (Sorry for dripping with sarcasm, you're just so wrong I cannot express it in any other way. who cares if a few patents are granted which are too broad -- big deal. literally a twenty year wait solves that problem forever. the contract with society works.)
wyldfire 9y ago
> There is pretty much no way that Qualcomm could ever get an injunction to stop sales of iPhones... Qualcomm is planning to ask the federal government to ban imports of iPhones. This is the technology equivalent of a Hail Mary pass. It was unclear from the article why this is a Hail Mary, so I looked it up. It initially seemed to me that if Qualcomm offers Apple a licensing agreement, Apple agrees to it, and later decides not to adhere to the agreement, they should be able to seek injunctive relief. The relevant precedent is probably eBay Inc. v. MercExchange [1], which SCOTUS used to establish a four-factor test. Among the four are "that [the party seeking injunction] has suffered an irreparable injury;" and "that the public interest would not be disserved by a permanent injunction." Public can't live without that sweet new iPhone stuff ;) and QCOM can always get paid later. [1] https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L.C https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L.... [2] https://www.scribd.com/document/337216142/1-Apple-v-Qualcomm-Lawsuit-Patently-Apple https://www.scribd.com/document/337216142/1-Apple-v-Qualcomm...
- IBM 9y ago
  Apple doesn't receive a license from Qualcomm. They pay their third party manufacturers which pass it on to Qualcomm (and until recently, Apple was receiving a rebate for some of it in exchange for exclusivity). Also I doubt anyone is going to ban the iPhone over SEPs.
- Animats 9y ago
  If Apple manufactured in the US, they could rely on eBay vs. MercExchange. But Apple imports from China. The rules for imports are tougher. That's handled by the International Trade Commission.[1] ITC cases take about a year, and if Qualcomm wins, iPhone imports will be seized at Customs. ITC rules favor American manufacturers fighting illegal imports. Qualcomm could win this. To bring an ITC case, you have to be manufacturing the thing in the US, which Qualcomm does; they make and sell cellular radio ICs. ITC proceedings are thus not available to "patent trolls". This deals with most of the usual complaints about patents. ITC actions are entirely about blocking imports. There's no issue of what's a "reasonable royalty". Qualcomm can just say "no imports". The Trump administration might view this as a win, as it would force Apple to manufacture in the US. [1] https://apps.americanbar.org/litigation/committees/intellectual/roundtables/1106_outline.pdf https://apps.americanbar.org/litigation/committees/intellect...
EGreg 9y ago
Each side argues that the other is theft. Either theft of intellectual property, or legal theft of money they didn't earn by not executing.
MBCook 9y ago
I'm an Apple fan and agree with their position here... but isn't this close to Apple's claim against Android or Samsung? That Apple's patents around touch screens are so important that they should get a cut of the full phone? I think Apple's position against Android or Samsung was much stronger than Qualcomm's against Apple... but I see a sneaky similarity and they appear to be switching sides.
- IBM 9y ago
  The Apple patents in question weren't SEP and aren't subject to FRAND terms.
  - MBCook 9y ago
    Good point.
  - tooltalk 9y ago
    doesn't really matter. SEP/FRAND doesn't mean cheap, as Apple seems to believe. Apple can't demand Samsung to pay the moon only because their patents aren't SEP either. While there are no firm rules, most courts look at value the patented features creates (market driver) as the basis of reasonable rates.
asafira 9y ago
Not to hijack this thread (ok, maybe to hijack this thread), does anyone know how Qualcomm is doing? It always seemed to me that their processors never really caught up to Apple's tech (with almost all benchmarks), and I was wondering if it had to do with the company just not doing so well nowadays (people leaving, etc.)
- Mathnerd314 9y ago
  I found some generic tech strategy report: https://www.qualcomm.com/media/documents/files/a-deeper-dive-into-qualcomm-s-iot-portfolio-and-strategy.pdf https://www.qualcomm.com/media/documents/files/a-deeper-dive..., it seems like their strategy is to just keep rolling in the money and pumping out chips and IP. They're still doing random R&D products, so not too much fiscal pressure I guess, although if they keep paying out huge settlements that could change: https://www.technologyreview.com/s/603964/qualcomm-wants-your-smartphone-to-have-energy-efficient-eyes/ https://www.technologyreview.com/s/603964/qualcomm-wants-you... Software-wise their code and maintenance strategy in general seems to suck, they throw the code over a wall and start over when doing the next project: https://news.ycombinator.com/item?id=13685273 https://news.ycombinator.com/item?id=13685273 Some guys from Google wrote yet another CPU scheduler, apparently it does better than Qualcomm's: http://linuxplumbersconf.com/2016/ocw//system/presentations/3693/original/LPC-%20EAS%20for%20Android.pdf http://linuxplumbersconf.com/2016/ocw//system/presentations/... Obviously they're not making many friends with their legal strategy. The chips are still selling, so the bottom line is sound at the moment. But other companies are developing ARM chips too: https://www.fool.com/investing/2017/03/06/should-qualcomm-inc-worry-about-xiaomis-new-chips.aspx https://www.fool.com/investing/2017/03/06/should-qualcomm-in... And there are a ton of lawsuits. So it wouldn't be surprising if Qualcomm suddenly went out of business due to a court judgement, or gradually had to scale down.
- eggie5 9y ago
  Morale is pretty low. Boston consulting group is there now presumably working on restructuring and layoffs. After Jacobs left and Mollenkopf took over a lot was cut, they even closed the Library which peeved a lot of people off. The little things... There is also a company-wide sentiment that they are abusing the H1B program...
microcolonel 9y ago
> If Apple loses, patent licensing practices will continue to throw sand in the wheels of commerce -- and cost consumers money. This metaphor is a bit weird. I know that throwing sand to the wheels of a train is helpful (generates traction). Prettymuch all freight trains throw sand in the wheels deliberately. Maybe they got it the wrong way around.
mrout 9y ago
Patents should be abolished. Anything less has no practical purpose.

