The big issue with Qualcomm IP practice is that they don't charge IPR on the modem function, but over the whole device. So put the same modem in a cheap phone, or in an expensive laptop, and the IPR will be very different. This is really charging IPR on a lot of value completely unrelated to the modem.
Historically, the cellular/3GPP world was very phone centric. The specs were for a phone, and the chipset was really the core of the phone. At that time, charging cellular IPR on the device embedding the chipset was reasonable: the device was just a phone, with all the intelligence coming from the chipset.
We're obviously no longer living in such a world. But Qualcomm keeps this practice, as it's very profitable for them and their dominant position let them do it (so far). Apple is mad at this, as most of the value of a smartphone is outside of the modem part nowadays (even more for a PC). Other device makers hate it too, but don't have the muscle to go against QCOM and can't afford alienating them. Europe is looking into it too, and will issue a recommendation that cellular IPR is charge only on the modem subsystem, not the including device (basically, Apple position). It will start as a recommendation, but could become law later on.
So it looks like it's QCOM against everybody else. Considering the money involved, I'm sure that QCOM has a pretty fat budget to push their angle. Hello Bloomberg ;)
That pricing argument is worthless when you start talking about percentages. 5% of a $500 device is quite a lot while 5% of some $25 IoT device is not very much.
Qualcomm spends around 5.5 Billion every year in R&D or 23% of net sales. For comparison, apple spends a paltry 2.2% of its net sales on R&D. Dry up Qualcomm's net sales and the R&D will dry up too.
All the most crucial wireless patents (the really fundamental ones) have already expired. Why doesn't Apple design another, competing system around Qualcomm's patents and license it for free? The answer is that it takes a decade and tens of Billions of dollars.
Apple has the money, but it's cheaper to work the courts over so they pay less. If Apple were the ones who built 4G, you can be very sure they'd be charging at least as much as Qualcomm.
Remember, Apple thought the look of their iphone was worth $40 per device when suing Samsung, but now they think the actual technology to make it work isn't even worth $10 per device. If Qualcomm were making the same profit margins (relative to R&D) as Apple, they'd have to go from $10 per device to $100.
I'm not a Qualcomm fan (or any big corporation for that matter), but if we were making a list of price gouging companies, I think there are a lot of companies that should be getting fined and regulated (especially Apple) before Qualcomm.
All the most crucial wireless patents have already expired
The 2G patents (that Qualcomm owned 90% of) have expired.. but who uses that anymore?
Qualcomm also owns 13% of the patents used for LTE (which they agreed to license under FRAND terms).. it's those patents they are using to create a monopoly on LTE chips.
First they refuse to license their patents to other manufacturers who want to produce chips.. then they say to handset manufacturers, they won't sell you chips unless you agree to pay a royalty on every handset (even if it does not contain Qualcomm chips).
They own the same percentage of patents as Erickson, but they produce 4x the revenue from IP licensing (+ the revenue from chipset sales).
Edit: if you believe the 13% of LTE patents Qualcomm owns are worth $10... that would be $77 for all of the LTE standard essential patents at the same rate. So we are not far off from your $100 Apple-like price in your post.
Yes one has to wonder why Ericsson and Nokia dont charges more.
But Ericsson and Nokia do charges a lot for their Mobile Carrier Infrastructure and Equipment, where as Qualcomm dont have part in that industry. And one reason why Huawei is winning because Huawei has been offering similar equipment for much cheaper price.
First, Qualcomm chipset also comes with IPs owned by Samsung and a slew of other wireless patent holders who crossed-licensed theirs with Qualcomm. Samsung and LG, along with Qualcomm, are the largest contributors of LTE SEP's and make up the bulk of LTE patents (KFTC likewise found that Qualcomm used its monopolistic position to force them to cross-license their patents for almost nothing in return). So no. Even if you stack everything, it won't be anywhere close to your nonsensical $77.
Second, under ETSI (see section 1.11), Qualcomm has the right to refuse the granting of licenses.
Do you think that just maybe you should stop quoting the ETSI IPR policy as if it defines the legal obligations of patent holders? It doesn’t, and I already pointed out that it doesn’t, and your own references elsewhere point out that it doesn’t.
Please see my reply @danjoc. I don't care much about Apple really. The manufacturing world is pretty hard and penny pinching, the practice of charging for value unrelated to one's IP hurts small manufacturers who can't stand to a QCOM. I really don't mind QCOM charging whatever they want on their modem, to sustain their R&D. But I don't agree on their charging unrelated parts just because they can. Hope this clarifies my previous comment.
>So put the same modem in a cheap phone, or in an expensive laptop, and the IPR will be very different. This is really charging IPR on a lot of value completely unrelated to the modem.
Pot, meet kettle. Apple charges 30% at the App store, whether I want to sell an app for $1 or $1000.
