11 ms·

The Secret Behind Qualcomm's Margins? Patents

176 points by ejz 3y ago

mushufasa 3y ago
This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.
- beambot 3y ago
  Patents don't protect smaller players -- enforcement is cost-prohibitive. The only sector that could plausibly justify patents is biotech... but even there, the vast majority of early R&D is publicly-funded, and thus should negate protection. A Government-mandated monopoly on ideas may have made sense at some point, but it's antiquated today. Today they serve to stifle innovation, extract rent and act as yet another form of regulatory capture -- e.g. when they become standards. (Coming from someone who has 20+ patents to their name.)
  - RachelF 3y ago
    In fact they have the opposite effect on smaller players. The big players all have a few thousand (junk) patents and they make deals with each other to exclude the smaller players, who can't afford to file thousands of patents to join the club.
    - slabity 3y ago
      Or worse, a small player developing something and then finding out after the fact that a junk patent prevents them from even selling the thing to begin with.
      - worthless-trash 3y ago
        See, this to me is the stupidest part of the whole system. Its essentially saying that 'first movers advantage' of an idea is something that can be protected for the life of a patent. You can be tripped over by patents you don't even know existed in unrelated fields, owned by people who didnt even work with the patent. So stupid.
    - AlbertCory 3y ago
      Everyone always says this. In fact, I was in Google's patent litigation division, and I can tell you firsthand that there is WAY less of this than you think. A cross-licensing deal is incredibly hard to negotiate. So if you could back this up with some links, it'd be appreciated. Otherwise it's just an urban myth.
      - vvvvvvvvvvvv 3y ago
        they might mean an unspoken deal no to sue each other rather than a written one
        AlbertCory 3y ago
        usually what I hear is "they've cross-licensed." That doesn't translate as "unspoken deal."
      - RachelF 3y ago
        It's not a myth, I've been involved in these sort of negotiations. The particular industry was maybe 10 years older than Google, but the number of patents, rather than their quality was the key factor.
        AlbertCory 3y ago
        since I've been watching Mythbusters: this one is not "confirmed." It's "plausible." There are some, but it's nowhere near universal.
      - beambot 3y ago
        All from the first page of quick Google search... Google and Samsung sign global patent cross-license deal https://arstechnica.com/gadgets/2014/01/google-and-samsung-sign-global-patent-cross-license-deal/ https://arstechnica.com/gadgets/2014/01/google-and-samsung-s... Google and Tencent agree to cross-license patents https://www.ft.com/content/0a1b904d-77f9-3b48-885d-0c2693a6dc61 https://www.ft.com/content/0a1b904d-77f9-3b48-885d-0c2693a6d... SAP and Google Cozy Up With Wide-Reaching Patent Deal: The Potential Implications https://www.constellationr.com/blog-news/insights/sap-and-google-cozy-wide-reaching-patent-deal-potential-implications https://www.constellationr.com/blog-news/insights/sap-and-go... Google and Cisco Enter Into Patent Cross-Licensing Agreement https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2014/m02/google-and-cisco-enter-into-patent-cross-licensing-agreement.html https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2014/m02/go...
- avidiax 3y ago
  Unless I misunderstand, they are codifying their patents into open standards like 5G. So you can't implement 5G without their patents. Add that to encouraging complexity (10,000+ pages of spec to do something outwardly similar to WiFi), and they have a really effective moat around an "open" standard. The entire protocol space is somewhat arbitrary. This is a bit like patenting a strategy in a board game you created, and that everyone is required to play.
  - amelius 3y ago
    I've been saying for years that patents and copyrights should be ruled out in communication protocols and communication formats, including file formats, file systems, languages, APIs and even fonts.
  - AmericanChopper 3y ago
    Getting your patents into standards is the fundamental business model of many patent holders. Not just for big business either, I’m friends with a bunch of PhDs/researchers who all have patents in their respective fields, they all know that they’ll only get paid for the patents that end up in standards, and devote a non-trivial amount of effort to pursuing that outcome.
  - scrlk 3y ago
    Are the 5G patents licenced under fair, reasonable, and non-discriminatory (FRAND) terms?
  - lxgr 3y ago
    > they are codifying their patents into open standards like 5G. What do you mean by open standard? I don't think 5G is patent-free by any means, nor is 802.11/Wi-Fi for that matter! That's just how most hardware standards are developed, as far as I know. The best thing you can hope for is a consortium maintaining a FRAND patent pool, like for the MPEG family of codecs (and even there you can't be sure that there aren't any patent trolls lurking outside the pool).
- amelius 3y ago
  Patents are inherently a bad idea because stuff can be invented independently by many people. This has happened many times in history. Also, we don't need patents for innovation; just look at Open Source for a good example why. Stuff will be invented anyway, patents or no patents.
- TaylorAlexander 3y ago
  We like to talk about the specific effects of the patent system (protects the little guy, etc), but we rarely talk about the cumulative effects of it. The more I look at the small innovators, they are all hungry to improve upon things the big companies are sitting on for 20+ years with a big moat to protect them, and I really get to thinking that in aggregate we are doing more harm than good. A response I hear is "then no one would invest" and I think that's false. The investment landscape would change from a small number of big investments to a larger number of smaller investments - investing in tooling to help you beat the competition next year, but not necessarily giving you a 10 year investment for your big dream. And I think that's fine - people still want to innovate and the market already rewards innovators. It is not clear to me that government mandated restrictions on innovation are a good idea at all, and none of the common talking points really engage with the facts as I see them. Take a look at FDM 3D printers. They went from $50k to $25k in the 13 years they were for sale and under patent protection, and then 10 years after patent protection ended they were $250 and sold by a wide variety of companies all over the world. How many of today's patented goods could be made for 100x cheaper without patents and what is the cumulative effect of manufacturing machinery, medical equipment, washing machines, computers, and more being 100x cheaper? Is our world really better without that?
  - m4rtink 3y ago
    LCD drawing tablets were another victim - Wacom sitting on their EMR patents, selling only overpriced pro gear cost the world a couple generations of digital artists!
  - mensetmanusman 3y ago
