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You are right in that it's not a bribe. It's a common industry practice to offer "discount" or "rebates" for volume customers, or those with longer contract du

You are right in that it's not a bribe. It's a common industry practice to offer "discount" or "rebates" for volume customers, or those with longer contract duration. Qualcomm did not specifically created a "plan" to discourage potential customers from choosing competitors. It was Apple who proposed the rebate deal with exclusivity and Qualcomm acquiesced to Apple's demand. Then Apple started parading around telling regulators that they were FORCED into that agreement. In hindsight, it was Qualcomm's contract lawyers' oversight to have let that big one slip. Qualcomm has been under regulators' radar for decades, but they might have felt it was ok to let that one in since it was their own customer Apple, not Qualcomm, demanding that exclusivity. Your understanding of the situation is a bit skewed: (1) yes, Qualcomm is a leading wireless inventors and owns the largest wireless patent portfolio (2) even if you don't use Qualcomm chips, you have to pay Qualcomm licensing fees. You are allowed to challenge their FRAND licensing practices and, for almost a full decade, Apple has done this every time their contract is up for renewal with Nokia, Ericsson, Samsung and pretty much every wireless patent holders WITHOUT any evidence that there is a breach of FRAND. (3) Qualcomm's rate is higher because the share and importance of their IPs and, again, because Apple is a huge volume customer. Apple was never in rush to get the latest and greatest tech.