Also, if Apple wanted, they could package the modem separately. Sell it for $50. Again, this mirrors Apple's advice to Samsung to build triangle phones since Apple patented a rectangle with rounded corners. Suddenly, clunky workarounds are bad. Quelle suprise.
I really can't feel sorry for Apple. Live by the sword, die by the sword. Must be nice to be an Apple IP lawyer. They win no matter what happens.
This story is very Apple vs. QCOM, but I don't care much about this angle really. What I care about is the underlying question: is it ok to charge IPR on value added way outside the scope of the given IP? I don't think so. QCOM does so. Apple is against. So I'm just sympathetic with Apple position in this strong debate and that's it (I'm not even an Apple user).
And I don't feel sorry for Apple. I feel sorry for all the other small manufacturer and companies suffering from this situation, but that are too small to make things move on their own. Apple and Samsung may not have the purest of interest in this debate, but if they move things in what I believe is the right direction, I'll be happy.
The difference is that for cellular phones to be effective, they all must use the same standard. Companies agree that for their inventions to be part of the standard, they will license their patents to all comers at FRAND. The patent holders are basically granted a monopoly by the standard setters in exchange for fair licensing terms.
In this case. Apple has a history of demanding extortionate patent licensing fees for incredibly obvious ideas.
You seem to be missing the bigger picture. The attack on Qualcomm is against the company, not the patents. Qualcomm snapdragons are the only competitive ARM chips against Apple's A series.
Apple is trying to destroy Qualcomm and monopolize the market. That's not going to help the little guys you claim to care so much about.
I already addressed it. The poster is repeating the point. That doesn't make it more valid.
>Apple A series tech is destroying the Qualcomm's snapdragons just fine without any need for legalities.
You might want to review world wide market share numbers before you try to defend that statement.
>Are you suggesting that Qualcomm is using its licensing fees to support an unprofitable Snapdragons?
I'm suggesting Apple is using litigation expense as an avenue to destroy the business of their competitor, again. Apple has much deeper pockets than Qualcomm. It's very simple math.
I might be able to believe that if Apple were trying to sell the A series chips and compete head-to-head with Qualcomm.
But Apple is not doing that. It is keeping that competitive advantage in house.
Whether you like Apple or not, you have to understand their business model before you criticize it. Apple doesn’t care about competing with component manufacturers. Not even a little bit.
Apple learned this the hard way in the 90s. Don’t compete on price, and don’t compete on specs. Apple happens to be winning on specs right now. The snapdragon procs are not even close to the A-series in performance. But that wasn’t always the case.
This is about maximizing profit. Not about putting anyone out of business.
> Apple has a history of demanding extortionate patent licensing fees for incredibly obvious ideas
When ? I am only aware of one situation in their history i.e. Android where Apple has sought an ongoing royalty.
> Apple is trying to destroy Qualcomm and monopolize the market
What ? Apple is never going to sell their CPUs to their competitors. They are a product company not a components vendor so not sure what market you are referring to. Also Intel sells modem components as well.
Has Apple sought a royalty on Android? My belief has been that Apple refused to license any of their patents. They've sued Samsung not to extract royalties, but to stop them infringing Apple's patents, full-stop.
And that's exactly where you're looking at this wrong. it's not just Apple that loses out because of this, it's consumer's at large.
Likewise, the same thing happens with apps, consumers must pay more money for apps which will have less revenue to invest in themselves.
That's the thing about unfair economic practices, it never just hurts the people directly involved, but also the massive amount of people indirectly involved.
Apple pays $10 on a $1k phone due to rebates (before the dispute started). Without rebates the cost would be $50. Apple will actually benefit less from a win here than the small phone manufacturer.
Not really equivalent though. Apple advertises and makes the whole app available on the App Store, delivers the whole app from their infrastructure, manages upgrades and back end services for the whole app, provide access to millions of customers and handle the financial transaction for the full cost of the app. It seems reasonable they get a percentage of the whole app’s price.
Meanwhile Qualcomm only own a few patents on a tiny sliver of the circuitry of one component for one function of the device.
The stronger argument I think is that Apple did not get its App Store put into a global standard which can't be avoided in exchange for promising to let people sells apps on it under FRAND terms.
Apple can do whatever it wants on its own App Store. It's their device and they aren't a monopoly nor is it anti-competitive for them to charge a high fee on their own store.
But Qualcomm IP is part of the LTE standard on the express condition that they will license their share of LTE mandatory features fairly. I don't think it's fair to take a percentage cut of the whole package price for an IP license that's part of a global standard.
I get that. I was wondering why Dell ships laptops with an LTE modem and Apple ships every mobile device except a MacBook with an LTE modem. It makes sense if it is some stupid negotiation tactic. I was wondering why they would not put something in so obvious to the benefit of users.