    We have already run the experiment nearly 100 years ago shortly after WW2 (and prior to the Bahl Dole act) on what happens when people have idea requiring capital investments that aren't protected by risk mitigation IP. People don't invest because of first mover disadvantage in game theory.
    - TaylorAlexander 3y ago
      Genuinely curious for my own research, can you give me more information? What exactly happened? What projects failed to gain investment? What projects subsequently were only funded due to IP restriction grants?
- CobrastanJorji 3y ago
  I'm really interested in the "does it limit innovation" question. Is this a case where Qualcomm is really innovating and coming up with novel ideas, or are they just some of the first people to encounter particular problems and are simply solving them in fairly obvious ways that would occur to anyone else who encountered those problems? And if it's the latter, is it that they are doing those investigations because of the potential for patents? Would the pace of innovation be slower if those incentives didn't exist, or would they be faster because everybody else independently figuring those things out later wouldn't need to pay Qualcomm for decades? Is there some sort form of technology economy scholarship that could answer those questions? If I had to guess, I'd guess that Qualcomm's patents over stuff like Wi-Fi and CDMA were probably more harmful than beneficial, but I'd love to know how one would analyze that.
- ryandrake 3y ago
  > You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. Who is the "smaller player" in this scenario? $150 billion QCOM?
- p1necone 3y ago
  > I think the bigger problem with the patent system is the patent trolls. This is almost a no true scotsman argument. The patent trolls are a direct result of incentives the patent system creates, getting rid of them necessarily involves seriously reforming the system.
mschuster91 3y ago
> Qualcomm’s licensing business is best-in-class and an example many companies can learn from. The last thing this world needs is more Qualcomm. I'd rather see the entire patent system go down in flames than this utter crap continuing. Qualcomm has been a vampire on technology for years now, it's time for this company to end once and for all. We have to get technology under the people's control again - it is ridiculous and stifling progress that governments legally prescribe standards that are not open to everyone to implement. And especially it's ridiculous how few notable manufacturers of mobile phone SoCs remain - it's either Qualcomm or Mediatek.
- deleted 3y ago
  [deleted]
- croemer 3y ago
  The author of the article appears to be a patent lawyer ;)
- kmeisthax 3y ago
  > it is ridiculous and stifling progress that governments legally prescribe standards that are not open to everyone to implement Standards-essential patents are required to be licensed this way. It's called "RAND licensing": reasonable and non-discriminatory. Everyone who participates in, say, ISO or the ITU, is required to fill out a form documenting if they own part of the standard and what terms they agree to license it on. If they refuse RAND licensing, their inventions get ripped out of the standard[0]. What you want is royalty-free RAND licensing. There are a few standards bodies that insist on royalty-free licensing, notably the W3C[1] and Khronos Group[2], but it's uncommon. Most standards bodies are in fields of endeavor that don't actually require free redistribution - in fact, they don't want it. They pay the people doing research for the standards on a "for exposure" basis[3]: they get their patented inventions in the standard, and as payment for their work, they get to charge a $2/unit royalty on every user, which they can then pour into research that yields more patents. I'm going to be honest, royalty-bearing RAND (as in, pay up or don't implement) is probably the right fit for a lot of industries. We hate it because it steps on our (FOSS) toes, and if we can develop the software as a community, why can't we invent the underlying technology too? This is the idea behind royalty-free video codecs like AV1 - it turns out a community of amateurs can do video codec research after all[4]. But at the same time, cellular radio technology is quite possibly the worst thing to leave to amateur[5] software development. There's a lot of very expensive lab tests you need to do to make sure the technology works, to ensure hundreds of devices can communicate with the towers without jamming each other, and to ensure each one of those devices isn't pumping the user with shittons of radiation. There's a lot of boring research and regulation needed to make radio work at all, it's not something that can be hacked together in a weekend and collaborated on over time. The real problem with RAND is that a lot of the licensing bodies that require it don't actually enforce that requirement all that well. For example, 4G and 5G cellular technology has a RAND requirement. If you want to put a 5G modem in a cellphone, there's a defined fee structure you pay that's the same deal everyone else gets. BUT, if you want to put a 5G modem in a laptop, that's not covered by the RAND promise, so Qualcomm reserves the right to charge whatever price it wants to each individual licensee, or even just not license it. This is why laptops with cellular modems in them are rare[6] and hideously expensive. [0] For the record, most standards bodies do NOT have a means to do this to people who refuse royalty-free licensing, which is why ISO has failed to create a royalty-free video standard. Every time they try someone says "I own this, here's your royalty bearing RAND license", and the standard is dead in the water. In fact, not only did they fail to make the standard, they kicked Leonardo Chiariglione, co-founder of MPEG, out of MPEG for making too much of a fuss about it. [1] Specifically as a reaction to the University of Minnesota trying to charge licensing fees for Gopher [2] Which has resulted in a number of "ubiquitous" OpenGL extensions that aren't in the standard solely because they cost money to license, but can be accessed through de-facto standard extension names [3] https://blog.chiariglione.org/a-crisis-the-causes-and-a-solution/ https://blog.chiariglione.org/a-crisis-the-causes-and-a-solu... [4] To be more accurate, AOM AV1 was only partially done by the community. Xiph.org contributed their work on Daala, but Google also included what would have become VP10. So there's still a lot of Google monopoly money in there. Furthermore, there's at least two companies claiming patent ownership on AV1 anyway, but I've yet to hear of any enforcement actions. [5] Amateur as in ham radio, not amateur as in unskilled layman [6] Apple doesn't sell a laptop with a cellular modem in it, and why the only Surface tablet Microsoft sells is the Qualcomm ARM version, not the x86 version. Qualcomm wants cellular capability to be a selling point of their ARM processors, so they (refuse to) license appropriately.
whynot-123 3y ago
I question who this article is for - having worked at Qualcomm, they beat you over the head on how their business is built on patents and how they were going to go belly up some 20 years ago had they not pivoted to this model. I can't imagine a single analyst or anyone interested in the company not aware of their business model in the same way it doesn't take long to figure out that Apple is in the business of selling iPhones, mac books, etc.