mdasen 9y ago
Apple and others would require a license for Qualcomm's IP, but the allegations are that Qualcomm forced others to agree to Qualcomm's preferred license terms or lose access to Qualcomm chips. If you tried to license Qualcomm's IP under FRAND terms rather than Qualcomm's preferred terms, you couldn't make a flagship phone since they wouldn't sell you the only high-end modems available. https://web.archive.org/web/20170419042209/https://www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-qualcomm-monopolizing-key-semiconductor-device-used https://web.archive.org/web/20170419042209/https://www.ftc.g... In the FTC complaint against Qualcomm, they say that Qualcomm, "Extracted exclusivity from Apple in exchange for reduced patent royalties. Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors." They also say that Qualcomm, "Maintains a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. The FTC alleges that this tactic forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. According to the Commission’s complaint, this is an anticompetitive tax on the use of rivals’ processors. “No license, no chips” is a condition that other suppliers of semiconductor devices do not impose. The risk of losing access to Qualcomm baseband processors is too great for a cell phone manufacturer to bear because it would preclude the manufacturer from selling phones for use on important cellular networks." So, the situation alleged seems to be that 1) phone makers can't forgo access to Qualcomm's chips because they need them for high-end phones; 2) Qualcomm won't sell you chips unless you agree to their preferred license terms rather than FRAND terms; 3) Qualcomm's control of the only high-end modems means that they can charge a much higher royalty on their patents (since companies will pay the higher royalty because they need Qualcomm's chips) and they can accept lower margins on the chips to make sure that competitors can't get into the market (and competing chips get subject to Qualcomm's anticompetitive tax if the manufacturer wants access to Qualcomm chips for any of its devices). Qualcomm also refuses to license their patents to competitors like Intel or MediaTek because they want a percentage of the handset cost rather than a fixed fee. The FTC has alleged that this alone is a violation of FRAND. According to one study cited by the FTC, Qualcomm's share of "highly novel" LTE patents was 13% compared to 19% for Nokia and 12% for Ericsson and Samsung, but Qualcomm gets paid far more than they do in licensing fees. You've said that Apple could challenge the licensing fees, but what's alleged is that Qualcomm would stop selling you their modems if you challenged their preferred licensing fees. Yes, Apple would still have to pay some fee, but it might be much lower than Qualcomm's preferred fees. The problem is that they'd lose access to Qualcomm's chips. ~~ Before the iPhone's Intel use, if you were a phone maker and you wanted to ship a flagship phone, you had to use Qualcomm's chips. There was no alternative modem you could use. Qualcomm had agreed to FRAND terms for their IP. But they saw that phone manufacturers couldn't force them to sell their chips. So, if a phone manufacturer wanted their chips, they'd say, "here are the royalties we prefer for our IP. If you don't agree to these rates, you could challenge them, but then we won't sell you any chips. Without our chips, you can't sell the high-end phones that are your entire margin. So, agree to the rates even if you think they're a bit higher than FRAND." ~~ Yes, Apple would still have to pay Qualcomm a royalty. However, if they didn't tie Qualcomm's preferred licensing to their chips, that royalty might be lower. If Qualcomm licensed their IP to competitors (as the FTC says is required under FRAND commitments), Apple's royalty would be a lot lower. "When Apple sought relief from Qualcomm’s excessive royalty burden, Qualcomm conditioned partial relief on Apple’s exclusive use of Qualcomm baseband processors from 2011 to 2016. Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors." Can you cite things that show Apple having originated the exclusivity? I mean, that's from an official court filing (https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf https://www.ftc.gov/system/files/documents/cases/170117qualc...). Apple wanted lower royalties. Maybe Qualcomm worried they'd get another company to create a flagship modem and then challenge Qualcomm's royalties. If I were Qualcomm, I would have. So, by requiring exclusivity, I could choke off competition to my modems and make sure that phone manufacturers had to continue paying me high royalties. If Qualcomm legitimately thought that their IP was worth as much as they were getting paid for it, then they wouldn't have to tie the rates to access to their chips. ~~ 1) According to the FTC, Qualcomm doesn't have the largest portfolio for LTE technologies. Nokia has 46% more "highly novel" standards essential patents for LTE than Qualcomm. 2) The complaint is that you couldn't challenge Qualcomm's preferred rates because they'd deny you access to their modems and without their modems, you'd be dead in the water. 3) The FTC complaint alleges the opposite. a) Qualcomm's IP is less important; b) Apple wasn't in the driver's seat and it was Qualcomm's plan to require exclusivity when they asked for relief from royalties they believed were too high.
zuminator 9y ago
Your narrative is rather nakedly anti-Apple, and I'm having trouble understanding how it even makes sense. You say there was "no evidence" Qualcomm breached FRAND. If that's the case, then why would Apple induce Qualcomm to offer them an exclusivity licence with partial rebate that still winds up being higher than FRAND? Why not just get a cheaper straight FRAND licence with no rebate? Conversely, if the rebate nets Apple sub FRAND rates, then why would they challenge it "every time"? A successful challenge would then result in higher net costs to them.
- tooltalk 9y ago
  Sure. 1) You are putting words in my mouth -- never claimed there was no evidence Qualcomm breached FRAND -- at least with respect to Apple, that is yet to be determined. There is no doubt that Qualcomm's licensing respect to competing baseband makers (or lack thereof) is clearly a violation of FRAND. What was said: there are real court cases involving Apple and wireless suppliers/patent holders (again, Nokia, Ericsson, Samsung) demonstrating my points that Apple challenged pretty much every wireless patent holders and lost or settled before trial. See Apple vs Samsung in particular where Apple made unsubstantiated claims against Samsung's FRAND violation and was dismissed. Even Apple's own ETSI expert came out testifying against Apple. 2) No, Qualcomm's FRAND licensing rate is published to the public time to time, so they don't look like they are ripping off anybody (or unfair). It's around 3%-5% range per device -- and it is not cheaper than whatever their agreed "preferential" rate is. Apple and FTC fanangled some nebulous calculus to come up with that absurd figure and claim that Qualcomm overcharged Apple. Ask them, not me -- and I bet you'd be surprised how far and silly they are willing to go to make their case against Qualcomm. 3) Apple's view on patent licensing is that while Apple's own frivolous design/utility patents are worth $7-$8 per end-user device (see Apple vs Samsung), everyone else's should be $0.00000X per smallest component that embodies them (see Apple vs Samsung, Nokia, Ericsson, Moto, etc). So Apple's problem here is that wireless companies like Qualcomm have for decades collected 3%-5% per end-user device and Apple doesn't want to pay that much, or anything close to that amount. Apple has little negotiating power since they have so few wireless patents to cross-license, but they are a huge volume customer. With Qualcomm, Apple managed to negotiate some discount, or "rebates" in exchange for exclusivity -- which btw was purposed by Apple, not forced upon by Qualcomm. But Apple still thinks it's too much. Instead of direct legal challenge which had not worked for Apple for years, Apple cleverly persuaded regulators to go after Qualcomm for anti-trust/anti-competition violations, which apparently looks like Apple had planned all long with the exclusivity deal. It's not difficult to understand where Apple stands on these licensing issues if you've followed their lawsuits past several years. I don't want to sound like a tin-foil hat, but at this point, especially after seeing Qualcomm's countersuit, it's not difficult to see how Apple might have plotted all this years ahead.

