Googorola's desire for iPhone royalties will upset Apple cart

Google's outline of how it will use Motorola Mobility's intellectual property – should regulators allow the buyout – has sparked fierce debate as pundits worry about how the smartphone patent wars will pan out. Originally, Google's letter to the IEEE, a global standards body, was praised by commentators because it promised …

[Dr. Mouse]

"Google will make a final offer of its RAND license terms... without prejudice to any right to recover damages for past unlicensed use... before seeking injunctive relief for infringement of the acquired… patents"

That certainly seems reasonable to me.

Assuming Moto have attempted to license the patents under reasonable terms but these have been rejected by the other party, Google are saying they'll give them another chance before seeking an injunction, although they'll reserve the right to sue for past, unlicensed use.

But this is where the line gets blurry: What is reasonable to one may not be to another.

[Goat Jam]

It'd be fun if Google found a way to patent-slap Windows Phones with, say, a $5 per handset royalty.

They might even make enough money for a packet of crisps and pint.

[Dazed and Confused]

Hardball

Given that Steve Jobs is reported to have said that he will do what ever it takes and spend every last dollar Apple have to see that no one else makes a smart phone with a touch screen, and that since his untimely demise Apple still seem wedded to that cause. They can hardly complain if the targets of their ire aren't going to the limits allowed them by the rules to fight back.

Apple could end this whole pile of poo in an instance if they wanted too. They could offer a cross licensing deal with their competitors, just like every other player in the market place has. But they don't want too. They've said repeatedly that they do not think any competitor should be allowed to exist.

[scarshapedstar]

Waaaaaaaaaaaaaahhh

Mommy, he hit me back!

-Apple

[Anonymous Coward]

Misquote

@Dazed and Confused: "Given that Steve Jobs is reported to have said that he will do what ever it takes and spend every last dollar Apple have to see that no one else makes a smart phone with a touch screen..."

He said nothing of the sort. Have you noticed that Apple has taken no action against touch screens from Microsoft, for example? But he *did* declare war on *Android*, having been betrayed by Eric Schmidt. Eric, as a board member at Apple, was privy to Apple's development, and undermined Apple's competitive advantage by passing information about the iPhone to Google. The best you can call that is "unethical".

[Keep Refrigerated]

Apple will take no action against Microsoft

MS owns a substantial amount of Apples stock. You don't bite the hand that feeds you.

[Anonymous Coward]

"MS owns a substantial amount of Apples stock."

No. No the don't. They sold it years ago. Nice try though.

[ThomH]

@Keep Refrigerated, Barry Shitpeas, others

Microsoft currently owns no Apple stock whatsoever.

The first company to sue for patent infringement in the current cycle was Nokia, which sued Apple in 2009.

[Anonymous Coward]

@Ralph 5 - Touch screens from Microsoft ?

you surely mean those funny little horses with a horn on their head ?

[Anonymous Coward]

Apple didn't invent the touchscreen phone

Was Schmidt also on the LG board? LG announced the worlds first all touch screen phone at least 6 months before the iphone. But there were touch screen phones before that, it's just that they also had keyboards.

[RichyS]

Really

LG first? Then that Sony Ericsson P800 I owned in 2003 must have just been in my imagination.

[Random Handle]

What about the 'Simon' - back when IBM used to cook with gas. Touchscreen smartphone which also did fax, pager & basic PDA stuff - and was launched in 1992.

[chr0m4t1c]

@RichyS

I was thinking the exact same thing.

[Blank Reg]

I had a p800 but mine had a keypad, was there a model without one?

[Paul M 1]

P800/900

Been a while but I'm pretty sure the keypad was detachable

Really was years ahead of its time.

[Heathroi]

So why did he keep him on the board then knowing El Goog were tinkering with cellphone gear as well?

[DAN*tastik]

@ dazed

Genuine question - what do they have to offer in exchange for that cross licensing? If they ended up talking about "design language" or something similar, after their "rounded corners", maybe they don't have much...

[Anonymous Coward]

Karma

Fucking sucks eh Apple???

They started this patent war, and now it's turned sour on them.

[Anonymous Coward]

The $12.5 billion question

So thst's how Google expects to recoup the $12.5 billion they're going to pay for Motorola (and other patent troves), they'll just slap 2.5% on every 3G smartphone out there.