- whatshisface 3y ago
  I guess it's for me, I've never worked at Qualcomm.
  - afandian 3y ago
    You may find this episode of the Acquired Podcast interesting. https://podcasts.apple.com/gb/podcast/acquired/id1050462261?i=1000606224375 https://podcasts.apple.com/gb/podcast/acquired/id1050462261?...
    - jomohke 3y ago
      (slightly) more platform neutral link: https://overcast.fm/+_ztydHHNo https://overcast.fm/+_ztydHHNo
- er4hn 3y ago
  I think this is valuable for those outside of Qualcomm to understand why they have the role that they do in the mobile space. Having worked there as well I have two observations: - So much of that wall of patents was undergrad level CS concepts with ", for mobile device" tacked on the end. Paraphrasing, don't sue me (kidding..), but that was the gist of it. - Their actual development process was pretty bad. I submitted a bug fix within the first few weeks I was there. Due to their CI process being entirely manual and very broken I was informed nearly a year later that my fix did not work. This tied in pretty well with my department being told they had a "budget"[1] of lines of code they could change and that budget being pretty limited. Overall I left with an impression that they were mostly there to license very old technology and make money from patents. Maybe their hardware team was better, I couldn't say. [1] Most of the effort of our team was spent debugging crash dumps determined to be in "our" part of the code. Nearly all of these were caused by other teams calling into an API we maintained with a null function pointer that "our" code would call. When I asked if we could refactor the API to return an error code if the function pointer was null I learned about the "code budget" and how it would cost too much to refactor.
FredPret 3y ago
Qualcomm does have a nice margin (20%) [https://valustox.com/QCOM https://valustox.com/QCOM] but this is roughly in line with other big co's in the industry. Motorola makes 18% [https://valustox.com/MSI https://valustox.com/MSI] Broadcom, Nvidia, and even Texas Instruments are around 40%! [https://valustox.com/AVGO https://valustox.com/AVGO, https://valustox.com/NVDA https://valustox.com/NVDA, https://valustox.com/TXN https://valustox.com/TXN]. Intel and AMD bring up the rear with 1.8% and 0.5%. [https://valustox.com/INTC https://valustox.com/INTC, https://valustox.com/AMD https://valustox.com/AMD] For reference, Apple is at 25% and Tesla is at 11%. https://valustox.com/AAPL https://valustox.com/AAPL, https://valustox.com/TSLA https://valustox.com/TSLA]
- axlee 3y ago
  It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?
  - bootloop 3y ago
    I guess that is what competition brings to the table.
  - FredPret 3y ago
    It might be that that's not as high of a barrier to entry as it seems. It would cost much more than that to replicate the engineering quality that goes into the Apple system of products for instance.
    - lotsofpulp 3y ago
      Also, Apple has lots of products and services to lots of potential buyers it can sell to at lots of price points, whereas a fab owner only has a few buyers and therefore less negotiating power, plus all the buyers are sophisticated and well informed.
  - Guvante 3y ago
kazinator 3y ago
Patents, inscrutable tools for working with low-level firmware, and a completely separate kernel line for each SoC based on an old kernel not even remotely upstreamed, ...
AlbertCory 3y ago
If you're serious about "reforming" software and standards patents, you should first carve off that area from pharma and bio patents. Make software just plain not patentable. Why? Strategically, you don't want those drug people as enemies. They have an extremely powerful lobby in D.C. and many "reforms" that make sense in software would get them up in arms. Choose your battles.
- mschuster91 3y ago
  Pharma and bio patents are a troubling issue on their own. We're already seeing this with the patent issues surrounding the Covid vaccines in pharma and with Monsanto and their accomplices monopolizing the agricultural high-yield seed markets. They need to be broken as well.
- deleted 3y ago
  [deleted]
- underlipton 3y ago
  I'm not convinced that pharma or bio patents are justified, either. >Strategically, you don't want those drug people as enemies. Oh, actually, yes, can we please ream the m*****f*****s already? To talk about a group of people like that, suggests that they wield far too much power. It gets worse when you learn about what they actually do. Enough already. An "extremely powerful lobby" is not so scary when you outlaw the type of corporate lobbying they engage in. And the American people don't have to let you have a business.
  - Pxtl 3y ago
    Without drug patents drug discovery would completely stop. I'm not averse to looking at alternative models for providing revenue to the drug discovery and testing infrastructure (the current model of patents is flawed as hell), but if you like new medications like the COVID vaccines then you have to respect the important of protecting the incentive to create them.
    - senderista 3y ago
greatpostman 3y ago
It’s kind of an untold story, but I grew up near San Diego. My dad knew a bunch of early Qualcomm employees (in the first 50). Many of them had most of their equity clawed back through unethical legal agreements
shmerl 3y ago
Qualcomm is a patent troll in some of the worst senses.
jauntywundrkind 3y ago
In the west, Qualcomm won. There's basically no one else even trying to make medium or high end chips. The patent encumbrance seems total. Even the mega giant Apple is reportedly just giving up on trying. And at huge real world impact, as well as market drive. Apple designs tend to use a third or more of their phone motherboard's real estate supporting Qualcomm's forest of different parts required for cellular. It's been stubbornly hard to integrate well, forever. The other IT field I'd cite is GPUs, where it's not at all a secret that companies would love to make more open hardware & stop using so many firmware blobs, but those blobs are the obfuscation layer that gets them legal protection, by making it unclear how the hardware works. In these regards, it's just a miracle wifi and bluetooth and consumer GPUs exist. That anyone can build any chips, given our shitty onerous forsaken legal IP system, seems like a miracle. Qualcomm feels like the dark world hell nightmare we can never escape from but miraculously nightmare-shit-world is in only one key part of information technology, not all of IT. Somehow. Thank the stars.
- fomine3 3y ago
  I'd count Taiwanese MediaTek as "western", maybe at least half
  - ksec 3y ago
    Mediatek took more market share from Qualcomm every single year and yet somehow the narrative is still Qualcomm has a monopoly.
    - jauntywundrkind 3y ago