mdasen 9y ago

Apple and others would require a license for Qualcomm's IP, but the allegations are that Qualcomm forced others to agree to Qualcomm's preferred license terms or lose access to Qualcomm chips. If you tried to license Qualcomm's IP under FRAND terms rather than Qualcomm's preferred terms, you couldn't make a flagship phone since they wouldn't sell you the only high-end modems available. https://web.archive.org/web/20170419042209/https://www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-qualcomm-monopolizing-key-semiconductor-device-used https://web.archive.org/web/20170419042209/https://www.ftc.g... In the FTC complaint against Qualcomm, they say that Qualcomm, "Extracted exclusivity from Apple in exchange for reduced patent royalties. Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors." They also say that Qualcomm, "Maintains a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. The FTC alleges that this tactic forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. According to the Commission’s complaint, this is an anticompetitive tax on the use of rivals’ processors. “No license, no chips” is a condition that other suppliers of semiconductor devices do not impose. The risk of losing access to Qualcomm baseband processors is too great for a cell phone manufacturer to bear because it would preclude the manufacturer from selling phones for use on important cellular networks." So, the situation alleged seems to be that 1) phone makers can't forgo access to Qualcomm's chips because they need them for high-end phones; 2) Qualcomm won't sell you chips unless you agree to their preferred license terms rather than FRAND terms; 3) Qualcomm's control of the only high-end modems means that they can charge a much higher royalty on their patents (since companies will pay the higher royalty because they need Qualcomm's chips) and they can accept lower margins on the chips to make sure that competitors can't get into the market (and competing chips get subject to Qualcomm's anticompetitive tax if the manufacturer wants access to Qualcomm chips for any of its devices). Qualcomm also refuses to license their patents to competitors like Intel or MediaTek because they want a percentage of the handset cost rather than a fixed fee. The FTC has alleged that this alone is a violation of FRAND. According to one study cited by the FTC, Qualcomm's share of "highly novel" LTE patents was 13% compared to 19% for Nokia and 12% for Ericsson and Samsung, but Qualcomm gets paid far more than they do in licensing fees. You've said that Apple could challenge the licensing fees, but what's alleged is that Qualcomm would stop selling you their modems if you challenged their preferred licensing fees. Yes, Apple would still have to pay some fee, but it might be much lower than Qualcomm's preferred fees. The problem is that they'd lose access to Qualcomm's chips. ~~ Before the iPhone's Intel use, if you were a phone maker and you wanted to ship a flagship phone, you had to use Qualcomm's chips. There was no alternative modem you could use. Qualcomm had agreed to FRAND terms for their IP. But they saw that phone manufacturers couldn't force them to sell their chips. So, if a phone manufacturer wanted their chips, they'd say, "here are the royalties we prefer for our IP. If you don't agree to these rates, you could challenge them, but then we won't sell you any chips. Without our chips, you can't sell the high-end phones that are your entire margin. So, agree to the rates even if you think they're a bit higher than FRAND." ~~ Yes, Apple would still have to pay Qualcomm a royalty. However, if they didn't tie Qualcomm's preferred licensing to their chips, that royalty might be lower. If Qualcomm licensed their IP to competitors (as the FTC says is required under FRAND commitments), Apple's royalty would be a lot lower. "When Apple sought relief from Qualcomm’s excessive royalty burden, Qualcomm conditioned partial relief on Apple’s exclusive use of Qualcomm baseband processors from 2011 to 2016. Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors." Can you cite things that show Apple having originated the exclusivity? I mean, that's from an official court filing (https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf https://www.ftc.gov/system/files/documents/cases/170117qualc...). Apple wanted lower royalties. Maybe Qualcomm worried they'd get another company to create a flagship modem and then challenge Qualcomm's royalties. If I were Qualcomm, I would have. So, by requiring exclusivity, I could choke off competition to my modems and make sure that phone manufacturers had to continue paying me high royalties. If Qualcomm legitimately thought that their IP was worth as much as they were getting paid for it, then they wouldn't have to tie the rates to access to their chips. ~~ 1) According to the FTC, Qualcomm doesn't have the largest portfolio for LTE technologies. Nokia has 46% more "highly novel" standards essential patents for LTE than Qualcomm. 2) The complaint is that you couldn't challenge Qualcomm's preferred rates because they'd deny you access to their modems and without their modems, you'd be dead in the water. 3) The FTC complaint alleges the opposite. a) Qualcomm's IP is less important; b) Apple wasn't in the driver's seat and it was Qualcomm's plan to require exclusivity when they asked for relief from royalties they believed were too high.