I think the key there is that Dell ships with an LTE modem, a separate device with a separate price. They pay royalties to Qualcomm on the price of the modem.
Apple would never (for some value of never) ship a laptop with an external device like that. The LTE is either baked into the laptop (at which point Qualcomm would demand a % of the entire laptop's sale price), or it's not included at all. They choose not at all.
I have no idea. I would only care how well integrated it is with the operating system. But yes, maybe this is some hardware designed against accounting constraints.
Qualcomm's patented features do drive market demand (or add value) for mobile devices, including that of Apple's. That's why Qualcomm can ask a percentage of the entire device.
This is not so with MacBook Pro -- unless Qualcomm can prove it otherwise.
From the guidelines: Please don't insinuate that someone hasn't read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that."
The guidelines are indeed a nice idea. Its a pity a tiny minority seems to care for or follow them. IMO Using them to selectively criticize is worse than not having them in the first place.
"Qualcomm’s big innovation" is followed by several exaggerations and falsehoods. So, saying you mention something is meaningless when you include that amount of bias.
Read up on Token ring vs Ethernet to get some understanding of the history in this area.
An analogy for this in the real world would be tips for waiters. As a foreigner, I'm aghast at the tipping culture in the US but more importantly, I fail to understand why tips are calculated on a percentage basis. It is no more effort to bring me out a $60 steak than it is to bring me a $5 coffee. So why should I tip $12 for the steak and $1 for the coffee? To Apple's point, they want a "fixed" tip charge. But then again, Apple charges devs 30% of revenue from their App store when really it's (arguably) no more effort for them to host/monitor a 99-cent app vs. $10 app.
Throughput, expectation of service and number of tables/waiter are very different for coffeeshop/casual diner and place that sells $60 steak. In casual restaurant you can expect one waiter per 8 tables compared to 4 tables/waiter in fine dining place. People easily take 2x time to eat the same amount of food in fine dining place compared to something cheaper. In fine dining place waiters are better trained/educated (ever tried to ask for wine recommendation at Denny's?) and dress nicer.
Higher tips per person are totally expected in fine dining place purely from economic perspective.
Agreed and my analogy is imperfect at best. However, assuming I am eating at a fine-dining establishment, why should tips be percentage calculated? Shouldn't the tip amount be the same regardless of whether I order the expensive items on the menu or the (relatively) cheaper ones? Which is basically what Apple's argument boils down to.
FWIW, I don't really have a dog in this race (except as an AAPL stockholder I want the stock to do well). If any judgement mandates that the license fee be charged on the cost of the chip and not the device, then I'd like to see that be extended to the App Store ToS as well.
Proportional tipping is much better at aligning the waiters' interests with the restaurant's than a flat tipping model would be; better customers get better service.
Wouldn't tipping some amount before give better service than tipping after? What if tipping was related to the number of services and/or difficulity of each service?
If I go to Denny's and order a coffee, the waitress pours the coffee and stops by every so often to refill it. They get a $1 tip.
If I go to that same Denny's and order 4 Grand Slams, the waitress waits on the cooks, and then makes one trip to my table. They get a much higher tip for less work.
So why is apple suing in 2017? why didn't they sued in 2007 at time of launch of iphone? Issue is way more complex in this fight.
1. Qc has more than 130k patents,licensee gets blanket protection for all.(one can argue about bundling though)
2. Qc,ericcson,nokia and other patent holders have cross licensing agreements with each other.This is to avoid negotiating individual contracts with every patent holder in a standard.
The article explicitly says Apple waited until they could get chips from another source, Intel. Their general counsel explicitly said they would have sued sooner, but were at Qualcomm's mercy and feared retaliation. Maybe that's revisionist history and seems unlikely to be so clearcut, but that's their story.
Intel Infineon has been around quite a while. Apple's lawsuit comes only after Apple as the article correctly notes conspired with Samsung to force the Korean regulators to go after Qualcomm. There are other backdrops, such as the SCOTUS's recent decision not to award damage on entire device willy-nilly (see Samsung vs Apple).
Hey, don't get mad at me, bro because Bloomberg thinks Apple a crook. That's Bloomberg's wording, not mine. The same article also mentions that JY Lee of Samsung is convicted of corruption in South Korea, having colluded with the previous administration. While there is no conclusive evidence that Samsung paid off KFTC regulators to go after Qualcomm, I wouldn't be too surprised it turns out they did -- my father used to work for the South Korean Intelligent Agency for almost two decades and these things do happen.
Apple is also known to influence and buy politicians to win favors -- see Obama's reversal of Samsung ITC in 2013. In America, this is called "lobbying" and is perfectly legit. It's also rumored that USFTC's lawsuit against Qualcomm was Obama's parting gift to Apple. It looked like Qualcomm's allies (aka, lobbyists) urged Trump to terminate FTC's complaint against Qualcom, but I guess we will have to see how far this administration will allow this to go on.
