What's Reasonable to Qualcomm Isn't to Apple

I've come to the same conclusion you have re: software patents. And it is the courts' fault. The use of functional language in patent claims is allowed without applying means-plus-funtion case law.

If you say "engine means for creating torque" in your patent claim, when you try to enforce your claim the court will look at the actual engine you disclosed in your patent's specification. You can't disclose a crank and flywheel and then assert it against sun and planet.

But if you call it an "engine module configured to provide torque" courts will let you assert that claim against pretty much anything vaguely like an engine that provides torque.

This phenomenon, where the need to license a patent is driven primarily by the need to comply with standard, rather than the advantages of the invention relative to alternatives, is accounted for in recent changes in the law of patent damages. See https://scholar.google.com/scholar_case?case=175128776687856....

Under this 2015 case, the patent owner gets less money if people just use their patent to comply with the standard, and not because it's a better way of doing something.

These patents aren't cheap to develop or obvious. Of all the tech patents that are out there, high bandwidth and low latency communication is the hardest to develop. Apple is sitting on a mountain of cash, Qualcomm is absolutely in their right to charge them at the threshold it would take to develop an alternative.

In terms of "good to society" it's hard to say what expiration date is the optimal one at maximizing innovation over all possible futures. I think it's probably greater then 0, but below 100 years.

it will only help apple, not you.

the article convenietly leaves out the pricing rules being disputed.

remember that there is already regulations for std patents to be priced reasonably and non discrimatory.

what apple is hunting here, is a discount. nothing else.

this is an excellent analogy!

If Apple manufactured in the US, they could rely on eBay vs. MercExchange. But Apple imports from China. The rules for imports are tougher. That's handled by the International Trade Commission.[1] ITC cases take about a year, and if Qualcomm wins, iPhone imports will be seized at Customs. ITC rules favor American manufacturers fighting illegal imports. Qualcomm could win this.

To bring an ITC case, you have to be manufacturing the thing in the US, which Qualcomm does; they make and sell cellular radio ICs. ITC proceedings are thus not available to "patent trolls". This deals with most of the usual complaints about patents.

ITC actions are entirely about blocking imports. There's no issue of what's a "reasonable royalty". Qualcomm can just say "no imports". The Trump administration might view this as a win, as it would force Apple to manufacture in the US.

[1] https://apps.americanbar.org/litigation/committees/intellect...

I'm a bit biased, having followed Apple's legal misadventures last few years. Apple believes that their frivolous patents (eg, slide-to-unlock) are worth $7-$8 per device, while everyone else's patents, especially when it comes to SEP, are $0.000000x. It's not surprising that Apple is doing what they are doing now.

First, this Bloomberg article is somewhat misleading. IEEE and their recent policy statement on SSPUS has very little to do with what's at dispute here. ETSI regulates most wireless 3G, LTE patents and ETSI doesn't want to dictate how licensees and licensors come to FRAND rates or what they ought to be. IEEE is the first and the only one so far to have clarified their stance on SEP licensing, but most SSO, standard setting organization, don't want to meddle with licensing practices because they don't want to cross path with regulators (ie, anti-trust/competitive) or discourage potential contributing members from declaring their patents SEP.

Second, Apple has never directly licensed Qualcomm's patents. Apple's contract manufacturer Foxconn has long been a legit licensee of Qualcomm wireless patents (even before Apple iPhone was released back in 2007) and pays royalty based on their manufacturing cost, not on the retail price ($600 or more). Apple pays nowhere close to what many people believe they are paying.

Third, Apple technically breached the contract with Qualcomm by cooperating with KTC, Korean Fair Trade Commission, last year. Qualcomm essentially had a gag order on their contract forbidding their licensees from speaking out. While this is not uncommon -- Apple is notorious for doing the same to their suppliers (eg, GT Advanced?) and is much worse in many respects -- there are clearly some elements in Qualcomm's licensing practices that are quite troubling as well.

Forth, SCOTUS's recent eBay's decision doesn't too much bearing on Qualcomm's ITC case. While SCOTUS opinions' are the supreme laws of the land, USITC is a quasi judicial agency that operates on different level. Their decision doesn't set legal precedence. They are not in the business of calculating damages, or determining royalty rates or basis -- their only power is to issue ITC import ban when infringement or breach of contract is found. Companies do prefer USITC because ITC cases move a lot faster and ITC is not encumbered by the same high standards that lower courts must consider.

Apple doesn't receive a license from Qualcomm. They pay their third party manufacturers which pass it on to Qualcomm (and until recently, Apple was receiving a rebate for some of it in exchange for exclusivity).

Also I doubt anyone is going to ban the iPhone over SEPs.

>> what prevent a 3rd party factory from building chips and licensing tech ..?

Quallcom. they could dictate the licensing agreement such that the phone maker also has to license it.

That would have definitely improved the state of things for the likes of BluRay software playback... Not to mention most electronics where software is a huge part of interaction.

I'm hoping we see some serious reduction in patents in the next few years, including compulsory licensing models for several sectors (namely medical/pharma).

Not a lawyer but thats what i would do too.

The Apple patents in question weren't SEP and aren't subject to FRAND terms.

Here's another article that says the royalty is about $15 per phone.

http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-s...

Are you saying that if Apple wins, we are going to pay less for iPhones? ;)

Apple's manufacturer Foxconn pays Qualcomm on their manufacturing costs (selling price to Apple), or $250-$300? Qualcomm's baseband is sold separately. Of course, Qualcomm would love to charge based on Apple's retail price $600+.

I found some generic tech strategy report: https://www.qualcomm.com/media/documents/files/a-deeper-dive..., it seems like their strategy is to just keep rolling in the money and pumping out chips and IP.

They're still doing random R&D products, so not too much fiscal pressure I guess, although if they keep paying out huge settlements that could change: https://www.technologyreview.com/s/603964/qualcomm-wants-you...

Software-wise their code and maintenance strategy in general seems to suck, they throw the code over a wall and start over when doing the next project: https://news.ycombinator.com/item?id=13685273 Some guys from Google wrote yet another CPU scheduler, apparently it does better than Qualcomm's: http://linuxplumbersconf.com/2016/ocw//system/presentations/...

Obviously they're not making many friends with their legal strategy. The chips are still selling, so the bottom line is sound at the moment. But other companies are developing ARM chips too: https://www.fool.com/investing/2017/03/06/should-qualcomm-in... And there are a ton of lawsuits. So it wouldn't be surprising if Qualcomm suddenly went out of business due to a court judgement, or gradually had to scale down.

Morale is pretty low. Boston consulting group is there now presumably working on restructuring and layoffs. After Jacobs left and Mollenkopf took over a lot was cut, they even closed the Library which peeved a lot of people off. The little things... There is also a company-wide sentiment that they are abusing the H1B program...