      MediaTek consistently offers far more value/$, which makes them seem less concerning. For a while they were second tier offerings, but increasingly, they're just fantastic pieces of equipment. The Retroid Pocket 4+ was announced today with the Dimensity 1100 processor - 4x A78 cores, 9 GPU cores - and it looks like a super tight mini-Deck; $200. Beyond a value assessment, if you look at who licenses whose patents, it's MediaTek paying handsomely to license a ton of Qualcomm patents. That happened in November 2009. I wonder how many new patents MediaTek has had to license to keep going, versus how many they're 3/4 of the way to done having to license. I truly like your point! I think a reversal of perspective is totally due here. But so far, MediaTek has been winning marketshare imho by playing a hella competitive game, where-as Qualcomm seems to be ultra expensive chips that consistently under-deliver on their promises. MediaTek also seems to be available in a wider range of systems, where-as Qualcomm chips seem to only be available on a very limited range of products. I wish Qualcomm was at least more competitive; the 8cx series could have been a value chip, but was hot and systems were still far too expensive.
Avelina10 3y ago
[dead]
contingencies 3y ago
IANAL but the patent system seems to be based upon outmoded thinking that a theoretical monopoly: (A) can be established (B) can be practically guaranteed or enforced by a single government authority (C) is a desirable 'deal' for the inventors vs. the nontrivial fees, disclosures and temporal inputs required on their part. Essentially the inventor is asked to invest in the commercialization of their idea before the viability is known. This greatly favors larger corporations as it is a resource vs. risk question. In fact you need deep pockets to litigate, and you get ~zero protection until that is done save threatening C&D letters. Most patents are garbage (eg. clear prior art exists, they are obvious and non-inventive, or they are poorly structured and easily sidestepped - but make the governments and lawyers money) and most alleged infractions are settled out of court (possibly largely because most patents are garbage, but invalidating their claims in court costs too much money). In the recent words of a prominent university law professor, "IP law is the field of law in which I have witnessed the most inconsistent results during my career" ... ie. great firms sometimes yield crap results, and crap firms sometimes yield great results - it's a relative shit show. In an ideal world it would be great to see either a deconstructed patent system or a revised patent system with lower fees, more boolean logic, less jurisdiction-specific human language verbiage, and a more structured character to the claims and description text. Realistically, that isn't going to happen because vast investments in the status quo exist. (Source: Spoke with four IP law firms across two countries and some prominent law professors in the last month, currently spending ~100% time on patent theory, drafting and review - 'tis the season to be lawyery!)
aspenmayer 3y ago
The amount of heavy lifting that the word “may” is doing in this FUD encoded legalese SEC disclosure is impressive. It also ignores that first order effects reducing profits due to open sourcing may be eclipsed by second order effects in the market possibly selecting for rather than against open source software/firmware/drivers for their products. > Our use of open source software may harm our business. > Certain of our software and our suppliers’ software may contain or may be derived from “open source” software, and we have seen, and believe that we will continue to see, customers request that we develop products, including software associated with our integrated circuit products, that incorporate open source software elements and operate in an open source environment, which, under certain open source licenses, may offer accessibility to a portion of our products’ source code and may expose our related intellectual property to adverse licensing conditions. Licensing of such software may impose certain obligations on us if we were to distribute derivative works of that software. For example, these obligations may require us to make source code for the derivative works available to our customers in a manner that allows them to make such source code available to their customers or license such derivative works under a particular type of license that is different than what we customarily use to license our software. Furthermore, in the course of product development, we may make contributions to third-party open source projects that could subject our intellectual property to adverse licensing conditions. For example, to encourage the growth of a software ecosystem that is interoperable with our products, we may need to contribute certain implementations under the open source licensing terms that govern such projects, which may adversely impact our associated intellectual property. Developing open source products, while adequately protecting the intellectual property upon which our licensing programs depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage, and we may not adequately protect our intellectual property. Also, our use and our customers’ use of open source software may subject our products and our customers’ products to governmental and third-party scrutiny and delays in product certification, which could cause customers to view our products as less desirable than our competitors’ products. https://investor.qualcomm.com/financial-information/sec-filings/content/0000804328-22-000021/qcom-20220925.htm https://investor.qualcomm.com/financial-information/sec-fili... https://web.archive.org/web/20230921012336/https://investor.qualcomm.com/financial-information/sec-filings/content/0000804328-22-000021/qcom-20220925.htm https://web.archive.org/web/20230921012336/https://investor....
croemer 3y ago
Oh, is Qualcomm the reason why adding cellular to an iPad is so expensive? I never understood how such a relatively small feature would cost that much. The alternative is that Apple just makes more money when setting prices like that. Would be curious how much of the price difference is extra license fees for Qualcomm.
- gruez 3y ago
  I'm not sure why you're inclined to pin the blame on qualcomm, when the pricing is set by a company that charges $200 for 256GB of nvme storage[1]. For that price you can get a high end pcie 4.0 2TB nvme drive. [1] price difference between an mac mini 256GB vs 512GB: https://www.apple.com/shop/buy-mac/mac-mini/apple-m2-chip-with-8-core-cpu-and-10-core-gpu-256gb https://www.apple.com/shop/buy-mac/mac-mini/apple-m2-chip-wi...
- mensetmanusman 3y ago
  No, that's apple marketing, eg. apple upselling 32 or 64 GB phones or ipads to 256 or 512 etc gives them huge margins on the SDDs they resell by a $100s. If that was its own business it would be larger than 3M.
sportstuff 3y ago
Qualcomm blew it on 5G. The math is so beautiful! It's more than patents.
levi_n 3y ago
When I worked at Qualcomm the inside joke was that Qualcomm is really a law firm that also employs several thousand engineers.
amadeuspagel 3y ago
The chip is the most important part of a computer, but most chip companies do not capture much of the value created with the computer. An OEM pays about as much for an intel i3 chip as they pay of a windows license, and intel actually has to produce the chip. This is why Apple has been so successful with Apple Silicon: Apple is able to capture way more of the value created with Apple devices, which is why they're able to invest more in chips then Intel/AMD and yes, even Qualcomm.
zoobab 3y ago
Qualcomm is a very aggressive proponent of software patents.