Apple in 2001 was posting losses and were an acquisition target. By 2007 they were just stabilising the company on the back of iPod but posting relatively small profits. It was the iPhone that propelled the company into being a huge, successful company we have today.
So why are they suing now ? Because they can afford to. They simply aren't the tiny, vulnerable company they were back in 2007 which Qualcomm could have crushed. And the world has changed such that phones are far more than just phones.
You aren't paying for their effort in hosting the app. It's a fixed cost and the App Store runs largely on the back of the iTunes Store platform. You are paying Apple for being a distribution channel i.e. channel to market. And it's incredibly common for those to be based on a percentage rather than fixed amount.
Apple does spends a significant amount of money (far more than your 30%) on giving developers the perfect market to sell to. Every customer has a credit card, is on the latest OS, is willing to spend, is unable to pirate etc.
That sounds very expensive. I believe a few years ago the whole SoC with the modem included was something like $20-$25. Qualcomm is basically trying to make Apple and others pay almost as much for the modem as they would pay for the SoC.
This is a tactic Intel itself is also very familiar with, as they've done with their CPU and GPU bundles. I believe in some cases it was even more expensive to buy the CPU alone, so OEMs were coerced into putting an Intel GPU into any device they sold, whether it had another dedicated GPU or not.
I understand at some point it becomes more expensive (but maybe not that much more) to keep those separated, but at the end of the day I believe it was an anti-competitive tactic through which Intel used its CPU monopoly to gain a much larger portion of the GPU market than they would've gained were it not for such bundles and price coercion tactics (and probably a few threats thrown into the mix against the OEMs too, if they dared to use AMD chips).
I wish regulators would catch on to stuff like this early and nip them in the bud, rather than act 10 years later, when the damage is already done, the monopoly is already well established, and the companies are forced to pay a fine of like 5% of what they gained from achieving that monopoly through the anti-competitive tactics.
>I wish regulators would catch on to stuff like this early and nip them in the bud, rather than act 10 years later, when the damage is already done, the monopoly is already well established, and the companies are forced to pay a fine of like 5% of what they gained from achieving that monopoly through the anti-competitive tactics.
Reminds me of Mr. Robot & how Evil Corp still profited from ignoring regulations (which got people killed).
We have very small companies (in the low tens of millions) that make decent SoC. Nobody is going to make 4G anything for less than the tens of billions). The entire market cap of ARM is half that of Qualcomm (and around a third before they lost a quarter of their valuation).
Building modems is way harder than building SoCs (all the SoC challenges plus all the modem ones too). It's taken a decade of work on 5G to just begin preliminary sampling (How many SoC generations would that be?).
You also have to keep in mind that it's not just the modem in the phone. You have huge software stacks, protocol design and testing, and an entire cell tower worth of electronics to design and build.
There's no free lunch. You have to strike a balance between forcing the cost onto the service provider (higher cell bills and/or slower adoption) and forcing the cost onto the phone.
Considering that Qualcomm's net sales to R&D ratio is basically unmatched (most companies spend half what Qualcomm does by that metric), it's not easy to make the case for gouging in my view.
I don't think it is expensive. Qualcomm is doing everyone a service by allowing anyone to buy the chipset from anyone else, just pay a small fee relative to the cost of device. This lets anyone with enough capital to get into the business and start off with good technology.
Apple simply has enough money they apparently have decided they don't have to follow any rules they don't want. How do they handle licensing their patents? The article made no mention.
This is specifically about the FRAND terms Qualcomm agreed to when their patented methods were included the cellular standards. These methods were included because they may have been the best way to solve the issue but more importantly because an industry giant is ready to build chips to adhere to the standard, helping adoption and time to market. To offset that vested interest, they have to agree to FRAND terms.
You guys are making this a really irrational, really emotional "Apple vs Qualcomm" issue. The root of the problem is not that.
The root of the problem is bad patent law. It really doesn't matter what apple does, it doesn't matter if their CEO eats babies, the merits of a patent are irrelevant to whether the company "feels like a baddy."
If you think apple has bad monopolistic practices in its app store, that only reinforces the fact that our system is anticompetitive, and that both Qualcomm should lose its patent as well as potential opening up of the IOS ecosystem.
And a broken cellular standards body that doesn't nail down in explicit detail how the IP will be licensed before granting a government-sponsored & mandated monopoly.
Who said anything about a "problem"? It's a fight between corporations, I don't see anything about this that is bad for society at large. Apple already turns a huge profit on each phone, it's not likely that they would pass on a potential saving to the consumer. And Qualcomm is hardly a patent troll, they use their licence fees to fund R&D. There are plenty of problems with our IP laws but is this really one of them?