[Antony Riley]

Apple says that "seeking an injunction would be a violation of the party's commitment to FRAND licensing".

Why does this remind me of the whole Samsung Galaxy Tab 10 fiasco? Admitedly this wasn't related to patents subject to FRAND licensing.

[RichyS]

There you go

I think you answered your own question there.

[Anonymous Coward]

I wonder if Google can charge their other Android partners less while still claiming to comply with FRAND? Might conflict with the non-discriminatory part?

Or maybe they're planning to charge everyone - Android partners included - the same 2.25%? After all that was Motorola's original plan.

Take care Samsung, HTCs, LGs and others...

[Anonymous Coward]

@Metavisor - It's ok for those companies to be targeted by Google

Since they take Android for free and prefer to pay Microsoft for it, Google should also make some money out of it don't you think ?

[Anonymous Coward]

Don't know if it's OK, may be deemed anticompetitive behaviour, but it's certainly becoming Google's modus operandi:

give away stuff for free until competition dies out and then charge through the nose.

They're even being fined in Italy because of similar actions.

[AlanS]

Italy?

It's Apple being fined there ... charging extra for legally mandated stiff, IIRC.

[Anonymous Coward]

You're absolutely right AlanS, it's France who is fining Google over their maps product anticompetitive behaviour.

[Charlie Clark]

FRAND rules out discriminatory pricing. The offer is 2.5 % of the end product. This can be offset by cross-licensing. Apple's move: either offer some useful, preferably, radio patents or pay up. This is how the consumer electronics business works. Apple is more than happy to be in the MPEG patent pool but cries foul over ETSI because it has nothing to offer.

[Anonymous Coward]

@Charlie Clark

Apple is on the MPEG H.264 pool - along with 28 other companies.

Their patents combined are free for first 100,000 units and then $0.20 each for the rest.

That is a lot fairer than 2.25% (~ $10) of the cost of a smartphone just to pay for some (one?) 3G patents from one company alone.

[Charlie Clark]

@Probing Analyst - the point is not the precise terms - and you have forgotten to mention how much you have to pay to play with MPEG* - but the same kind of cosy industry cartel that makes these kind of rules. The ETSI rates are, as these things usually are, negotiable.

That the ETSI system has survived so long without too many challenges says something about how it worked for members. Now, with the move towards services instead of devices, it doesn't seem to suit some players. And while Apple locks people in with its services, it makes its money with the hardware as Mr Orlowski so cogently argued about I-Tunes so many years ago. And, while there are still plenty of people prepared to buy whatever shiny shiny Apple offer, I'm sure that if they were forced to break down the walls of their garden, they'd have a different price policy.

*You used to have to buy your way into MPEG for about 1 million USD which was one of the things that did for BeOS, if memory serves. And if WebM wasn't around I think the MPEG decision to be royalty free for playback might have come out a bit differently!

[Anonymous Coward]

> *You used to have to buy your way into MPEG for about 1 million USD

Not sure when that was, if ever. What I know is they certainly they don't ask that for the h.264 patent pool Apple is in.

Just ask the Raspberry Pi people who just got a h.264 license, they certainly didn't pay $1 million for it.

[Daf L]

Rasberry Pi

That is decode only - encode was too expensive for them

[Anonymous Coward]

Re: Raspberry Pi

That's completely false Daf L.

From Raspberry Pi themselves:

"Does the H.264 codec support GPU accelerated *encoding* as well as *decoding* ?"

Not at the moment. We’ll be making a camera add-on board later in 2012, though, and when that’s released we’ll also be releasing a firmware update to allow encode."

I wish you wouldn't post made up stuff.

[mccp]

@ Daf L

The MPEG-LA H.264 license pool makes no distinction between decode and encode, you pay one license fee per unit where a unit is a decoder, and encoder or a decoder/encoder:

"For (a) (1) branded encoder and decoder products sold both to End Users and on an OEM

basis for incorporation into personal computers but not part of a personal computer

operating system (a decoder, encoder, or product consisting of one decoder and one

encoder = “unit”), royalties (beginning January 1, 2005) per Legal Entity are 0 - 100,000

units per year = no royalty (this threshold is available to one Legal Entity in an affiliated

group); US $0.20 per unit after first 100,000 units each year; above 5 million units per

year, royalty = US $0.10 per unit."

