To Mollify Google on Moto Patents, Apple Proposes $1/Device Fee

An anonymous reader writes "Motorola feels that Apple is infringing on several FRAND patents that have to do with how every smartphone in existence connects to WiFi and cellular networks. Since Apple makes smartphones, and Google is looking to use their newly acquired Motorola as a weapon, the two companies are only a few days away from the courtroom. Apple has conceded that the Moto patents are valid by offering to pay Google/Moto $1 per device, but only going forward. Motorola wants 2.25% per device and for it to cover all Apple devices (back dated). If Motorola pursues the case and the court issues a per device rate that is higher than Apple's offer, Apple promises to pursue all possible appeals to avoid paying more than $1. Motorola could end this quickly, or watch as Apple drags this out for what could be years."

Comments

Is $2.25 FRAND?

[serviscope_minor]

If $2.25 is simimar to what they have licensed it to others for, then Apple will have a hard job arguing that it isn't FRAND, and therefore that Moto shouldn't be allowed to enforce the patents.

I'm also fairly sure that FRAND doesn't mean that you're free to infringe until you get caught.

Anyway, bad as patents seem to be I'd love to see Apple get absoloutely battered because of patent infringements, because they insist on doing it to others. Hoist on their own petard and all.

Perhaps it will convince them to divert their lobbying power to removing patents.

Just kidding!

Re:Is $2.25 FRAND?

[JDG1980]

My understanding is that most other companies who use these patents opted to do some sort of cross-licensing agreement rather than paying cash on the barrelhead. Since Apple refuses to do that, it could make it tricky to figure out exactly what they should owe, even if the patents are found to be covered by FRAND principles.

Re:Is $2.25 FRAND?

[hondo77]

Wrong. If Apple and Microsoft can reach a cross-licensing agreement that includes iPhones and iPads, then I guess you're FOS, eh?

Re:Is $2.25 FRAND?

[serviscope_minor]

Hahaha!

Apple want $40 per device! That's about 1/6 of the final retail cost of a mid range Android phone like the ACE. No wonder Samsung told them to fuck off.

Also, Microsoft almost certainly has enough bullshit software patents that any attempt to sue by Apple would surely be MAD. The only option was to cross license.

Re:Is $2.25 FRAND?

[DRJlaw]

If you think about it, if there are 10 companies with standards-essential patents, and each charges 2.25%, then that's 22.5% of the device's post-profit cost, which seems rather high.

You assume that the royalty percentages are cumulative. They are not. If there are two companies with standards essential patents who manufacture and sell the devices, which is typically but not exclusively the case, then Company A could pay Company B 2.25% per device, and Company B could pay Company A 2.25% per device, or Company A and Company B could cross-license. When Company A manufactures a devices per year and Company B manufactures b devices per year, net patent revenue (or expense) for each is:

For A, (b-a)*0.0225
For B, (a-b)*0.0225

If the number of devices manufactured is comparable to equal, these figures trend to 0, not to (b)*0.045 and (a)*0.045 as you suggest.

Why is Company A compelled to charge an extra 4.5% per device? It could, but then again it has little reason to. Supply and demand and other cost factors will principally drive the price, and chopping that price into royalties versus other factors is like debating how many angels can sit on the head of a pin. What matters is your net patent expense, just like your supplier expense, labor expense, etc.

The royalty rate is a cost of entry if you have nothing other than cash to trade. Companies holding standards essential patents are not being altruistic -- they are trading amongst themselves, and a cross-license is in some ways simpler than paying cash.

Apple does not have anything that it wishes to trade, but wants the cost of entry (i.e., the royalty rate) to be really, really low. Yet the cost of entry is based upon obtaining the benefit of each standard-essential patent owner's R&D efforts and IP, which Apple claims, at least with respect to its own efforts and IP, to be worth a very great deal (as reflected in the price premium that consumers pay and Apple's efforts to keep its IP completely proprietary).

A court (or expert) looking to establish a reasonably royalty rate is not merely going to evaluate a percentage per device -- that is the end result. That court is going to have to consider the royalties paid by other companies which have sought royalty-only license agreements (are there any?) and the gross value of what has been traded between standards-essential patent holders in pure cross-licensing or hybrid cross-licensing + royalty deals.

In Apple's case, iSuppli figures suggest that materials + labor represent about 1/3rd the price of their devices. That means Roughly 66% is IP + goodwill. That may "seem rather high," but that is what the market thinks that those properties are worth.

Re:How is a percentage of a device cost fair?

[Anonymous Coward]

I don't know, maybe because that's how every single FRAND license has ever been negotiated? If the terms are Fair and Non-Discriminatory (the F and ND in FRAND), you cannot use fixed-per-device terms for one company and percentage-based terms for others.

Re:Bad faith

[Bobfrankly1]

Who says they're unreasonable? Maybe Moto's demands are...

Realizing that apple is offering quite a bit less then even half a pecent, and while recognizing that the patents are valid they refuse to be responsible for the past, it doesn't take much sanity to see Apple is trying to leverage the threat of a long drawn out lawsuit to avoid paying for their past infringement. It's exactly the kind of behavior that Googlerola should be putting them to the screws for, and seeing that they both have disposable lawyers sitting around, it's not unlikely either.

Judge will not block sales

[SuperKendall]

then a Judge will surely be willing to grant a injunction against sales and promotion of all infringing products.

