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It's a bit more nuanced than that. Under ETSI, where most of QCOM's SEPs (standard essential patents) are declared, licensing SEPs only to end-device makers is

It's a bit more nuanced than that. Under ETSI, where most of QCOM's SEPs (standard essential patents) are declared, licensing SEPs only to end-device makers is consistent with FRAND terms. It's essentially a contract law under French law. While there aren't too many case laws to precise define what is deemed FRAND, in Dec 2018, judge Gilstrap ruled in support of end-device licensing scheme in HTC vs Ericsson ("District Court Holds That FRAND Commitment Does Not Require Licensing at Chip Level"). Another thing to consider is that most SSO's (standard setting organizations, eg, ETSI) usually don't set out precise terms of licensing rates or basis, in part their fear of breaking local antitrust laws*. Instead, ETSI allows reliance on existing industry common practices and the courts have used "comparative analysis" (ie, licensing practices by similarly situated SEP holders) to determine what is "fair," "reasonable," and "non-discriminatory." So for instance, in Microsoft vs Moto, Moto's patents weren't as large in number or significant in contribution to justify Moto's demand, in addition to being completely out of whack with the common licensing practices embraced by the industry. By contrast, it's widely accepted that Qualcomm is a significant contributor to various wireless standards and holds large seminal/essential SEPs -- QCOM's case is nothing like Motorola's. Further, in the wireless business, it's a common industry practice for SEP holders to collect royalties at the end of the supply chain, ie end-device makers, for simplicity and maximum monetization; and this custom has been embraced and practiced for the past two decades. In a pre-trial decision last November, however, Apple's hometown judge Lucy Koh, sided with the FTC that under ATIS/TIA FRAND obligation (yes, there are competing SSOs with overlapping FRAND terms apparently). I'm not entirely sure why Koh's novel decision has precedence over ETSI FRAND where QCOM's SEPs are actually declared, but I'm pretty sure it would be appealed and reversed in next year or two.

AnthonyMouse 8y ago
> Further, in the wireless business, it's a common industry practice for SEP holders to collect royalties at the end of the supply chain, ie end-device makers, for simplicity and maximum monetization; and this custom has been embraced and practiced for the past two decades. That seems like a weak argument given how slowly courts and regulators move on things like this. By the time they get around to telling you to stop doing something you're already claiming that it's an established practice. And there is no simplicity there because there are more end device makers than chip makers, so "maximum monetization" is precisely the issue -- they're claiming more than they brought to the table using a manifestly unreasonable practice. Surely Qualcomm is not entitled to the same percentage of a $1M house that a wireless router is installed in as they are of the $100 wireless router to begin with, or the same percentage of a $100M commercial jetliner when it has in-flight wireless. They are not responsible for any of the difference in value between a $100K house and a $1M house, what reasonably entitles them to a percentage of the difference? If one iPhone is worth $300 more than another because it has a bigger screen and faster processor but the exact same wireless capability, why should Qualcomm receive any of the additional money?
- tooltalk 8y ago
  > ... how slowly courts and regulators move on things like this. By the time they get around to telling you to stop doing something you're already claiming that it's an established practice. Not really. We are talking about industry practices that have been around for two or three decades now and precede the development of various wireless standards created by the SSOs. > And there is no simplicity there because there are more end device makers than chip makers, so "maximum monetization" is precisely the issue -- they're claiming more than they brought to the table using a manifestly unreasonable That's not true. We are not talking about at the baseband level, but there are also many others who operate at different level (ie, Skyworks) which complicates the licensing. If we are to follow SSPPU, SEP holders would have to go after everyone from end device makers (Apple), to baseband chips (Qualcomm), to power management chips used in baseband chips (Qorvo), to etc... as QCOM's patent portfolio covers many different areas of wireless communication. The end-user device is one single aggregation point that embodies all patented features and where royalty collection is simpler. > Surely Qualcomm is not entitled to the same percentage of a $1M house that a wireless router is installed in as they are of the $100 wireless router to begin with, ... Sure, if QCOM can demonstrate that QCOM's patented features are a) an integral part of the $1M home, b) add significant value and c) drive market demand for that $1M house, yes. In another word, if QCOM's $100 wireless modems is an essential part of the 1M house, significantly enhances the market value (eg, $1M with $100 modem, $300K without it), and attracts home buyers, that's very legit. QC's $100 wireless router in a $1M house or a $100M jetliner however wouldn't pass this test in reality -- no sane buyers would pay such premium for features that are not essential in aviation or housing business. But can you say the same for wireless mobile devices? > If one iPhone is worth $300 more than another because it has a bigger screen and faster processor but the exact same wireless capability, why should Qualcomm receive any of the additional money? Yep, Apple's iPod Touch is almost at feature parity with the iPhone, but without QCOM's patented features. The Touch sells significantly fewer units despite its significantly lower price (even lower than that older iPhones with LCD and low capacity memory/storage). In this case, QCOM can argue that their $30 modem + wireless patents are integral part of the wireless mobile product, add significant value and drive market demand for their iPhones, that most consumers wouldn't otherwise buy at that price point.