176 points by ejz 3y ago

This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.

beambot 3y ago
Patents don't protect smaller players -- enforcement is cost-prohibitive. The only sector that could plausibly justify patents is biotech... but even there, the vast majority of early R&D is publicly-funded, and thus should negate protection. A Government-mandated monopoly on ideas may have made sense at some point, but it's antiquated today. Today they serve to stifle innovation, extract rent and act as yet another form of regulatory capture -- e.g. when they become standards. (Coming from someone who has 20+ patents to their name.)
- RachelF 3y ago
  In fact they have the opposite effect on smaller players. The big players all have a few thousand (junk) patents and they make deals with each other to exclude the smaller players, who can't afford to file thousands of patents to join the club.
  - slabity 3y ago
    Or worse, a small player developing something and then finding out after the fact that a junk patent prevents them from even selling the thing to begin with.
    - worthless-trash 3y ago
      See, this to me is the stupidest part of the whole system. Its essentially saying that 'first movers advantage' of an idea is something that can be protected for the life of a patent. You can be tripped over by patents you don't even know existed in unrelated fields, owned by people who didnt even work with the patent. So stupid.
  - AlbertCory 3y ago
    Everyone always says this. In fact, I was in Google's patent litigation division, and I can tell you firsthand that there is WAY less of this than you think. A cross-licensing deal is incredibly hard to negotiate. So if you could back this up with some links, it'd be appreciated. Otherwise it's just an urban myth.
    - vvvvvvvvvvvv 3y ago
      they might mean an unspoken deal no to sue each other rather than a written one
      - AlbertCory 3y ago
        usually what I hear is "they've cross-licensed." That doesn't translate as "unspoken deal."
    - RachelF 3y ago
      It's not a myth, I've been involved in these sort of negotiations. The particular industry was maybe 10 years older than Google, but the number of patents, rather than their quality was the key factor.
      - AlbertCory 3y ago
        since I've been watching Mythbusters: this one is not "confirmed." It's "plausible." There are some, but it's nowhere near universal.
    - beambot 3y ago
      All from the first page of quick Google search... Google and Samsung sign global patent cross-license deal https://arstechnica.com/gadgets/2014/01/google-and-samsung-sign-global-patent-cross-license-deal/ https://arstechnica.com/gadgets/2014/01/google-and-samsung-s... Google and Tencent agree to cross-license patents https://www.ft.com/content/0a1b904d-77f9-3b48-885d-0c2693a6dc61 https://www.ft.com/content/0a1b904d-77f9-3b48-885d-0c2693a6d... SAP and Google Cozy Up With Wide-Reaching Patent Deal: The Potential Implications https://www.constellationr.com/blog-news/insights/sap-and-google-cozy-wide-reaching-patent-deal-potential-implications https://www.constellationr.com/blog-news/insights/sap-and-go... Google and Cisco Enter Into Patent Cross-Licensing Agreement https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2014/m02/google-and-cisco-enter-into-patent-cross-licensing-agreement.html https://newsroom.cisco.com/c/r/newsroom/en/us/a/y2014/m02/go...
avidiax 3y ago
Unless I misunderstand, they are codifying their patents into open standards like 5G. So you can't implement 5G without their patents. Add that to encouraging complexity (10,000+ pages of spec to do something outwardly similar to WiFi), and they have a really effective moat around an "open" standard. The entire protocol space is somewhat arbitrary. This is a bit like patenting a strategy in a board game you created, and that everyone is required to play.
- amelius 3y ago
  I've been saying for years that patents and copyrights should be ruled out in communication protocols and communication formats, including file formats, file systems, languages, APIs and even fonts.
- AmericanChopper 3y ago
  Getting your patents into standards is the fundamental business model of many patent holders. Not just for big business either, I’m friends with a bunch of PhDs/researchers who all have patents in their respective fields, they all know that they’ll only get paid for the patents that end up in standards, and devote a non-trivial amount of effort to pursuing that outcome.
- scrlk 3y ago
  Are the 5G patents licenced under fair, reasonable, and non-discriminatory (FRAND) terms?
- lxgr 3y ago
  > they are codifying their patents into open standards like 5G. What do you mean by open standard? I don't think 5G is patent-free by any means, nor is 802.11/Wi-Fi for that matter! That's just how most hardware standards are developed, as far as I know. The best thing you can hope for is a consortium maintaining a FRAND patent pool, like for the MPEG family of codecs (and even there you can't be sure that there aren't any patent trolls lurking outside the pool).
amelius 3y ago
Patents are inherently a bad idea because stuff can be invented independently by many people. This has happened many times in history. Also, we don't need patents for innovation; just look at Open Source for a good example why. Stuff will be invented anyway, patents or no patents.
TaylorAlexander 3y ago
We like to talk about the specific effects of the patent system (protects the little guy, etc), but we rarely talk about the cumulative effects of it. The more I look at the small innovators, they are all hungry to improve upon things the big companies are sitting on for 20+ years with a big moat to protect them, and I really get to thinking that in aggregate we are doing more harm than good. A response I hear is "then no one would invest" and I think that's false. The investment landscape would change from a small number of big investments to a larger number of smaller investments - investing in tooling to help you beat the competition next year, but not necessarily giving you a 10 year investment for your big dream. And I think that's fine - people still want to innovate and the market already rewards innovators. It is not clear to me that government mandated restrictions on innovation are a good idea at all, and none of the common talking points really engage with the facts as I see them. Take a look at FDM 3D printers. They went from $50k to $25k in the 13 years they were for sale and under patent protection, and then 10 years after patent protection ended they were $250 and sold by a wide variety of companies all over the world. How many of today's patented goods could be made for 100x cheaper without patents and what is the cumulative effect of manufacturing machinery, medical equipment, washing machines, computers, and more being 100x cheaper? Is our world really better without that?
- m4rtink 3y ago
  LCD drawing tablets were another victim - Wacom sitting on their EMR patents, selling only overpriced pro gear cost the world a couple generations of digital artists!
- mensetmanusman 3y ago
  We have already run the experiment nearly 100 years ago shortly after WW2 (and prior to the Bahl Dole act) on what happens when people have idea requiring capital investments that aren't protected by risk mitigation IP. People don't invest because of first mover disadvantage in game theory.
  - TaylorAlexander 3y ago
    Genuinely curious for my own research, can you give me more information? What exactly happened? What projects failed to gain investment? What projects subsequently were only funded due to IP restriction grants?
CobrastanJorji 3y ago
I'm really interested in the "does it limit innovation" question. Is this a case where Qualcomm is really innovating and coming up with novel ideas, or are they just some of the first people to encounter particular problems and are simply solving them in fairly obvious ways that would occur to anyone else who encountered those problems? And if it's the latter, is it that they are doing those investigations because of the potential for patents? Would the pace of innovation be slower if those incentives didn't exist, or would they be faster because everybody else independently figuring those things out later wouldn't need to pay Qualcomm for decades? Is there some sort form of technology economy scholarship that could answer those questions? If I had to guess, I'd guess that Qualcomm's patents over stuff like Wi-Fi and CDMA were probably more harmful than beneficial, but I'd love to know how one would analyze that.
ryandrake 3y ago
> You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. Who is the "smaller player" in this scenario? $150 billion QCOM?
p1necone 3y ago
> I think the bigger problem with the patent system is the patent trolls. This is almost a no true scotsman argument. The patent trolls are a direct result of incentives the patent system creates, getting rid of them necessarily involves seriously reforming the system.

