back to article You're not our FRAND any more, Apple tells Qualcomm: iGiant and pals lob $30bn sueball

Apple, the world's third-largest smartphone manufacturer, is once again set to battle its long-term hardware partner Qualcomm in court – but with the stakes raised higher than ever before. Apple and its contract manufacturers, including Foxconn, are claiming that since 2013, Qualcomm used its dominant position in semiconductor …

  1. Duncan Macdonald Silver badge
    Stop

    Given the inevitable appeals

    Can't they just take the case to the Supreme Court now.

    Whoever loses in this court will appeal then whoever loses in the appeal court will ask for a hearing by the full appeal court then the loser will appeal to the Supreme Court - all the time the lawyers get richer.

    My own view - when Apple do as much technical research and development as Qualcomm then they have a right to complain - at the moment it it like someone who buys a Rolls Royce then complains that it costs more than a Ford Focus.

    (And no - rounded corners do not count as technical research!!!)

    Apple makes about 40% net profit margin on its Iphones - Qualcomm was charging a IP licensing fee of about $7.50 per Iphone - about 1% of the price of each phone. If Apple paid nothing to Qualcomm then its profit margin per phone would rise from 40% to 41%.

    1. eldakka Silver badge

      Re: Given the inevitable appeals

      My own view - when Apple do as much technical research and development as Qualcomm then they have a right to complain - at the moment it it like someone who buys a Rolls Royce then complains that it costs more than a Ford Focus.

      That's nothing like the case.

      The case is more like:

      All the car manufacturers get together to standardise on a common set of control interfaces to driving the car, i.e. (for a manual), 3 pedals that are clutch, brake, throttle. And a steering wheel to change the angle of the wheels. And different companies have already developed specific elements of these and have patents on them. But all the companies agree on the common standard, and the companies that have patents on elements of this system agree to license to anyone who asks their patent for on a Fair, Reasonable, Non-discriminatory (FRAND) basis. So in this case Rolls Royce is one of the patent holders who offered and agreed to license their patents for this system under FRAND, along with multiple other patent holders (e.g. Toyota, Renault, GM), to allow everyone to standardise on the same set of control interfaces.

      However, Rolls Royce who holds some (some, not all) of the key patents, decides after everyone has agreed to this and have committed to it in such a way as it is infeasible to back out now, that its patents are more critical than anyone else's , therefore they:

      1) charge more for their patents (that they had previously agreed to apply FRAND to) than other companies who are contributing patents without which the system also couldn't work (breaching the Fair and Reasonable tenets);

      2) requires that you also license other of their patents that are unrelated to these control systems, that you don't want to use, say a welding method that you aren't using, or a screw design that you aren't using, an engine mounting/isolation bracket that you don't use, and so on (breaching the Non-discriminatory tenet, as well as the Fair and Reasonable ones, i.e. you must also license these if you want to license that).

      I'm not saying that the above is what is happening, that's up to the courts to rule on, however those are the types of allegations being made (amongst others).

      1. tooltalk

        Re: Given the inevitable appeals

        1) Qualcomm can charge more because their patent portfolio contain more seminal/essential patents in 2G/3G/4G -- the company more or less singlehandedly created 2G -- and it's significantly larger than those of other SEP holders.

        2) "portfolio licensing" is fully FRAND compliant. Apple made the same claim against Samsung years ago without anything to back that claim and the ITC ALJ rejected Apple's argument. Apple again brings nothing new to prove its case this time.

        1. Mage Silver badge

          Re:Qualcomm singlehandedly created 2G

          Only the inferior USA kind, later called CDMA-one for data. They recycled ideas going back to 1930s (NOT Heidi Lamar) and used by Racal and others in Military Equipment.

          Qualcomm did a lot on CDMA, the rubbish USA "2G", inferior to GSM. They got the worst bit (CDMA mechanism) included in 3G, making 3G less reliable than GSM. It was an already obsolete idea and disproportionately slows 3G as more users are added and shrinks cell range. The 3G used 5MHz channels. USA CDMA/CDMA-1 used 1MHz channels. GSM uses 200kHz channels, but can bond time slots in those or use multiple channels. LTE uses loads of multiple "channels" in the overall 5MHz, 10MHz or 20MHz channel, thus it's OFDMA like Flash-OFDMA and Wimax and related to how DAB and DTT (outside USA) works.