90 points by heisenbit 9y ago

So... is obligatory patent licensing subject to patent exhaustion? If so, what prevents a 3rd party factory from building chips and licensing tech, then selling chips and becoming the only party to pay royalties, and only on the cost of the chips, rather than on the final product? Is there some kind of legal differentiation of patent exhaustion based on who the purchaser is?

dhruvb14 9y ago
Not a lawyer but thats what i would do too.
petra 9y ago
>> what prevent a 3rd party factory from building chips and licensing tech ..? Quallcom. they could dictate the licensing agreement such that the phone maker also has to license it.
- Glyptodon 9y ago
  Only if that's part of the standard compulsory license agreement, and if any such agreement somehow gets around patent exhaustion. Which is more or less what I was curious about.
tracker1 9y ago
That would have definitely improved the state of things for the likes of BluRay software playback... Not to mention most electronics where software is a huge part of interaction. I'm hoping we see some serious reduction in patents in the next few years, including compulsory licensing models for several sectors (namely medical/pharma).
- Glyptodon 9y ago
  I'm not sure I see how it would have much to do with BluRay at all, at least for playback of encrypted content, as I think that's all about licensing non-patent IP and agreeing to non-patent-related contractual terms.
  - tracker1 9y ago
    If the licensing were done at the component level, than any software could be used with a BR Drive... no patent royalties on top of the existing implementations in hardware... though, who knows. It's the Patent IP that is the problem... you don't license non-patent IP.

cbanek 9y ago

So this article talks all about pricing, and how the case might affect the price of an iPhone, but gives no numbers. Have to give it to them on mentioning 5G posturing though, which I think is what this is. From another recent article (https://www.cnet.com/news/qualcomm-apple-iphone-patents-royalties-manufacturers-chips/ https://www.cnet.com/news/qualcomm-apple-iphone-patents-roya...): In Apple's case, the iPhone maker pays Qualcomm's licensing fee through its manufacturers. Apple doesn't have a direct license of its own. The fee is based on the total value of the device ($650 in the case of the iPhone) versus the value of the chip (closer to $20), but it's capped at a certain level. Neither company has disclosed the limit, but it's lower than the actual $650 price of the iPhone.

cbanek 9y ago
Here's another article that says the royalty is about $15 per phone. http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-siege/ http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-s...
- tooltalk 9y ago
  is that after rebate or before?
tooltalk 9y ago
Are you saying that if Apple wins, we are going to pay less for iPhones? ;) Apple's manufacturer Foxconn pays Qualcomm on their manufacturing costs (selling price to Apple), or $250-$300? Qualcomm's baseband is sold separately. Of course, Qualcomm would love to charge based on Apple's retail price $600+.

