5 ms·

Apple is pretty much in the right on royalty based on device cost is crazy. Even more extreme example. Imagine you're Rolls Royce and want to make your next ca

Apple is pretty much in the right on royalty based on device cost is crazy. Even more extreme example. Imagine you're Rolls Royce and want to make your next car have a permanent cell connection. Does 2% of the cost of a car at say 500k sound "reasonable" any longer? It should be the component or at best overall component in a larger design, not the design itself. As it stands final device cost just seems like a liver punch for no real reason than "because". But thats just my view of things, I'm curious if anyone can argue for a fixed % of final device cost for things that start to get costly as being "fair and reasonable". I'm having a really hard time coming up with one outside of its good for qualcomm's bottom line.

aey 9y ago
Except that using an alternative technology (gsm/tdma) would make their phone laughable. A windows phone with LTE would outsell an iPhone without :). Qualcomm is correct to argue that their patents are critical to the device functionality, so they should get a chunk of the profits. Apples market cap went up by 5 Qualcomms since they started selling the iPhone, so they clearly get the lions share of profits. It's hard to argue that the pricing is unfair.
- dep_b 9y ago
  I've done fine without it. 3G with good coverage is not bad at all.
  - aey 9y ago
    Apple could certainly try to prove that theory in the market place. They wouldn't even have to have this lawsuit.
- ralfd 9y ago
  But People are not buying an iPhone because of LTE, as almost every other phone has that too, but because of the Apple brand, app ecosystem, lock-in, ease of use, design, manufacturing quality, marketing, etc etc ... all that is value Apple provides, not Qualcomm. FRAND stands for "fair, reasonable, and non-discriminatory terms". How is it not discriminatory to charge companies, who operate in different market segments, different amounts for the same needed part?
  - aey 9y ago
    The whole point of granting a patent is that it's a monopoly. I think it can be argued that the amount of time the patent is valid for is not optimal for maximizing the most social gains over all possible futures, but I think it's greater then 0. Yes, people buy apple products for lots of reasons, but would apple have made 50% of Qualcomms market cap in profits from iPhone each year if it was a gsm device? Qualcomm can argue that it's pricing is Fair and Readonable since it does not inhibit Apple from making a mountain of money. There is nothing out of the ordinary for charging people a different price (unless it's because they are a protected class, but that's a separate issue)
tooltalk 9y ago
Well, if you believe that Apple's iPhone is a communication device that depends heavily on the wireless tech pioneered by Qualcomm, then the EMVR, or entire market value rule, is appropriate and Qualcomm's royalty basis is fair. If not, perhaps what you need is a Apple iPod touch. Apple's sales however demonstrates that the iPhone is a significant driver of their sales and profit, especially when compare to iPod touch. Sadly, while I agree with Samsung and Intel that Qualcomm's anti-competitive practices caused a direct harm, it's difficult to prove Apple's direct harm. Apple has argued against the FRAND royalty basis (EMVR) before back in 2012 in a USITC case without much evidence and lost.
- mitchty 9y ago
  Correct, however the argument I was presenting with the car was intended to demonstrate: 1: A product that ostensibly is not a communications device 2: The component providing LTE is but a small subset of the overall device 3: A rather high cost item where a fixed percentage ends up being rather significant Even for the iPhone I'd argue that the overall communications ensemble is but a small part of the phone overall. Contrast to an IOT device that might cost $50, the same should apply. I'm curious what the cutoff is for depends heavily and how EMVR is determined exactly?
  - tooltalk 9y ago
    1. that's fine. Again, it depends on how much value LTE adds to the end product and, 2. if Qualcomm can prove that LTE adds significant value to the core functionining of the product and consumer demand driven by Qualcomm's patented features is significant, they are all entitled to it. In patent cases, the courts use similar underlying concepts (eg, Georgia Pacific analysis) to determine what's fair. In Apple's case, there is significantly cheaper alternative to the iPhone without Qualcomm's patented feature, the iPod touch. But we also know from Apple's own sales figure that much greater number of consumers are willing to pay much higher price for the iPhone precisely because of Qualcomm's wireless functionality. 3. Apple has in the past demanded as much as $8 per, or about 1.5% of, end-device price, for frivolous patents such as slide-to-unlock, rounded-corners, etc (for a total of $30, or about 5%, of end-user device for four such patents). Qualcomm's published rate is somewhere between 3%-5% based on Foxconn's manufacturing cost, or less than 2% of the retail price. In comparison to Apple's own licensing practices, IMO, that's a bargain.
watano 9y ago
Interestingly, Apple does its business the very same way for their app store. For all paid apps and in-app purchases, Apple will collect a flat 30% fee.