mschuster91 3y ago

> Qualcomm’s licensing business is best-in-class and an example many companies can learn from. The last thing this world needs is more Qualcomm. I'd rather see the entire patent system go down in flames than this utter crap continuing. Qualcomm has been a vampire on technology for years now, it's time for this company to end once and for all. We have to get technology under the people's control again - it is ridiculous and stifling progress that governments legally prescribe standards that are not open to everyone to implement. And especially it's ridiculous how few notable manufacturers of mobile phone SoCs remain - it's either Qualcomm or Mediatek.

deleted 3y ago
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croemer 3y ago
The author of the article appears to be a patent lawyer ;)
kmeisthax 3y ago
> it is ridiculous and stifling progress that governments legally prescribe standards that are not open to everyone to implement Standards-essential patents are required to be licensed this way. It's called "RAND licensing": reasonable and non-discriminatory. Everyone who participates in, say, ISO or the ITU, is required to fill out a form documenting if they own part of the standard and what terms they agree to license it on. If they refuse RAND licensing, their inventions get ripped out of the standard[0]. What you want is royalty-free RAND licensing. There are a few standards bodies that insist on royalty-free licensing, notably the W3C[1] and Khronos Group[2], but it's uncommon. Most standards bodies are in fields of endeavor that don't actually require free redistribution - in fact, they don't want it. They pay the people doing research for the standards on a "for exposure" basis[3]: they get their patented inventions in the standard, and as payment for their work, they get to charge a $2/unit royalty on every user, which they can then pour into research that yields more patents. I'm going to be honest, royalty-bearing RAND (as in, pay up or don't implement) is probably the right fit for a lot of industries. We hate it because it steps on our (FOSS) toes, and if we can develop the software as a community, why can't we invent the underlying technology too? This is the idea behind royalty-free video codecs like AV1 - it turns out a community of amateurs can do video codec research after all[4]. But at the same time, cellular radio technology is quite possibly the worst thing to leave to amateur[5] software development. There's a lot of very expensive lab tests you need to do to make sure the technology works, to ensure hundreds of devices can communicate with the towers without jamming each other, and to ensure each one of those devices isn't pumping the user with shittons of radiation. There's a lot of boring research and regulation needed to make radio work at all, it's not something that can be hacked together in a weekend and collaborated on over time. The real problem with RAND is that a lot of the licensing bodies that require it don't actually enforce that requirement all that well. For example, 4G and 5G cellular technology has a RAND requirement. If you want to put a 5G modem in a cellphone, there's a defined fee structure you pay that's the same deal everyone else gets. BUT, if you want to put a 5G modem in a laptop, that's not covered by the RAND promise, so Qualcomm reserves the right to charge whatever price it wants to each individual licensee, or even just not license it. This is why laptops with cellular modems in them are rare[6] and hideously expensive. [0] For the record, most standards bodies do NOT have a means to do this to people who refuse royalty-free licensing, which is why ISO has failed to create a royalty-free video standard. Every time they try someone says "I own this, here's your royalty bearing RAND license", and the standard is dead in the water. In fact, not only did they fail to make the standard, they kicked Leonardo Chiariglione, co-founder of MPEG, out of MPEG for making too much of a fuss about it. [1] Specifically as a reaction to the University of Minnesota trying to charge licensing fees for Gopher [2] Which has resulted in a number of "ubiquitous" OpenGL extensions that aren't in the standard solely because they cost money to license, but can be accessed through de-facto standard extension names [3] https://blog.chiariglione.org/a-crisis-the-causes-and-a-solution/ https://blog.chiariglione.org/a-crisis-the-causes-and-a-solu... [4] To be more accurate, AOM AV1 was only partially done by the community. Xiph.org contributed their work on Daala, but Google also included what would have become VP10. So there's still a lot of Google monopoly money in there. Furthermore, there's at least two companies claiming patent ownership on AV1 anyway, but I've yet to hear of any enforcement actions. [5] Amateur as in ham radio, not amateur as in unskilled layman [6] Apple doesn't sell a laptop with a cellular modem in it, and why the only Surface tablet Microsoft sells is the Qualcomm ARM version, not the x86 version. Qualcomm wants cellular capability to be a selling point of their ARM processors, so they (refuse to) license appropriately.

whynot-123 3y ago

I question who this article is for - having worked at Qualcomm, they beat you over the head on how their business is built on patents and how they were going to go belly up some 20 years ago had they not pivoted to this model. I can't imagine a single analyst or anyone interested in the company not aware of their business model in the same way it doesn't take long to figure out that Apple is in the business of selling iPhones, mac books, etc.