It's a difficult one - Qualcomm have invested a huge amount of money in developing some awesome baseband hardware - so should see some protection of that.
It's kind of hilarious to hear Apple bitching that when it marks up its phones a ridiculous $100 for $20 worth of memory, it has to share its $80 profit.
Neither of these companies deserves our sympathy. They are two big amoral profit-seeking entities wrestling for money in a way that won't meaningfully affect your life. Whether Apple wins or Qualcomm wins or they split the difference, it's neither justice nor injustice.
What can you do with the $20 worth of memory by itself? That $100 "markup" is because it's part of a great whole -- a whole that took millions to engineer and create. It isn't like Apple is just reselling memory chips.
I could buy all the raw materials that go into an iPhone, but that doesn't mean that I personally could make an iPhone. I'm glad to pay a premium because I don't have time to build a phone.
Not sure why this is being downvoted. The existence of Apple at all today is exactly because people perceive a value greater than the sum of the cost of parts.
This isn’t a new idea, and people put tens of billions of dollars behind this concept every fiscal quarter.
> The existence of Apple at all today is exactly because people perceive a value greater than the sum of the cost of parts.
yes and Apple loves that and that's why it makes its phones notoriously hard to repair or upgrade. that's why there are no SD card slots. that's why you have to buy an overpriced Apple exclusive lightning earphones or connector or whatever.
everyone is acting like the price of the phone must go up so much if it has higher storage, like there is no other engineering option.
I wasn't making a value judgement about whether or not this is a good thing. I was just pointing out that many people do find this a good thing. The product is more valuable than the price of the components to a large number of people. Whether or not that should be the case is better left to a different discussion. But the objective fact is that it's true for a huge number of people, and that provides an incentive for Apple to do more of the same.
If people were buying tens of billions of dollars worth of your product every three months, what would you do? Make it worse? Not find ways to make it more profitable?
I think you're incorrect about why Apple devices are not easy to repair and upgrade. But we may have to agree to disagree or have a different conversation about that.
If AAPL thinks QCOM doesn't add proportional value to their phone, let them sell their phone without QCOM ip.
Because we all know AAPL takes its proportional percentage of flesh from an app developer for having the audacity to add value to iOS, whilst simultaneously holding back the web.
Sewell is directly quoted as saying cellular "isn't as important as it used to be." When they thought 3.5mm TRS wasn't as important as it used to be they cut it. Seems like cellular is perhaps still more crucial to the viability of the phone than they want to admit.
in what ways did Qualcomm violate FRAND terms? Nokia, Ericsson and pretty much everyone else uses the entire device as a royalty basis. This is a fairly standard industry practice -- and has been so for decades.
While Qualcomm is the largest contributor of wireless standards, it is far from a monopology.
Also note that Apple accuses of every wireless patents holders of some sort of unfair pricing and violation of FRAND terms whenever Apple is up for license renewal. This is coming from a company that audaciously asked about $30 per device for a handful of frivolous design and utility patents from Samsung.
First, Apple doesn't directly pay Qualcomm. Apple has refused to take Qualcomm license, though I'm pretty sure Qualcomm would love to have Apple as their customer and start collecting license fees based on their retail price.
Second, Foxconn, Pegatron and Apple's contractors are the ones paying for Qualcomm licenses. Their licensing agreement with Qualcomm likewise precedes Apple's iPhone release in 2007. In another word, those contract manufacturers pay the same royalty rate to Qualcomm whether their end-products are for Apple, HTC, or whoever -- they all pay the same rate. Apple's rates are probably lower given various "collation" agreements (and rebates) Apple imposed on Qualcomm.
If you are trying to say Qualcomm unfairly charges Apple more, you need to bring some facts.
Directly From Apple. And they have said these number of times in the public. Apple did not bring out any thing to prove it, so i am going to take its word they are not lying.
Those agreement also precede LTE.
You cant NOT use Qualcomm patents in LTE, but if Qualcomm were allowed to charge whatever they wanted, then they have a monopoly case, and we have to have somebody to define what is a fair price. Since Qualcomm are subject to FRAND.
All these patents fee were one of the reason why HEVC started charging $100M / year combined for their Video Codec, 20 times more the AVC / H.264. Because they saw what 4G patents were capable of charging.
1) can you cite your source? Apple is known for their sleazy wordsmithing and, having followed their lawsuits last several years, throwing completely unsubstantiated accusation at their opponent (see my comment about a 2012 USITC case against Samsung where Apple's own witness came out testifying against Apple). I'd like to read it myself as I'm pretty sure there are a lot of footnotes and modifiers that are not conveyed in one-liners.