(http://www.mpegla.com/main/programs/avc/Documents/AVC_TermsSummary.pdf)

[Daf L]

@mccp

Yes, I stand corrected. The information was from postings on Their forums regarding the reasons for only having decodes but it looks like that poster was incorrect.

A decode and encode in the same product is 1 unit.

[Anonymous Coward]

@Probing Analyst

Apple were also heavily involved in the FireWire licensing pool ... from what I recall they wanted a "per port" royalty fee at such a level that many of the people involved went away and developed USB as an alternative.

[Anonymous Coward]

Re: Firewire

As you can see for yourself here:

http://www.mpegla.com/main/programs/1394/Pages/Agreement.aspx

The royalty for IEEE1394 (Firewire) paid to a collective pool of 10 companies including Apple is $0.25 per device.

At the beginning implementers of Firewire paid a $7000 one-time fee that covered all devices sold. There was some noise about an increase to $1 per device but that plan never came to fruition.

USB was developed not only because it saves manufacturers $0.25 but also because it shifted a lot of "intelligence" to the host CPU side - it's an asymmetric protocol with a smart host and dumb devices - which helped Intel make a case for more powerful CPUs (and made peripherals cheaper)

[Chet Mannly]

But...

"Apple is on the MPEG H.264 pool - along with 28 other companies.

...a lot fairer than 2.25% (~ $10) of the cost of a smartphone just to pay for some (one?) 3G patents from one company alone."

But to be fair - you can easily make a phone that doesn't include MPEG H264.

3G is absolutely essential for a phone though.

Not saying 2%+ is necessarily fair, but I'd expect a lot more for that patent than a non-essential video codec...

[Anonymous Coward]

@Charlie Clark - Not unless pricing is under an NDA

If I'm not mistaking, Microsoft pricing for patents infringed by Android is still secret so can anyone please tell us if they are reasonable and non-discriminatory or not ?

[Charlie Clark]

re. Microsoft patents. As far as I know the patents - things like FAT are not part of the telephony stack and, therefore, not covered by the whole FRAND thing. In fact I think patents that are to be covered cannot be covered by an NDA. That's why the court cases are generally in the US as software patents while generally recognised in the EU are on shaky ground, hence the vociferous lobbying for us to accept them.

I think that may be an example of the post-war European tradition of "arrangement" against the Anglo-Saxon tradition of winner/lawyer takes all.

[Anonymous Coward]

@Metavisor - So far it's the competition

that is charging you through the nose

[Anonymous Coward]

Android isn't free

They pay google if they want access to the Google services and access to the market place.

[Steve Renouf]

Reciprocal arrangements - remember that bit?

Perhaps the other players have reduced their payments, say, from 2.25% to 0.25% by virtue of having reciprocal licensing to the tune of 2% in their favour. And maybe Apple hasn't got anything to offer by the way of reciprocation but doesn't think they should pay the full whack!?!

[Anonymous Coward]

The thing about Apple's letter is that it gives me the impression that they want the kind patents they don't have many of (standards essential) to be free for them to use while expecting that the kind of patents that they do have (non-essential) can be used to prevent anyone else from doing similar things.

If MMI is used to licensing to companies with low-margin products, such as a $10 chip, the 2 percent may not be that significant.

I have no idea if this is how they charge other companies, but if it is,and they were to give Apple a lower percentage because of the higher selling value of the Apple product, it would be unfair to the companies who have been paying licensing fees.

[Anonymous Coward]

They don't?

I think Apple got quite a nice trove of LTE/4G essential patents from the Nortel auction. You know the one Google was fooling around with silly bids.

[Anonymous Coward]

Google did not start this whole mess and they're still fighting against it

...fears that the Chocolate Factory will start throwing its weight around in the courts ? That will be the F in FUD. The title of the article is misleading since Google is not seeking any licensing revenue from Apple, it just want to make sure they're not being bullied. After all it is not Google that promised to destroy Apple, it is rather the other way around.