whatshisface 3y ago
I guess it's for me, I've never worked at Qualcomm.
- afandian 3y ago
  You may find this episode of the Acquired Podcast interesting. https://podcasts.apple.com/gb/podcast/acquired/id1050462261?i=1000606224375 https://podcasts.apple.com/gb/podcast/acquired/id1050462261?...
  - jomohke 3y ago
    (slightly) more platform neutral link: https://overcast.fm/+_ztydHHNo https://overcast.fm/+_ztydHHNo
er4hn 3y ago
I think this is valuable for those outside of Qualcomm to understand why they have the role that they do in the mobile space. Having worked there as well I have two observations: - So much of that wall of patents was undergrad level CS concepts with ", for mobile device" tacked on the end. Paraphrasing, don't sue me (kidding..), but that was the gist of it. - Their actual development process was pretty bad. I submitted a bug fix within the first few weeks I was there. Due to their CI process being entirely manual and very broken I was informed nearly a year later that my fix did not work. This tied in pretty well with my department being told they had a "budget"[1] of lines of code they could change and that budget being pretty limited. Overall I left with an impression that they were mostly there to license very old technology and make money from patents. Maybe their hardware team was better, I couldn't say. [1] Most of the effort of our team was spent debugging crash dumps determined to be in "our" part of the code. Nearly all of these were caused by other teams calling into an API we maintained with a null function pointer that "our" code would call. When I asked if we could refactor the API to return an error code if the function pointer was null I learned about the "code budget" and how it would cost too much to refactor.

FredPret 3y ago

Qualcomm does have a nice margin (20%) [https://valustox.com/QCOM https://valustox.com/QCOM] but this is roughly in line with other big co's in the industry. Motorola makes 18% [https://valustox.com/MSI https://valustox.com/MSI] Broadcom, Nvidia, and even Texas Instruments are around 40%! [https://valustox.com/AVGO https://valustox.com/AVGO, https://valustox.com/NVDA https://valustox.com/NVDA, https://valustox.com/TXN https://valustox.com/TXN]. Intel and AMD bring up the rear with 1.8% and 0.5%. [https://valustox.com/INTC https://valustox.com/INTC, https://valustox.com/AMD https://valustox.com/AMD] For reference, Apple is at 25% and Tesla is at 11%. https://valustox.com/AAPL https://valustox.com/AAPL, https://valustox.com/TSLA https://valustox.com/TSLA]

axlee 3y ago
It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?
- bootloop 3y ago
  I guess that is what competition brings to the table.
- FredPret 3y ago
  It might be that that's not as high of a barrier to entry as it seems. It would cost much more than that to replicate the engineering quality that goes into the Apple system of products for instance.
  - lotsofpulp 3y ago
    Also, Apple has lots of products and services to lots of potential buyers it can sell to at lots of price points, whereas a fab owner only has a few buyers and therefore less negotiating power, plus all the buyers are sophisticated and well informed.
- Guvante 3y ago

kazinator 3y ago

Patents, inscrutable tools for working with low-level firmware, and a completely separate kernel line for each SoC based on an old kernel not even remotely upstreamed, ...

AlbertCory 3y ago

If you're serious about "reforming" software and standards patents, you should first carve off that area from pharma and bio patents. Make software just plain not patentable. Why? Strategically, you don't want those drug people as enemies. They have an extremely powerful lobby in D.C. and many "reforms" that make sense in software would get them up in arms. Choose your battles.

mschuster91 3y ago
Pharma and bio patents are a troubling issue on their own. We're already seeing this with the patent issues surrounding the Covid vaccines in pharma and with Monsanto and their accomplices monopolizing the agricultural high-yield seed markets. They need to be broken as well.
deleted 3y ago
[deleted]
underlipton 3y ago
I'm not convinced that pharma or bio patents are justified, either. >Strategically, you don't want those drug people as enemies. Oh, actually, yes, can we please ream the m*****f*****s already? To talk about a group of people like that, suggests that they wield far too much power. It gets worse when you learn about what they actually do. Enough already. An "extremely powerful lobby" is not so scary when you outlaw the type of corporate lobbying they engage in. And the American people don't have to let you have a business.
- Pxtl 3y ago
  Without drug patents drug discovery would completely stop. I'm not averse to looking at alternative models for providing revenue to the drug discovery and testing infrastructure (the current model of patents is flawed as hell), but if you like new medications like the COVID vaccines then you have to respect the important of protecting the incentive to create them.
  - senderista 3y ago

greatpostman 3y ago

It’s kind of an untold story, but I grew up near San Diego. My dad knew a bunch of early Qualcomm employees (in the first 50). Many of them had most of their equity clawed back through unethical legal agreements

shmerl 3y ago

Qualcomm is a patent troll in some of the worst senses.

jauntywundrkind 3y ago

In the west, Qualcomm won. There's basically no one else even trying to make medium or high end chips. The patent encumbrance seems total. Even the mega giant Apple is reportedly just giving up on trying. And at huge real world impact, as well as market drive. Apple designs tend to use a third or more of their phone motherboard's real estate supporting Qualcomm's forest of different parts required for cellular. It's been stubbornly hard to integrate well, forever. The other IT field I'd cite is GPUs, where it's not at all a secret that companies would love to make more open hardware & stop using so many firmware blobs, but those blobs are the obfuscation layer that gets them legal protection, by making it unclear how the hardware works. In these regards, it's just a miracle wifi and bluetooth and consumer GPUs exist. That anyone can build any chips, given our shitty onerous forsaken legal IP system, seems like a miracle. Qualcomm feels like the dark world hell nightmare we can never escape from but miraculously nightmare-shit-world is in only one key part of information technology, not all of IT. Somehow. Thank the stars.