2) whether contract manufacturers' licensing with Qualcomm precede LTE is immaterial in this case. Any LTE handset maker sourcing those contract manufacturers will (indirectly) pay the same rates. Apple and Qualcomm had business "collaboration" agreements in which Qualcomm provided additional technical, support resources and monetary compensation for sticking with Qualcomm (see Qualcomm's lawsuit). Apple is likely paying far less than smaller handset makers without such agreements with Qualcomm.
3) "You cant NOT use Qualcomm patents in LTE" <-- not sure what you mean. Qualcomm like many wireless patent holders routinely publishes their (initial) FRAND rates and if the company is engaged in unfair licensing practices, it would be easy to find that out. I'd like to emphasize that, contrary to Apple's view on FRAND, FRAND doesn't mean cheap and SEP patent holders are under no obligation to license their patents. (ETSI IPR Guide, Section 1.11 (http://www.etsi.org/images/files/IPR/etsi-guide-on-ipr.pdf):
The purpose of the ETSI IPR Policy is to facilitate the
standards making process within ETSI. In complying with the
Policy the Technical Bodies should not become involved in
legal discussion on IPR matters. The main characteristics
of the Policy can be simplified as follows:
• Members are fully entitled to hold and benefit from any
IPRs which they may own, including the right
to refuse the granting of licenses.
4) MPEGA licensing schemes are fundamentally different than that of the wireless industry. For starter, theirs is based on some fixed cost per unit which caps at 90M per year; whereas Qualcomm's is a percentage of end-user device with no limit in quantity. Apple is allegedly paying something like $2B per year to Qualcomm as a result. Further Apple is an active contributing member of MPEGLA standard and most patents holders pay nowhere close to the publicized figure due to various sales and cross-licensing agreements.
How is Apple holding back the web? Is there an assumption that every application ought to be on the web and that a browser is the best means to use an application?
Is it a common practice in other fields to charge a percentage of final product as a fee? To me it seems that while this can make sense to some extent there should be a cap. If I put a modem which uses Qualcomm IP in a car should I also pay 5% of the price?
A patent holder can charge whatever they want, or even refuse to allow anyone to license it.
The difference is that Qualcomm agreed to FRAND (fair, reasonable, and non-discriminatory) licensing terms in exchange for their patent being included in the standard.
Once they got their patent in the standard, now they're saying they get to charge whatever they want.
That's the problem. That wasn't the deal they and everyone else agreed to, and it's too late to remove their patent from the standard.
Isn't the point that the R of FRAND is being violated because it is not reasonable to charge a % of the cost of the entire device when they are contributing only the modem.
no, a patent holder CAN NOT charge whatever they want. Apple tried it during their quest to destroy Android (Samsung) a few years back, but most of their utility claims were "apportioned" accordingly. Apple was able to gorge the entire profit on per device on a couple of frivolous design patents, but the SCOTUS stepped in to reverse that absurd ruling last year.
Contrary to your unsubstantiated claims, Qualcomm's licensing rates are publicly available and published time to time -- often in the range of 3% to 5%. Apple according to this article pays nowhere close to the published rate that most other handset makers are paying.
In this particular industry, it is. It depends on whether qualcomm's patented features "drive the market demand" for the finished goods.
So in mobile devices, Qualcomm's wireless patents do deservingly get per device royalty whereas, for automobiles, it would make no sense to use the same per device royalty.
On a somewhat unrelated note, Apple demanded the entire profit on per device basis for a couple of frivolous design infringement from Samsung and won a couple of years ago. This absurd, biased lower court ruling was overturned by the Supreme Court last year.
Qualcomm's chips have a very bad computer security track record, and their patent-enforced monopoly status makes this a serious problem. If they would go the way of Flash and Acrobat, this would make the world much better off.
Qcom is not a chip company. It is an IP company that happens to make some chips on the side. A majority of their profits are based on their IP portfolio. As a percentage of revenue they spend more on R&D than most Tech companies especially apple. Apple spends less than 5% on R&D. However I am not a fan of their chips. Their chips aren't that great, but its hard to compete with them since you have to use their patents on your radio.
It would be good if they just split the IP and Chip parts.
Qualcomm reports QCT (chips and software) separately from QTL (licensing). In 2015, their Form 10-K reported that licensing was around 30% of their income and the rest was chips and software (see page 8).
I think you are looking at their revenue figures. Look on page 40. 87% of the EBT are from QTL. Despite being a small portion of its revenue the Licensing business is a large majority of their profits.
Would whoever supplanted them necessarily have a better record? Competition is a fine thing, but doesn't necessarily optimise for every desirable outcome. Usually the optimised factor is price, not quality metrics like security.
> Qualcomm's chips have a very bad computer security track record,
Better hope you never see the source of a MediaTek Android kernel code dump. Someone with more malicious intent than me could instantly compromise a boatload of devices.
Are you referring to exploits in the modifications made to kernel source or to something underlying in the hardware or bootloader that is exposed by looking at kernel source.