          We'd have been better off without Qualcomm and some others in the 3G "patent pool". Politics. Then Qualcomm bought and buried companies like Flarion to ensure leverage and power in the 4G patent pool. I'm no Apple fan, but time someone stood up to Qualcomm's manipulation of patents.

  2. Mark 85 Silver badge

    Dumb questoin.....

    Did Qualcomm actually do the work for the patents or are they just being a patent troll? If Qualcomm is the manufacturer of the chips then why charge a license fee? It should just be part of the purchase price and those are usually open to negotiation. Strange bedfellows and all that...

    1. Yet Another Anonymous coward Silver badge

      Re: Dumb questoin.....

      They aren't a troll, they do actually make the parts that their patents are on.

      But since they own the patents that allow you to make a 4G (and probably 5G) phone, they have to license them to everyone.

      The reason for the license/part cost split is usually complicated, if you buy more parts the cost/part drops but the fee doesn't, what if you use Qualcomm IP in your own chip, what if you use their modem block inside a SOC you fab somewhere else etc etc

      1. Mage Silver badge
        Devil

        Re: Dumb questoin.....

        They are trollish. They buy a lot of small companies to monetise the patents and bury the products. It will be bad if they get NXP.

        They double dip. They want a % of the product price. Not just content to sell the chips. With other chip makers and companies developing chips (Texas, Intel, Analog Devices, Microchip etc) selling the chips is the aim.

        With Qualcomm the aim is to licence, the chips aid that end and provide leverage.

        1. tooltalk

          Re: Dumb questoin.....

          > They double dip

          1) QTC and QTL are two separate businesses and 2) QC's patent portfolio goes beyond what's embedded in their baseband chips that becomes exhausted after first sales.

          >They want a % of the product price.

          Don't understand why I keep hearing this asinine argument. There is nothing un-FRAND about a percentage licensing model. It's a fairly common licensing practice in many different industries -- the one that accepted and practiced by the wireless industry for two decades.

          1. SuccessCase

            Re: Dumb questoin.....

            "There is nothing un-FRAND about a percentage licensing model."

            Well the question in dispute is a percentage of what? Let's make an extreme example to illustrate the point.

            If I build and sell houses off plan, and install hardwired 4G Data based connectivity in those houses, I wouldn't expect Qualcomm to say that because the houses are sold with 4G capability they can apply their percentage as against the total selling price of the house. Smartphone handsets, as everyone knows these days, are so much more than phones. They include camera's, advanced speaker tech, advanced 3D graphics technology, accelerometers. If the data comms unit were removable it would be clear the percentage due to Qualcom is a percentage of the price of the data comms subsystem. But currently Qualcom is claiming a percentage of the total value of the handset.

            IMO this is too much and they are free-riding on the business of others. The whole point of FRAND standards is so a company cannot act alone as a monopolistic gatekeeper that can blackmail other vendors into paying extortionate fees. A company that owns essential tech *can* choose not to join the FRAND club and go it alone if they wish, but then they do not get protection afforded to members of the FRAND club and may reasonably be hit by patent infringement claims by other members of the FRAND club. Apple claim that by wanting to apply their percentage to all of the handset value and also remain a member of the FRAND club, Qualcom are acting as a monopolistic gatekeeper. Apple have been withholding what they think is the difference between the amount due to Qualcomm based on pricing the data comms subsystem alone the total handset based value Qualcomm have been claiming.

            I suspect Apple's "base" system they are using to calculate the fees due to Qualcomm is probably too low, and the amount Qualcomm have been claiming is too high. The fair price is probably somewhere in between the two amounts. Because so much of the value of Qualcomm comes from licensing, they are desperately clinging to the "whole handset" model.

      2. Trollslayer Silver badge

        Re: Dumb questoin.....

        I can tell you - they increase license fees to potential customers for your silicon which ends up meaning the customer can't afford to use your silicon.

        Definitely not FRAND.

    2. DougS Silver badge

      Re: Dumb questoin.....

      The reason Qualcomm separates the chips from the licenses is because they want to force everyone to license ALL their patents, not just the ones that apply to cellular. They have some patents that are not FRAND, and involve various things like CPUs, batteries etc.