AnthonyMouse 8y ago

> Further, in the wireless business, it's a common industry practice for SEP holders to collect royalties at the end of the supply chain, ie end-device makers, for simplicity and maximum monetization; and this custom has been embraced and practiced for the past two decades. That seems like a weak argument given how slowly courts and regulators move on things like this. By the time they get around to telling you to stop doing something you're already claiming that it's an established practice. And there is no simplicity there because there are more end device makers than chip makers, so "maximum monetization" is precisely the issue -- they're claiming more than they brought to the table using a manifestly unreasonable practice. Surely Qualcomm is not entitled to the same percentage of a $1M house that a wireless router is installed in as they are of the $100 wireless router to begin with, or the same percentage of a $100M commercial jetliner when it has in-flight wireless. They are not responsible for any of the difference in value between a $100K house and a $1M house, what reasonably entitles them to a percentage of the difference? If one iPhone is worth $300 more than another because it has a bigger screen and faster processor but the exact same wireless capability, why should Qualcomm receive any of the additional money?

tooltalk 8y ago
> ... how slowly courts and regulators move on things like this. By the time they get around to telling you to stop doing something you're already claiming that it's an established practice. Not really. We are talking about industry practices that have been around for two or three decades now and precede the development of various wireless standards created by the SSOs. > And there is no simplicity there because there are more end device makers than chip makers, so "maximum monetization" is precisely the issue -- they're claiming more than they brought to the table using a manifestly unreasonable That's not true. We are not talking about at the baseband level, but there are also many others who operate at different level (ie, Skyworks) which complicates the licensing. If we are to follow SSPPU, SEP holders would have to go after everyone from end device makers (Apple), to baseband chips (Qualcomm), to power management chips used in baseband chips (Qorvo), to etc... as QCOM's patent portfolio covers many different areas of wireless communication. The end-user device is one single aggregation point that embodies all patented features and where royalty collection is simpler. > Surely Qualcomm is not entitled to the same percentage of a $1M house that a wireless router is installed in as they are of the $100 wireless router to begin with, ... Sure, if QCOM can demonstrate that QCOM's patented features are a) an integral part of the $1M home, b) add significant value and c) drive market demand for that $1M house, yes. In another word, if QCOM's $100 wireless modems is an essential part of the 1M house, significantly enhances the market value (eg, $1M with $100 modem, $300K without it), and attracts home buyers, that's very legit. QC's $100 wireless router in a $1M house or a $100M jetliner however wouldn't pass this test in reality -- no sane buyers would pay such premium for features that are not essential in aviation or housing business. But can you say the same for wireless mobile devices? > If one iPhone is worth $300 more than another because it has a bigger screen and faster processor but the exact same wireless capability, why should Qualcomm receive any of the additional money? Yep, Apple's iPod Touch is almost at feature parity with the iPhone, but without QCOM's patented features. The Touch sells significantly fewer units despite its significantly lower price (even lower than that older iPhones with LCD and low capacity memory/storage). In this case, QCOM can argue that their $30 modem + wireless patents are integral part of the wireless mobile product, add significant value and drive market demand for their iPhones, that most consumers wouldn't otherwise buy at that price point.