Are they actually making GPL source availible for their kernels?
I am referring to kernel modifications and especially custom module source code. But given the state of the kernel code I've seen, I don't put much trust in bootloader and hardware either.
Go search on Github for leaked sources, I am not sure if they're legal to post here...
Those were Apple's gross margins. Cost of goods is never the total cost, even for retail. In Apple's case, a lot of the magic of the iPhone happens through the effort of R&D. The media saying Apple's profit margin is their gross margin is disingenuous and grossly misleading. Most companies' gross margins are somewhere around 70% for products, but Apple is the one that gets singled out.
Apple's total profit after everything, for 2016, was $45.69B on $214.23B. That's over 21% net profit after every expense they have, which is insanely high. Apple's entire reputation is based on having crazy high profits for their revenue. That you're arguing that they have ordinary profit margins is insane.
And no, "most companies" do not have gross margins of 70%.
I love battles when you can't really feel sorry for either side.
As much as I or anyone hate patent trolls, one can't sit here and complain that a percentage of the value isn't a fair price to pay if one thinks it's okay for Apple to charge Music + App devs 30% to improve their OS + provide content for it's users.
and Apple agreed to pay Qualcomm's FRAND rates, didn't it? Like Apple's 30% cut known to the public, Qualcomm's FRAND licensing rates are published time to time and Apple agreed to abide by it.
Apple pays according to the article about $10 per device, or 1.33% of the retail price. This is far below what Qualcomm is charging, 3% to 5%, and what most handset makers pay. Further the royalty Apple pays (indirectly) is based on Apple's manufacturer's build cost, not retail cost.
App developers are free to find customers elsewhere. Perhaps app developers could create their own distribution system that guarantees security, updates and ease of use and create a device upon which it can run.
App developers can also handle the multiple country's tax laws, create a payment system and do all of that on their own as well. Apple devs don't have to deal with collecting taxes in the countries in which they sell. They don't have to deal with fraudulent transactions, chargebacks or distributing updates to users.
The idea that the 30% is somehow unfair is ridiculous. Look at retail markup rates for products sold in conventional stores. That's what that 30% is -- a retail markup and it's completely fair. Whole Foods sells olive oil for $20 that they buy from a supplier for $8. How unfair does 30% seem now? The supplier prices their product at the price they need to collect. What the end-distributer charges really isn't a concern to the supplier. But unlike Whole Foods, Apple doesn't give preference to certain suppliers over others. Everyone on the App Store has an equal chance to sell their product.
People forget that 30% was lower than most comparable outlets prior to Apple's App Store. Competitors immediately slashed their own rates to 30% to match.
> I don't understand what the problem is. Qualcomm invents something, patents it, and then they have a monopoly.
Apple's assertion is that the pricing is not Fair or Reasonable, which Qualcomm agreed to as a concession to make their patents part of the cellular network standards.
> Apple's answer should be to open their own EE labs and start inventing things and getting their own patents. Instead, they complain and go to court.
Apple cannot simply invent their own cell technology and have it work with the cellular networks that actually exist.
The problem seems to be that there's no definition what exactly FRAND actually means. The only thing everyone seems to agree on is that "you cannot exclude companies from licensing your tech", but apart from that it seems to be wild west.
@sgift: no, there is some definition of what FRAND is. It's just that Apple doesn't like it. In once instance, Apple's own FRAND expert came out testifying against Apple (in a 2012 ITC case involving Samsung and Apple).
The purpose of the ETSI IPR Policy is to facilitate the
standards making process within ETSI. In complying with the
Policy the Technical Bodies should not become involved in
legal discussion on IPR matters. The main characteristics
of the Policy can be simplified as follows:
• Members are fully entitled to hold and benefit from any
IPRs which they may own, including the right
to refuse the granting of licenses.
Sure, let's also look what is allowed and not under FRAND based on Apple's past allegation against FRAND patent holders.
Apple alleged that Samsung violated FRAND terms in the following ways:
1)
Apple argues that Samsung was obligated to make an initial
offer to Apple of a specific fair and reasonable royalty
rate." (p.60)
ITC's finding:
The evidence on record does not suppmt Apple's position.
Apple's witness on ETSI policy and practice testified the
ETSI IPR Policy document has "no precise definition ofFRAND" and that
it is expected that parties arrive at a FRAND license through
negotiation." (p. 60)
Conclusion: Apple's own witness testified that Samsung is under no obligation to make a FRAND "initial offer." Apple and their own expert clearly knew about it.
2)
Apple also criticizes Samsung's attempt to negotiate a cross-license of
both parties' mobile telephone patent portfolios."
ITC's finding:
We cannot say that Sam sung's offers in this regard are unreasonable.