fomine3 3y ago
I'd count Taiwanese MediaTek as "western", maybe at least half
- ksec 3y ago
  Mediatek took more market share from Qualcomm every single year and yet somehow the narrative is still Qualcomm has a monopoly.
  - jauntywundrkind 3y ago
    MediaTek consistently offers far more value/$, which makes them seem less concerning. For a while they were second tier offerings, but increasingly, they're just fantastic pieces of equipment. The Retroid Pocket 4+ was announced today with the Dimensity 1100 processor - 4x A78 cores, 9 GPU cores - and it looks like a super tight mini-Deck; $200. Beyond a value assessment, if you look at who licenses whose patents, it's MediaTek paying handsomely to license a ton of Qualcomm patents. That happened in November 2009. I wonder how many new patents MediaTek has had to license to keep going, versus how many they're 3/4 of the way to done having to license. I truly like your point! I think a reversal of perspective is totally due here. But so far, MediaTek has been winning marketshare imho by playing a hella competitive game, where-as Qualcomm seems to be ultra expensive chips that consistently under-deliver on their promises. MediaTek also seems to be available in a wider range of systems, where-as Qualcomm chips seem to only be available on a very limited range of products. I wish Qualcomm was at least more competitive; the 8cx series could have been a value chip, but was hot and systems were still far too expensive.

Avelina10 3y ago

[dead]

contingencies 3y ago

IANAL but the patent system seems to be based upon outmoded thinking that a theoretical monopoly: (A) can be established (B) can be practically guaranteed or enforced by a single government authority (C) is a desirable 'deal' for the inventors vs. the nontrivial fees, disclosures and temporal inputs required on their part. Essentially the inventor is asked to invest in the commercialization of their idea before the viability is known. This greatly favors larger corporations as it is a resource vs. risk question. In fact you need deep pockets to litigate, and you get ~zero protection until that is done save threatening C&D letters. Most patents are garbage (eg. clear prior art exists, they are obvious and non-inventive, or they are poorly structured and easily sidestepped - but make the governments and lawyers money) and most alleged infractions are settled out of court (possibly largely because most patents are garbage, but invalidating their claims in court costs too much money). In the recent words of a prominent university law professor, "IP law is the field of law in which I have witnessed the most inconsistent results during my career" ... ie. great firms sometimes yield crap results, and crap firms sometimes yield great results - it's a relative shit show. In an ideal world it would be great to see either a deconstructed patent system or a revised patent system with lower fees, more boolean logic, less jurisdiction-specific human language verbiage, and a more structured character to the claims and description text. Realistically, that isn't going to happen because vast investments in the status quo exist. (Source: Spoke with four IP law firms across two countries and some prominent law professors in the last month, currently spending ~100% time on patent theory, drafting and review - 'tis the season to be lawyery!)

aspenmayer 3y ago

The amount of heavy lifting that the word “may” is doing in this FUD encoded legalese SEC disclosure is impressive. It also ignores that first order effects reducing profits due to open sourcing may be eclipsed by second order effects in the market possibly selecting for rather than against open source software/firmware/drivers for their products. > Our use of open source software may harm our business. > Certain of our software and our suppliers’ software may contain or may be derived from “open source” software, and we have seen, and believe that we will continue to see, customers request that we develop products, including software associated with our integrated circuit products, that incorporate open source software elements and operate in an open source environment, which, under certain open source licenses, may offer accessibility to a portion of our products’ source code and may expose our related intellectual property to adverse licensing conditions. Licensing of such software may impose certain obligations on us if we were to distribute derivative works of that software. For example, these obligations may require us to make source code for the derivative works available to our customers in a manner that allows them to make such source code available to their customers or license such derivative works under a particular type of license that is different than what we customarily use to license our software. Furthermore, in the course of product development, we may make contributions to third-party open source projects that could subject our intellectual property to adverse licensing conditions. For example, to encourage the growth of a software ecosystem that is interoperable with our products, we may need to contribute certain implementations under the open source licensing terms that govern such projects, which may adversely impact our associated intellectual property. Developing open source products, while adequately protecting the intellectual property upon which our licensing programs depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage, and we may not adequately protect our intellectual property. Also, our use and our customers’ use of open source software may subject our products and our customers’ products to governmental and third-party scrutiny and delays in product certification, which could cause customers to view our products as less desirable than our competitors’ products. https://investor.qualcomm.com/financial-information/sec-filings/content/0000804328-22-000021/qcom-20220925.htm https://investor.qualcomm.com/financial-information/sec-fili... https://web.archive.org/web/20230921012336/https://investor.qualcomm.com/financial-information/sec-filings/content/0000804328-22-000021/qcom-20220925.htm https://web.archive.org/web/20230921012336/https://investor....

croemer 3y ago

Oh, is Qualcomm the reason why adding cellular to an iPad is so expensive? I never understood how such a relatively small feature would cost that much. The alternative is that Apple just makes more money when setting prices like that. Would be curious how much of the price difference is extra license fees for Qualcomm.

gruez 3y ago
I'm not sure why you're inclined to pin the blame on qualcomm, when the pricing is set by a company that charges $200 for 256GB of nvme storage[1]. For that price you can get a high end pcie 4.0 2TB nvme drive. [1] price difference between an mac mini 256GB vs 512GB: https://www.apple.com/shop/buy-mac/mac-mini/apple-m2-chip-with-8-core-cpu-and-10-core-gpu-256gb https://www.apple.com/shop/buy-mac/mac-mini/apple-m2-chip-wi...
mensetmanusman 3y ago
No, that's apple marketing, eg. apple upselling 32 or 64 GB phones or ipads to 256 or 512 etc gives them huge margins on the SDDs they resell by a $100s. If that was its own business it would be larger than 3M.

sportstuff 3y ago

Qualcomm blew it on 5G. The math is so beautiful! It's more than patents.

levi_n 3y ago

When I worked at Qualcomm the inside joke was that Qualcomm is really a law firm that also employs several thousand engineers.

amadeuspagel 3y ago

The chip is the most important part of a computer, but most chip companies do not capture much of the value created with the computer. An OEM pays about as much for an intel i3 chip as they pay of a windows license, and intel actually has to produce the chip. This is why Apple has been so successful with Apple Silicon: Apple is able to capture way more of the value created with Apple devices, which is why they're able to invest more in chips then Intel/AMD and yes, even Qualcomm.

zoobab 3y ago

Qualcomm is a very aggressive proponent of software patents.