aey 9y ago

Except that using an alternative technology (gsm/tdma) would make their phone laughable. A windows phone with LTE would outsell an iPhone without :). Qualcomm is correct to argue that their patents are critical to the device functionality, so they should get a chunk of the profits. Apples market cap went up by 5 Qualcomms since they started selling the iPhone, so they clearly get the lions share of profits. It's hard to argue that the pricing is unfair.

dep_b 9y ago
I've done fine without it. 3G with good coverage is not bad at all.
- aey 9y ago
  Apple could certainly try to prove that theory in the market place. They wouldn't even have to have this lawsuit.
ralfd 9y ago
But People are not buying an iPhone because of LTE, as almost every other phone has that too, but because of the Apple brand, app ecosystem, lock-in, ease of use, design, manufacturing quality, marketing, etc etc ... all that is value Apple provides, not Qualcomm. FRAND stands for "fair, reasonable, and non-discriminatory terms". How is it not discriminatory to charge companies, who operate in different market segments, different amounts for the same needed part?
- aey 9y ago
  The whole point of granting a patent is that it's a monopoly. I think it can be argued that the amount of time the patent is valid for is not optimal for maximizing the most social gains over all possible futures, but I think it's greater then 0. Yes, people buy apple products for lots of reasons, but would apple have made 50% of Qualcomms market cap in profits from iPhone each year if it was a gsm device? Qualcomm can argue that it's pricing is Fair and Readonable since it does not inhibit Apple from making a mountain of money. There is nothing out of the ordinary for charging people a different price (unless it's because they are a protected class, but that's a separate issue)

tooltalk 9y ago

Well, if you believe that Apple's iPhone is a communication device that depends heavily on the wireless tech pioneered by Qualcomm, then the EMVR, or entire market value rule, is appropriate and Qualcomm's royalty basis is fair. If not, perhaps what you need is a Apple iPod touch. Apple's sales however demonstrates that the iPhone is a significant driver of their sales and profit, especially when compare to iPod touch. Sadly, while I agree with Samsung and Intel that Qualcomm's anti-competitive practices caused a direct harm, it's difficult to prove Apple's direct harm. Apple has argued against the FRAND royalty basis (EMVR) before back in 2012 in a USITC case without much evidence and lost.

mitchty 9y ago
Correct, however the argument I was presenting with the car was intended to demonstrate: 1: A product that ostensibly is not a communications device 2: The component providing LTE is but a small subset of the overall device 3: A rather high cost item where a fixed percentage ends up being rather significant Even for the iPhone I'd argue that the overall communications ensemble is but a small part of the phone overall. Contrast to an IOT device that might cost $50, the same should apply. I'm curious what the cutoff is for depends heavily and how EMVR is determined exactly?
- tooltalk 9y ago
  1. that's fine. Again, it depends on how much value LTE adds to the end product and, 2. if Qualcomm can prove that LTE adds significant value to the core functionining of the product and consumer demand driven by Qualcomm's patented features is significant, they are all entitled to it. In patent cases, the courts use similar underlying concepts (eg, Georgia Pacific analysis) to determine what's fair. In Apple's case, there is significantly cheaper alternative to the iPhone without Qualcomm's patented feature, the iPod touch. But we also know from Apple's own sales figure that much greater number of consumers are willing to pay much higher price for the iPhone precisely because of Qualcomm's wireless functionality. 3. Apple has in the past demanded as much as $8 per, or about 1.5% of, end-device price, for frivolous patents such as slide-to-unlock, rounded-corners, etc (for a total of $30, or about 5%, of end-user device for four such patents). Qualcomm's published rate is somewhere between 3%-5% based on Foxconn's manufacturing cost, or less than 2% of the retail price. In comparison to Apple's own licensing practices, IMO, that's a bargain.

watano 9y ago

Interestingly, Apple does its business the very same way for their app store. For all paid apps and in-app purchases, Apple will collect a flat 30% fee.