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The common industry practice is to collect royalties at the end of the supply chain -- from smartphone OEMs. So, SEP holders, Qualcomm, Ericsson, Nokia, etc, us

The common industry practice is to collect royalties at the end of the supply chain -- from smartphone OEMs. So, SEP holders, Qualcomm, Ericsson, Nokia, etc, usually don't after each other or chip makers for royalties. Now, Apple's judge, Lucy Koh, in a pretrial decision last year, declared that Qualcomm is obligated to license their SEPs to all willing licensees under ATI/TIS FRAND (Fair, Reasonable and Non-Discriminatory) terms, including baseband makers such as Intel, but this remains to be seen (will be appealed by Qualcomm). Another judge in the ED of Texas, Gilstrap however ruled in December that SEP holders aren't required to license their patents to baseband makers under ETSI FRAND. (yes, there are apparently different/conflicting competing FRAND terms) I'm not sure if patent exhaustion applies since QTL (licensing) and QTC (chip-making) are technically two separate business entities (subsidiaries). I'm assuming this is all legit, since Apple had funneled their IP and oversea profit to Irish subsidiaries to avoid taxes for years -- meaning they were treated as entirely separate businesses. Qualcomm also argued that QC's patent portfolio goes beyond chip-making and there are other wireless technologies that are not embedded in the baseband chip (hence no exhaustion). The USFTC's lawsuit against Qualcomm ended about a month ago and now we are all patiently awaiting for Koh's decision.

saidajigumi 8y ago
I'm not sure if patent exhaustion applies since QTL (licensing) and QTC (chip-making) are technically two separate business entities (subsidiaries). I wasn't aware of that; that's quite interesting. But it's unclear whether it affects exhaustion, in that QTL would still have (or have not) licensed Intel (or QTC). So either (Intel or QTC) have a license and exhaustion applies, or they do not, and are the actual infringers. Now, the law being the law, "the actual infringers" is not going to be a strict legal concept, but in some areas of law and/or some jurisdictions, there are legal structures that produce similar outcomes – where a suit cannot be brought against someone one or more "jumps" away, e.g. just to find a defendant with deeper pockets. I'm absolutely out of my depth re: US patent law on this topic, except that it seems insane for a patent holder to be able to sue all the users of an infringing product. But then patent law so ¯\_(ツ)_/¯
- tooltalk 8y ago
  Ok. it's actually fairly simple. A minor correction though: Qualcomm actually never made their legal argument based on QTL and QTC. Qualcomm did argue that their patent portfolio goes beyond baseband chips and their customers are paying for non-chip related features that cover security, encryption, algorithm, etc.. (hence no exhaustion) And yes, it's perfectly legal to pick anyone one, not all, layer in the supplier chain and collect royalties there. The wireless industry agreed to collect the royalties from the last manufacturer in the supply chain decades ago -- and that's more or less the de facto industry practice today. This isn't to say SEP holders can go after any random body as they please -- there are legal analysis and factors that help determine if that's fair. For instance, I think it's reasonable to use the end-user smartphone device as royalty basis since Qualcomm's IP adds significant value and drive market demand for Apple's iPhones. On the other hand, it would be silly to make similar comparison to a BWM 8 Series Coupe with wireless functionality.

saidajigumi 8y ago

I'm not sure if patent exhaustion applies since QTL (licensing) and QTC (chip-making) are technically two separate business entities (subsidiaries). I wasn't aware of that; that's quite interesting. But it's unclear whether it affects exhaustion, in that QTL would still have (or have not) licensed Intel (or QTC). So either (Intel or QTC) have a license and exhaustion applies, or they do not, and are the actual infringers. Now, the law being the law, "the actual infringers" is not going to be a strict legal concept, but in some areas of law and/or some jurisdictions, there are legal structures that produce similar outcomes – where a suit cannot be brought against someone one or more "jumps" away, e.g. just to find a defendant with deeper pockets. I'm absolutely out of my depth re: US patent law on this topic, except that it seems insane for a patent holder to be able to sue all the users of an infringing product. But then patent law so ¯\_(ツ)_/¯

tooltalk 8y ago
Ok. it's actually fairly simple. A minor correction though: Qualcomm actually never made their legal argument based on QTL and QTC. Qualcomm did argue that their patent portfolio goes beyond baseband chips and their customers are paying for non-chip related features that cover security, encryption, algorithm, etc.. (hence no exhaustion) And yes, it's perfectly legal to pick anyone one, not all, layer in the supplier chain and collect royalties there. The wireless industry agreed to collect the royalties from the last manufacturer in the supply chain decades ago -- and that's more or less the de facto industry practice today. This isn't to say SEP holders can go after any random body as they please -- there are legal analysis and factors that help determine if that's fair. For instance, I think it's reasonable to use the end-user smartphone device as royalty basis since Qualcomm's IP adds significant value and drive market demand for Apple's iPhones. On the other hand, it would be silly to make similar comparison to a BWM 8 Series Coupe with wireless functionality.