Nope. Read this related review of Microsoft vs. Google (er, Motorola) on FRAND

Basically judges everywhere agree you cannot use FRAND as a tool to extort way more money from successful companies than from others. The only question at hand is how much money Apple (and Microsoft) will be paying - even if Apple appeals it simply means delaying when they are paying Motorola, but will not result in Apple devices being blocked from sale.

Re:Apple has shown the way for Motorola.

[serviscope_minor]

I can't believe people actually think this garbage.

I can't believe people in glass houses use a stone throwing gattling gun with such abandon.

http://media.idownloadblog.com/wp-content/uploads/2011/08/samsung-vs.-apple-e1313955567548.jpg

And there you go like a true fanboi using that widely debunked graphic which only shows a small selection of Samsung phones.

If you were hones, you would have shown this one:

http://www.osnews.com/img/26230/s-comp.PNG

Re:Apple has shown the way for Motorola.

[AmiMoJo]

That would be the 2.5% that Google wants.

Most companies actually just do a patent licensing exchange with each other for FRAND patents. Apple doesn't have any valuable tech patents that Google wants, and it's design patents are either worthless or they are unwilling to allow anyone else to use them anyway.

So, Apple has to pay cash. 2.5% of the sale price of every product. On a $500 iPhone that would be $12.50, rather more than they want to pay.

Re:Lets hope common sense wins

[bws111]

No, Apple is NOT asking to pay the same price as everyone else. Everyone else is cross-licensing, which Apple refuses to do. So if Samsung (for example) is giving Motorola licenses which would add up to 2.25% of the device if they were paid for in cash, then it is entirely fair and reasonable to expect Apple to cough up 2.25% in cash.

Re:Apple has shown the way for Motorola.

[the computer guy nex]

And there you go like a true fanboi using that widely debunked graphic which only shows a small selection of Samsung phones.

So you are saying that patent infringement occurs only when *every* product you offer infringes? How ridiculous.

Re:Apple was not "caught" doing anything

[JDG1980]

Let's see a reliable source. Everyone knows Florian Mueller is a laughable shill.

Re:At last an offer.

[LodCrappo]

Seriously?

You don't see the difference between Apple's abuse of the patent system by attempting to prove someone copied trivial things that already existed like rounded corners, and Google's FRAND patents that *every* manufacturer *including* Apple agrees are valid? Patents that actually cover meaningful technologies that "have to do with how every smartphone in existence connects to WiFi and cellular networks"?

Are you kidding me?

As for the doing or not doing evil, whatever, maybe. But to equate Apple and Google's patent activity is just absurdly wrong.

Re:Apple has shown the way for Motorola.

[Anonymous Coward]

Apple can't just decide by themselves what is or isnt fair, from Apple's dealings with Samsung's FRAND patents: http://www.groklaw.net/article.php?story=20121007194355579

"the judge told Apple, which had claimed that the amount Samsung asked for licensing was too high to be a FRAND offer, that Apple can't unilaterally decide what is or is not a fair price. If it had objections, it could negotiate, which Apple failed to do, or there is a mediation process at ETSI it could have used, which it also apparently failed to do. Instead, the ruling says, the court battles are about negotiating a lower price. "

Re:Think about What Could Be...

[Githaron]

It has a tiny screen, a non-removable battery, a non-standard connector, no microSD port, and no NFC chip. Also, it is no longer king in battery life. While I am not if sure they have fixed it yet or not, at release, they apparently didn't even have a decent map application for it. From a OS standpoint, Android has finally gotten to the point where it is at least as polished as iOS if not more polished. Some of the top Android phones are even coming out this cool new features that aren't even part of the stock Android OS. I haven't heard of any awesome new features in Apple since Siri. Siri is probably one of Apple's bigger advantages but Google has been making strides to lessen that advantage with Google Now and voice searching. Apple also has the advantage on manufacture support in pushing OS updates but then again, Apple has a nasty habit of keeping out the coolest new features on its older models. Overall, I am thoroughly unimpressed by Apples newest iPhone. It used to be that Apple was one of the first with new awesome features. Apple can't keep customers based on past successes forever.

Re:At last an offer.

[ogdenk]

Moto's patents may be legit, but they're asking a very high price for them. If 50 companies each ask for 2.25% royalties, it doesn't leave much...

And Apple is free not to license those patents and come up with a new and unique way of doing it. Had they not paraded around like assholes claiming they basically invented the smartphone (hint.... they didn't) and using frivolous BS patents in abusive ways MotoGoogle might be willing to license them for less. They are Google's patents, they can charge whatever they want to whoever they want for them. Don't like it? Go burn down the USPTO.

Apple decided to play conqueror and they're about to get a taste of what happens when you go up against an evenly matched enemy who's tired of your shit.

I like Apple products (OSX is awesome) but I find myself hating the company itself quite a bit over the last couple years. Halting progress with asinine lawsuits to assure market dominance is wrong. That's what got us years of crappy Win32 OS's on everybody's desk.

Re:At last an offer.

[Anonymous Coward]

The problem is that other manufacturers don't pay cash, they cross-license patents valued at an equivalent amount. Apple is literally the only one that refuses to cross-license, so they're the only ones that need to pay the non-discriminatory fee of whatever Motorola wants to charge for their patent licenses.