In regard to the thorny issue of injunctions, it is a nice try from Apple which flooded their competitors with them and now they would like to not be used against them because they say it's not fair.

Let's also not forget Microsoft who handsomely taxed Android OEMs and now when it's their turn to come out with Windows tablets and phones, they are afraid to face the same music they played and they would like Google to be disarmed.

As one roman senator said more that two thousand years ago, prepare for war all of you who couldn't bear the peace.

As for citing Florian Mueller as a source, I will just leave it for other commentators to express their opinion.

[Anonymous Coward]

Except that is already happening

http://www.theregister.co.uk/2012/02/03/apple_motorola_patents/

Motorola, with Google's backing, is already suing Apple - and sued Apple first - exactly because they demand Apple pay 2.25% of sales as royalties for one of their patents.

This is not FUD, it's already happening.

[Anonymous Coward]

@AC 18:32GMT - I followed your link

and I don't see any Google backing, apart from citing Florian Mueller in a totally unrelated manner.

[Anonymous Coward]

The story is about the lawsuit, the Google backing is confirmed here:

http://www.guardian.co.uk/technology/2012/jan/26/google-motorola-lawsuit-apple-iphone

Essentially Google had to specifically approve the iPhone injuction in Germany as per their purchase agreement with Motorola Mobility.

[Irony Deficient]

Which senator?

Anonymous Coward, are you thinking of “Igitur qui desiderat pacem, praeparet bellum” from Vegetius? If so, note that nothing is known of Vegetius other than what is found in his surviving books (e.g. he lived at the tail end of the Roman Empire, in the 4th or 5th century AD); and a closer translation of this quote would be “Therefore he who longs for peace should prepare for war”.

The full quote is “Igitur qui desiderat pacem, praeparet bellum; qui victoriam cupit, milites imbuat diligenter; qui secundos optat eventus, dimicet arte, non casu.” — “Therefore he who longs for peace should prepare for war; he who desires victory should thoroughly train soldiers; and he who wishes for favourable outcomes should fight relying upon skill, not chance.” Someone somewhere must have adapted this into a “success for corporate warriors” book by now.

[Alan Denman]

Microsoft is fair?

It's all seems to be marketing tactics/words from Apple.

Obviously, slavery is deemed fair if both sides know what they are getting!

[g e]

Infringing

If you're infringing then you're not licensed, FRAND or otherwise.

So pay up. If you thought you'd just have to pay backdated FRAND rates instead of a more severe penalty for your infringement then get another lawyer you Klutz. A less smug one, preferably.

You weren't covered and you are liable and it will cost you and that is the law.

[Anonymous Coward]

What if you thought you weren't infringing because the company you got the chips from was supposed to have a license in place but didn't - because of some other deal that went on? Reality is rarely as plain and simple as you make it.

[g e]

Presumably

The companies give you a written statement of what's covered and what's not.

A license as part of the package is normally a selling point so they'd say, don't you think?

[Anonymous Coward]

Presumably is the correct word because you don't get this. No manufacturer knows every single patent their chip infringes.

Patents rely on legal interpretation, so a single patent like the one Motorola is using can easily slip by until later in the game. This is why patent pools make life so much easier, however 3G doesn't have a single nice patent pool one can just license.

The other problem is the patent holder can always sue any user of the chip even down to the end user. Remember when Innovatio was threatening to sue Wi-Fi users over their patents?

[The Cube]

"it would only take 45 patents" ???

Erm,

If the royalty is 2.5% of the net selling price then, even by Apple's fantastic margins I think you'll find that it requires a lot less than 100% of the selling price to reduce the profit to zero....

Perhaps a semester of business studies is in order?

[Anonymous Coward]

What Apple are really saying is "We don't want to bother paying licence fees until we get sued"

[Anonymous Coward]

I thought that was what Google said about Java, almost explicitly.

[John Brown (no body)]

The real question is...

...what is the "end product"?

Is Motorola asking for 2.5% of the retail or wholesale price of an entire iPhone? Or are they asking for 2.5% of the price of a 10p chip inside the iPhone?

[Silverburn]

On a lighter note...

Googorola or Motoogle? I just can't decide.

[Oddbin]

Moogle?

[Bob Vistakin]

"Microsoft doesn't mention any percentages in its statement either..."