Declanomous 9y ago

Given how important standards are in the realm of computers, I think the degree of protection patents provide is ludicrous. Patents ostensibly exist to benefit society while allowing the inventor to benefit from their invention. I feel like in the digital world the balance has tipped too far in favor of the inventor. If we look to the industrial revolution for example, we have the conversion of linear motion to reciprocating motion. This is an incredibly important development for getting useful work out of steam engines. The most common solution is the crank and flywheel, but when James Watt was designing his steam engines he found that the crank was patented by James Pickard. Rather than license the crank, he invented the Sun and Planet gear[1]. The Sun and Planet gear was less efficient than the crank, but it was a suitable workaround which allowed Watt's engines to be competitive. When it comes to computers, you either have the ability to interact or you don't. If you don't have the right radio, you cannot build a cell phone. If you don't have the right codec, you cannot build a web browser. Functionally, these patents are effectively more like patenting the concept of changing linear motion into rotational motion than patenting a particular mechanism for doing so. I'm glad Apple is forcing Qualcomm's hand on this one. [1] https://en.wikipedia.org/wiki/Sun_and_planet_gear https://en.wikipedia.org/wiki/Sun_and_planet_gear

esMazer 9y ago
this is an excellent analogy!
- newusertoday 9y ago
  so when apple uses its patents to sue samsung or get import ban it is alright but when the company that invented the tech before apple even sold phones asks for royalties it's theft?
logicallee 9y ago
>Functionally, these patents are effectively more like patenting the concept of changing linear motion into rotational motion than patenting a particular mechanism for doing so. And one thing is clear: if the industrial revolution had started 20 years later due to some over-broad patent on a whole class of devices, then today we would be lawless cavepeople without electricity. I mean just think it through! Surely whatever incentives the patent system created - including for Watt, or, for that matter, the wright brothers, pales in comparison to the fact that as a species we came this close >< to losing it all. There was a race against time and we won that race. If the hundred thousand year old history of science had been delayed by just twenty years, surely we would have lost it all. The fact that the industrial revolution happened under a broad patent system that produced Watt, the wright brothers, and others, is the purest coincidence. If the patent regime had been even slightly broader, the twentieth century would have been one very long, very boring appendix to Archemedes' screw. Thank God that it happened to be just right! And alas, that nothing has been invented in the digital domain since 1997, since, alas, this system simply does not work there. :( :( :( Can you imagine if things had been invented since 1997? Imagine if people could communicate or innovate without patents coming and beating them up like a school bully. one can dream. . . (Sorry for dripping with sarcasm, you're just so wrong I cannot express it in any other way. who cares if a few patents are granted which are too broad -- big deal. literally a twenty year wait solves that problem forever. the contract with society works.)

wyldfire 9y ago

> There is pretty much no way that Qualcomm could ever get an injunction to stop sales of iPhones... Qualcomm is planning to ask the federal government to ban imports of iPhones. This is the technology equivalent of a Hail Mary pass. It was unclear from the article why this is a Hail Mary, so I looked it up. It initially seemed to me that if Qualcomm offers Apple a licensing agreement, Apple agrees to it, and later decides not to adhere to the agreement, they should be able to seek injunctive relief. The relevant precedent is probably eBay Inc. v. MercExchange [1], which SCOTUS used to establish a four-factor test. Among the four are "that [the party seeking injunction] has suffered an irreparable injury;" and "that the public interest would not be disserved by a permanent injunction." Public can't live without that sweet new iPhone stuff ;) and QCOM can always get paid later. [1] https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L.C https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L.... [2] https://www.scribd.com/document/337216142/1-Apple-v-Qualcomm-Lawsuit-Patently-Apple https://www.scribd.com/document/337216142/1-Apple-v-Qualcomm...