      Their condition that you must license everything from them appears to be in violation of FRAND, which doesn't permit tying the licensing of FRAND and non-FRAND patents. Qualcomm argues that they have to do this in order to get paid for their other inventions. If Samsung or Apple or Nokia want to get paid for patents they hold having to do with CPUs, batteries or other non-cellular technologies involved in making a phone they strike up license agreements with the companies making them, or sue those companies if they are using the patents without an agreement. Which is in fact what Qualcomm is doing in one of their lawsuits against Apple, so they don't seem to have much of a leg to stand on with their patent tying claiming they "must" do it.

      The fees charged for the patents are a whole other kettle of fish that's a lot more complicated. Supposedly Qualcomm collects more in license fees for its cellular patents than every other cellular patent holder in the world combine, that will be hard to defend. But the fees they charge for non-FRAND patents are easier to defend since there isn't any standard there - it is basically what you can get a jury to go along with, but you are always free to refuse to license to at any price if you so choose - the jury can only assign a value to patents used without your consent, and you ask a judge to block imports for further such use of non-FRAND patents without your consent.

      1. Keef

        Re: Dumb questoin.....

        DougS,

        Shurely shome mishtake with the 'a whole other kettle of fish' comment.

        'Whole other kettle of worms' is I think the El Reg standard measure of a kettle's contents.

        Just sayin'

        1. Yet Another Anonymous coward Silver badge

          Re: Dumb questoin.....

          Why would you put worms in a kettle ?

          1. DCFusor Silver badge

            Re: Dumb questoin.....

            Thanks from all the fish?

          2. Anonymous Coward
            Anonymous Coward

            Re: Dumb questoin.....

            Why would you put worms in a kettle ?

            Because you were able to move the eels into the helicopter first

            1. Yet Another Anonymous coward Silver badge

              Re: Dumb questoin.....

              Because the hovercraft was full ?

    3. Warm Braw Silver badge

      Re: Dumb questoin.....

      I can see that if the patents concerned are part of a patent pool then there might have to be a discrete charge as the money would be going into the pool not just into Qualcomm's pocket.

      Otherwise it doesn't make a great deal of sense - would you buy a Dyson hoover and then pay a separate levy for use of the patents? Sorry, bad example - Dyson buyers probably would...

      1. tooltalk

        Re: Dumb questoin.....

        > would you buy a Dyson hoover and then pay a separate levy for use of the patents

        the answer is no because Dyson's patented features are all embedded in Dyson's end-user product and become exhausted after the first sales.

    4. tooltalk

      Re: Dumb questoin.....

      QTL (licensing) and QTC (chip-makgin) are two separate entities. Further, Qualcomm has argued in the recent FTC case that the full extent of their patent portfolio goes beyond chip-making -- ie there are other patented features that are not part of baseband chips, such as security, encryption, algorithms, etc... so the exhaustion doesn't apply.

      Ericsson's 5G/NR licensing fee is now based on per unit licensing -- a tiered fixed cost per unit (and I believe there are two different tiers based on the cost of end-user device). A percentage based licensing also makes sense as it lessens the licensing fee burden born by low-cost manufacturers.

  3. Marketing Hack Silver badge
    Gimp

    Some would call this reporting on "poetic" justice.

    "Apple and its contract manufacturers, including Foxconn, are claiming that since 2013, Qualcomm used its dominant position in semiconductor design to overcharge..."

    Apple complaining about SOMEONE ELSE charging exorbitant amounts for tech products? Pot...Kettle...Black...

    1. Alan Brown Silver badge

      Re: Some would call this reporting on "poetic" justice.

      "Apple complaining about SOMEONE ELSE charging exorbitant amounts for tech products? Pot...Kettle...Black..."

      You can choose to buy something other than iPhone.

      You CAN'T buy a 3G/4G/LTE phone without Qualcomm IP in it. Hence the dominant position.

  4. lglethal Silver badge
    Devil

    I dont know...

    Is it possible for both of them to lose somehow???

    1. tooltalk

      Re: I dont know...

      I guess there is only one scenario:

      Apple loses the contract dispute, but Qualcomm loses the FRAND part of the lawsuit - Apple and CMs have to pay up $7+B immediately, but Qualcomm's licensing model is forever destroyed and their licensing revenue vanishes.

  5. Trollslayer Silver badge
    Mushroom

    Couldn't happen to two nicer

    Sorry, can't finish the sentence.

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