"We're so late to the mobile party, and our comedy token offerings are so crap, that we gave up competing fairly on merit years ago. Our mobile strategy now is to rape Nokia for its patents so we can extort the others even more, when Elops mission to bust it is complete, than the $5 per handset we take now".

So, please everyone, as usual find some trivial spelling mistake or point out my posting history - anything but deal with the point I made.

[Anonymous Coward]

Ah the anti-MS fud

Late to the party?

Windows Mobile has been huge in businesses for years, and you can go back a decade or more to see MS pushing the tablet concept.

Crap?

You've presumably never long term used or developed for Windows Phone 7. Absolutely nothing like the old Windows Mobile, a dream to code for and far, far superior to the child-like iPhone or the cobbled-together Android phones (I've used iPhone 4S, Blackberry and Galaxy S2, plus developed on Macs, so am not particularly biased on this).

In my experience people look at the Windows Phone 7 UI and see something different. They then struggle trying to do things the old way rather than approaching the UI fresh and seeing what it offers.

[h3]

I hope Apple gets absolutely hammered in the courts. They started this (The radio patents are the worthwhile ones).

The reason why this has happened is because of Apple refusing FRAND terms in the past. (The Qualcomm chips in the 4S are already licensed). That is why it is 2.25% for *past* infringement.

They want FRAND now and to ignore the past. (Which is against the FRAND terms).

[Anonymous Coward]

Where did Apple refuse FRAND terms on essential technologies?

[Tom 38]

They wanted FRAND terms, were not offered terms that were FRAND, and so said 'fuck you jimmy, see you in court if you want something'*. Seems reasonable to me.

[Anonymous Coward]

I think you'll find…

Nokia started this.

[Anonymous Coward]

Larger than Apple

Cisco and Microsoft are already backing Apple's proposal too:

http://www.bbc.co.uk/news/technology-16960676

[Wile E. Veteran]

And we are surprised because ...?

For publicly-traded corporations her in the US, under current doctrine and legal precedent, anybody who fails to maximize the profits from the IP they hold is liable to suit by stockholders for failure to do their "fiduciary duty." Most of those lawsuits are successful which means the greedy bastard stockholders are largely to blame for corporations acting like greedy bastards. Steve Jobs' megalomaniacal quest to destroy all competitors leads the greedy-bastard stockholders instead of following their instructions.

[Anonymous Coward]

Wile E Veteran, you may be to blame?

the law in most/all western countries, at the moment (note - not fixed) does indeed force company directors to do whatever maximises shareholder return, And yes. this is, of course, a ludicrous way for humanity as a whole to behave. an insane law, almost destroying humanity.

and these super-rich corporations then bankroll the successful political parties, whose success relies on them continuing with this law.

don't blame stuff that you voted for. if you vote republican or democratic, if you vote labour or tory or libdem, you're voting for the corporations (who pay for those political parties) to rape the world to maximise shareholder return (partly by owning politics).

it's no-one's fault. it's just an idea - limited liability corporations - that has got out of control, size-wise, and is now controlling lots of what we do, in bad ways.

[Anonymous Coward]

sick

I am so sick of copyrights and patents being being used to shut down competition that I could puke. Even with copyrights on movies being extended to 120 years by the Sonny Bono copyright changes is now keeping people from viewing old movies. I hope that the US wakes up and completely reforms it copyright and patient laws before it totally destroys innovation and the arts.

[sisk]

"Apple says the terms of the licence were not fair and reasonable and non-discriminatory – so it didn't accept it."

Isn't that irrelevant? If I'm not mistaken that statement would indicate that Apple knowingly and willingly violated Motorolla's patent. Surely not liking the price of a license can't be legal grounds for ignoring IP laws....or if it is then someone should probably let the guys over at Pirate Bay know about that little loophole.

[chr0m4t1c]

No, it's not irrelevant.

If we could take a step back from the players involved then you *may* be talking about a scenario like this:

Company X produces a phone that sells for $300 and uses a 10c chip from a third party supplier that implements part of the 3G standard.

That chip implements 100 patents from various companies that are included in the 3G standard, for which the chip manufacturer pays royalties to those companies.