zuminator 9y ago

Your narrative is rather nakedly anti-Apple, and I'm having trouble understanding how it even makes sense. You say there was "no evidence" Qualcomm breached FRAND. If that's the case, then why would Apple induce Qualcomm to offer them an exclusivity licence with partial rebate that still winds up being higher than FRAND? Why not just get a cheaper straight FRAND licence with no rebate? Conversely, if the rebate nets Apple sub FRAND rates, then why would they challenge it "every time"? A successful challenge would then result in higher net costs to them.

tooltalk 9y ago
Sure. 1) You are putting words in my mouth -- never claimed there was no evidence Qualcomm breached FRAND -- at least with respect to Apple, that is yet to be determined. There is no doubt that Qualcomm's licensing respect to competing baseband makers (or lack thereof) is clearly a violation of FRAND. What was said: there are real court cases involving Apple and wireless suppliers/patent holders (again, Nokia, Ericsson, Samsung) demonstrating my points that Apple challenged pretty much every wireless patent holders and lost or settled before trial. See Apple vs Samsung in particular where Apple made unsubstantiated claims against Samsung's FRAND violation and was dismissed. Even Apple's own ETSI expert came out testifying against Apple. 2) No, Qualcomm's FRAND licensing rate is published to the public time to time, so they don't look like they are ripping off anybody (or unfair). It's around 3%-5% range per device -- and it is not cheaper than whatever their agreed "preferential" rate is. Apple and FTC fanangled some nebulous calculus to come up with that absurd figure and claim that Qualcomm overcharged Apple. Ask them, not me -- and I bet you'd be surprised how far and silly they are willing to go to make their case against Qualcomm. 3) Apple's view on patent licensing is that while Apple's own frivolous design/utility patents are worth $7-$8 per end-user device (see Apple vs Samsung), everyone else's should be $0.00000X per smallest component that embodies them (see Apple vs Samsung, Nokia, Ericsson, Moto, etc). So Apple's problem here is that wireless companies like Qualcomm have for decades collected 3%-5% per end-user device and Apple doesn't want to pay that much, or anything close to that amount. Apple has little negotiating power since they have so few wireless patents to cross-license, but they are a huge volume customer. With Qualcomm, Apple managed to negotiate some discount, or "rebates" in exchange for exclusivity -- which btw was purposed by Apple, not forced upon by Qualcomm. But Apple still thinks it's too much. Instead of direct legal challenge which had not worked for Apple for years, Apple cleverly persuaded regulators to go after Qualcomm for anti-trust/anti-competition violations, which apparently looks like Apple had planned all long with the exclusivity deal. It's not difficult to understand where Apple stands on these licensing issues if you've followed their lawsuits past several years. I don't want to sound like a tin-foil hat, but at this point, especially after seeing Qualcomm's countersuit, it's not difficult to see how Apple might have plotted all this years ahead.