The record contains evidence of more than 30 Samsung licenses that
cover the '348 and '644 patents. See RX-173C, RX-178C, RX-188, RX-189C,
RX-191C, RX-193C to -209C, RX-421C, RX-423C. All of those licenses
include a cross-license to the licensee's portfolio. That evidence
supports a conclusion t~at a portfolio cross-license offer is typical
in the industry and reasonable. ...
Apple has offered no evidence to suggest that such portfolio cross-
licenses are atypical in the industry. 19 In fact, Apple's own witness
on ETSI policies affirmed that ETSI anticipates cross-licensing may be
part of the process of negotiating a FRAND license between two parties.
Conclusion: cross-licensing was unfair in the eyes of Apple only, not everyone else. Apple had zero evidence to backup their claims, and their own expertise again came out against it (meaning they clearly knew about the rule).
3)
Apple also complains that Samsung's offer is unreasonable because [some
redacted terms Apple claimed was unreasonable]
ITC's finding:
Apple's argument lacks merit for several reasons. First, as has been
articulated in comments to the Commission from Qualcomm, Ericsson, and
Samsung, a FRAND license could encompass a range of reasonable terms. A
reasonable cross-license with one competitor may involve a
balancing payment to Samsung while a reasonable cross-license with
another competitor may involve Samsung making a balancing payment. Both
types of agreements may be reasonable, depending on the two portfolios
at issue and each party's respective volume of sales. F"
Conclusion:
this is clearly beyond common sense. Apple is just playing dumb.
I could go on and on and point out Apple's willful ignorance on FRAND. And, yes, Apple's appeal to ignorance or your ridiculous claim that "There really isn't a clear definition for "fair" or "reasonable"," is not much of a sensical arguement.
> I'm not sure where you are getting it from, but according to ETSI IPR Guide, Section 1.11
That’s not a definition of FRAND, legal or otherwise. This is a statement of the ESTIs view on IP rights. The only reference to FRAND in that section is at the end, where it talks about non-FRAND IP.
> Conclusion: Apple's own witness testified that Samsung is under no obligation to make a FRAND "initial offer." Apple and their own expert clearly knew about it.
You literally just quoted an expert witness who says that there’s no definition of FRAND in that doc: Apple's witness on ETSI policy and practice testified the ETSI IPR Policy document has "no precise definition of FRAND"
You’ve provided no evidence for your claims about FRAND and I’m very uninterested in discussing whether Apple is playing dumb, because I really don’t care.
Yes, Apple has made the same assertion against every FRAND patent holders for many, many years-- without zero evidence. This time around, it's slightly different in that Apple successfully engineered a scheme in which KFTC convicted Qualcomm of anti-competitive licensing practices.
Apple is late to the wireless game and now they are trying to find a way to pay as little as possible while not contributing virtually nothing to it and being one of the largest benefactors of the tech.
Qualcomm's R&D budget is around 25% of net sales. Google, Cisco, Intel, and Microsoft (for example) are considered big spenders, but they only spend 12-15% of net sales (apple spends 2.2% of net sales on R&D).
Qualcomm sounds a lot more fair and reasonable than any of the other multi-billion dollar companies I know of.
My number was taken from another source (I lost it). You can get higher or lower numbers by comparing to other things. For an apples to apples comparison (latest Qualcomm data I found was 2015) gives 3.4%.
>Apple's assertion is that the pricing is not Fair or Reasonable
I assert Apple's markup on products is not fair or reasonable. Perhaps Qualcomm's demands are in line with the true value of the device and not the pie in the sky numbers Apple wants.
You can’t just arbitrarily apply it to something that’s not under a contract (Apple’s device prices) and say that because you don’t like that due to a non-legal system definition of FRAND Qualcomm is off the hook.
The big issue with Qualcomm IP practice is that they don't charge IPR on the modem function, but over the whole device. So put the same modem in a cheap phone, or in an expensive laptop, and the IPR will be very different. This is really charging IPR on a lot of value completely unrelated to the modem.
Historically, the cellular/3GPP world was very phone centric. The specs were for a phone, and the chipset was really the core of the phone. At that time, charging cellular IPR on the device embedding the chipset was reasonable: the device was just a phone, with all the intelligence coming from the chipset.
We're obviously no longer living in such a world. But Qualcomm keeps this practice, as it's very profitable for them and their dominant position let them do it (so far). Apple is mad at this, as most of the value of a smartphone is outside of the modem part nowadays (even more for a PC). Other device makers hate it too, but don't have the muscle to go against QCOM and can't afford alienating them. Europe is looking into it too, and will issue a recommendation that cellular IPR is charge only on the modem subsystem, not the including device (basically, Apple position). It will start as a recommendation, but could become law later on.
So it looks like it's QCOM against everybody else. Considering the money involved, I'm sure that QCOM has a pretty fat budget to push their angle. Hello Bloomberg ;)