For simplicity's sake, lets say those 100 patents are split in roughly equal measure between companies A, B and C.

Company A doesn't make phones and only asks for licenses from the chip manufacturer.

Companies B and C both make phones and so decide that whilst their licenses must also be bought by manufacturers using the chips, they will not charge each other anything (even though company C ships three times the number of phones of company B).

Now, along comes company X with their new phone. Company A charges them nothing (fair), company B charges them 0.225c per chip (could also be considered fair), company C charges them 2.25% per handset - i.e. $6.75. Is that even slightly fair or reasonable?

N.B. I'm not defending or attacking any company in particular here, just trying to illustrate the scenario; it's all very well hating a company, but don't let that stop you supporting what's right. You'd be pretty upset if you were charged double when you went shopping because you happened to earn twice the average wage.

[Anonymous Coward]

MMI are being c***ts

Apple bought chips that were patent encumbered, and the chip vendor coughed up to Moto as required. Subsequently, ...

Negotiations for Licensing between Apple and Motorola

Apple’s original iPhone went on sale in June 2007. Apple’s original iPhone contained an Infineon baseband chipset, which incorporated technology covered by patents that Motorola has declared as essential. Apple purchased the Infineon baseband chipset through a manufacturing agreement with Chi Mei Corporation, which manufactured the Infineon baseband chipset under a licensing agreement with Motorola. On August 4, 2007, Motorola gave Chi Mei a 60-day suspension notice on its licensing agreement.

D. Motorola’s Termination of the Qualcomm License

On December 16, 2009, Apple and Qualcomm entered into a contract whereby Apple would purchase chipsets from Qualcomm that were compliant with the CDMA2000 standard. The chipsets incorporated technology that Qualcomm licensed from Motorola. On January 11, 2011, on the day Apple announced the Verizon iPhone 4, Motorola notified Qualcomm of its intent to terminate any and all license covenant rights with respect to Qualcomm’s business with Apple, effective February 10, 2011.

http://articles.law360.s3.amazonaws.com/0249000/249997//mnt/rails_cache/https-ecf-wiwd-uscourts-gov-cgi-bin-show_doc-pl-caseid-29810-de_seq_num-329-dm_id-3602496-doc_num-93.pdf

[Anonymous Coward]

That smacks of anti-trust.

[Anonymous Coward]

You don't license the monkey

when you can sue the organ-grinder for more!

[Anonymous Coward]

In summary, MMI has left Apple thinking.....

With FRANDS like these, who needs enemies!!?

Grabbing my coat before the shower of rocks and bottles starts.....

[James O'Brien]

Excuse me?

"Microsoft will always adhere to the promises it has made to standards organisations to make its standard essential patents available on fair, reasonable and nondiscriminatory terms."

Microsoft? Adhere to a promise? Made to a standards orginzation? Really?

I think that about sums up how utterly shocked I was to read this in the article. Alittle sure M$ will only adhere to that which they can get away with and make a boat load of dosh.

[Turtle]

As usual, when Google wins, everyone else loses.

Can you give me some examples when Microsoft demanded price-gouging royalties for a FRAND patent? Or some examples of promises made to a standards organization that they subsequently violated?

On the other hand you can be sure that if Motorola/Google is successful in this ploy, then FRAND will cease to have any meaning at all, and every holder of a FRAND patent will demand the same kind of exorbitant royalties - not only Microsoft. And *you* can expect prices of electronics goods to soar, as either the exorbitant royalties will need to paid, or expensive research to find workarounds will need to be found, or competition will be restricted - or all of the foregoing. But no matter how it works out, if Google/Motorola wins with this ploy, *you* will lose.

But then again, that oh-so-clever "M$" you use, tells us that you are *already* a loser.

[James 36]

yawn

american tech company ties another american tech company up in court over pointless patent battle even though they have both made tons of cash out of the market over which they are fighting

so bored with it I felt motivated enough to post

i am now having a crisis of emotion but as its friday impending alcohol consumption will resolve the crisis to a headache, which can be dealt with by a painkiller

[smit]

Googorola hmmm

I Prefer " Moogul" like the off spring of a cow n a poodle!

[Anonymous Coward]

How about Motogoogle?

Just rolls off the tongue.