IBM 9y ago
Apple doesn't receive a license from Qualcomm. They pay their third party manufacturers which pass it on to Qualcomm (and until recently, Apple was receiving a rebate for some of it in exchange for exclusivity). Also I doubt anyone is going to ban the iPhone over SEPs.
Animats 9y ago
If Apple manufactured in the US, they could rely on eBay vs. MercExchange. But Apple imports from China. The rules for imports are tougher. That's handled by the International Trade Commission.[1] ITC cases take about a year, and if Qualcomm wins, iPhone imports will be seized at Customs. ITC rules favor American manufacturers fighting illegal imports. Qualcomm could win this. To bring an ITC case, you have to be manufacturing the thing in the US, which Qualcomm does; they make and sell cellular radio ICs. ITC proceedings are thus not available to "patent trolls". This deals with most of the usual complaints about patents. ITC actions are entirely about blocking imports. There's no issue of what's a "reasonable royalty". Qualcomm can just say "no imports". The Trump administration might view this as a win, as it would force Apple to manufacture in the US. [1] https://apps.americanbar.org/litigation/committees/intellectual/roundtables/1106_outline.pdf https://apps.americanbar.org/litigation/committees/intellect...

EGreg 9y ago

Each side argues that the other is theft. Either theft of intellectual property, or legal theft of money they didn't earn by not executing.

MBCook 9y ago

I'm an Apple fan and agree with their position here... but isn't this close to Apple's claim against Android or Samsung? That Apple's patents around touch screens are so important that they should get a cut of the full phone? I think Apple's position against Android or Samsung was much stronger than Qualcomm's against Apple... but I see a sneaky similarity and they appear to be switching sides.

IBM 9y ago
The Apple patents in question weren't SEP and aren't subject to FRAND terms.
- MBCook 9y ago
  Good point.
- tooltalk 9y ago
  doesn't really matter. SEP/FRAND doesn't mean cheap, as Apple seems to believe. Apple can't demand Samsung to pay the moon only because their patents aren't SEP either. While there are no firm rules, most courts look at value the patented features creates (market driver) as the basis of reasonable rates.

asafira 9y ago

Not to hijack this thread (ok, maybe to hijack this thread), does anyone know how Qualcomm is doing? It always seemed to me that their processors never really caught up to Apple's tech (with almost all benchmarks), and I was wondering if it had to do with the company just not doing so well nowadays (people leaving, etc.)

Mathnerd314 9y ago
I found some generic tech strategy report: https://www.qualcomm.com/media/documents/files/a-deeper-dive-into-qualcomm-s-iot-portfolio-and-strategy.pdf https://www.qualcomm.com/media/documents/files/a-deeper-dive..., it seems like their strategy is to just keep rolling in the money and pumping out chips and IP. They're still doing random R&D products, so not too much fiscal pressure I guess, although if they keep paying out huge settlements that could change: https://www.technologyreview.com/s/603964/qualcomm-wants-your-smartphone-to-have-energy-efficient-eyes/ https://www.technologyreview.com/s/603964/qualcomm-wants-you... Software-wise their code and maintenance strategy in general seems to suck, they throw the code over a wall and start over when doing the next project: https://news.ycombinator.com/item?id=13685273 https://news.ycombinator.com/item?id=13685273 Some guys from Google wrote yet another CPU scheduler, apparently it does better than Qualcomm's: http://linuxplumbersconf.com/2016/ocw//system/presentations/3693/original/LPC-%20EAS%20for%20Android.pdf http://linuxplumbersconf.com/2016/ocw//system/presentations/... Obviously they're not making many friends with their legal strategy. The chips are still selling, so the bottom line is sound at the moment. But other companies are developing ARM chips too: https://www.fool.com/investing/2017/03/06/should-qualcomm-inc-worry-about-xiaomis-new-chips.aspx https://www.fool.com/investing/2017/03/06/should-qualcomm-in... And there are a ton of lawsuits. So it wouldn't be surprising if Qualcomm suddenly went out of business due to a court judgement, or gradually had to scale down.
eggie5 9y ago
Morale is pretty low. Boston consulting group is there now presumably working on restructuring and layoffs. After Jacobs left and Mollenkopf took over a lot was cut, they even closed the Library which peeved a lot of people off. The little things... There is also a company-wide sentiment that they are abusing the H1B program...

microcolonel 9y ago

> If Apple loses, patent licensing practices will continue to throw sand in the wheels of commerce -- and cost consumers money. This metaphor is a bit weird. I know that throwing sand to the wheels of a train is helpful (generates traction). Prettymuch all freight trains throw sand in the wheels deliberately. Maybe they got it the wrong way around.

mrout 9y ago

Patents should be abolished. Anything less has no practical purpose.