Bullyboy Apple just blew a $500m hole in our wallet, cries Qualcomm Qualcomm claims Apple has ordered chip manufacturers to stop sending royalty checks to the Snapdragon designer amid the pair's patent licensing war. On Friday, lawyers for Qualy blamed the Cupertino iPhone racket for cutting half a billion dollars from its next quarterly forecast due to lower-than-expected royalties. Qualcomm …
Once upon a time I used to design cellular equipment. I fondly remember a Qualcom IPR salesman and what he quite openly told us. I believe anyone in the business who has been in that position knows exactly what he told us at the time (we were looking at starting to build 3G kit in addition to our existing and fully IPR covered 2G).
My heart bleeds and I am crying with crocodile tears... Could not have happened to a nicer, friendlier and more benevolent company.
Neither side is especially deserving of sympathy nor have they covered themselves in glory but this seems to be another step by an ever more arrogant and confident Apple in increasing the way it persecutes its suppliers in recent months, specifically Imagination Technologies and Dialog (coming soon!).
Now Apple has decided to go after another cost centre supplier in a particularly public way. Frankly the way Qualcomm derive the charges for their supposedly FRAND patent licenses sounds like bollocks but if Apple are in dispute to the point they're refusing to pay the license fee I'd suggest they also stop using the technology that is at the centre of the dispute. If they're not paying for it they shouldn't think they can keep using it until they've all resolved their differences. If that means the iPhone assembly lines fall silent it might focus both sides to get it resolved quickly without further enriching the lawyers for the foreseeable future.
"Apple are in dispute to the point they're refusing to pay the license fee I'd suggest they also stop using the technology that is at the centre of the dispute."
Yes, isn't this how capitalism and the free market is supposed to work? As consumers, we get told to vote with our wallets and go somewhere else if we aren't happy with a product. So why don't Apple do this too? What's that you say, there is no choice? Well we consumers get told continually that we always have a choice, even if that choice is to accept the conditions/prices or do without.
See comment below buy DougS noting Qualcomm's licence fees have been repeatedly shown in court as violating FRAND terms. If Qualcomm's charges aren't compatible with the requirements of FRAND then they should be wiped out in Court over it. That still doesn't give anyone the right to use their technology for free by not paying for it at all.
To put it another way - Qualcomm acting like arseholes doesn't give Apple the right to do the same.
Apple buys Qualcomm's X* cellular modem for the iPhone (except for those iPhone 7 models that use Intel's modem)
Maybe the licensee in question are TSMC and Samsung, the foundries that makes the chips?
Anyone know further details, or do we have to wait until the court case?
@ Doctor Syntax "If Qualcom took over Comcast or vice versa would they make lawnmowers?"
They could call them ComCom perhaps? It wouldn't be the first time that technology and gardening had become intertwined viz. Mike and Terry's Lawnmowers
It has been determined by multiple courts in multiple jurisdictions that it violates FRAND terms to charge based on the value of the entire device a patent is used in, rather than the component that embodies the patent. Standards organizations agree and have clarified this in more recent standards setting committees.
Besides the example I've used before of "if you put a Qualcomm cellular modem in an A380, should they get a percentage of the sales price of the entire airplane?" think of Apple's argument this way. Phones are becoming less and less about the phone and more about all the other things they can do. Let's say Apple invented (or much more likely bought a small company that invented) Star Wars like holographic technology, so you could have a little Princess Leia in 3D standing on your phone asking for help. It adds cost, so the "iPhone Holo" model costs twice as much as the regular iPhone. Why should Qualcomm suddenly get 2x as much to license their cellular patents used in that model, when they had fuck-all to do with the reason it has a higher selling price?
Qualcomm poisoned the 3G and 4G well.
They have bought promising companies and shuttered them to leverage the IP. Many tech companies have patents and copyrights to protect their investment in R&D, Production and Marketing. Qualcomm turns that on it's head, they do R&D, Production and Marketing to support their overpriced IP licence sales.
Patents and Copyright royalties should ONLY be included in the chip bought. Qualcomm's model of essentially supplying chip and charging the royalty on the product that uses it is simply greed, that should only apply to someone using Qualcomm IP as part of a chip they make themselves if the internal value of chip can't be established (i.e. Samsung designed chip exclusive to Samsung, Samsung foundry and Samsung Phone, obviously Samsung could claim it's a really cheap chip.). But in this case Qualcomm is selling the chip, Apple isn't making it.
Not that it's not a Kettle & Pot situation but OTHER makers suffer Qualcomm's greedy approach to royalties. Put the Qualcomm stuff on a module swappable with Broadcom / Intel / Etc and sell it separately is what I would recommend to all makers of gear using Qualcomm stuff.
Boo hoo.
I worked for a UK mobile modem company bought up by a large semiconductor company and we had problems breaking into the market, in part (it seemed!) due to talk of changing licensing deals by a large mobile company.
Go Intel (acquired another UK startup and people still work on this in the UK).
> should they get a percentage of the sales price of the entire airplane?
The answer is "yes" if those are the terms specified in their signed contract. This was once a pretty common practice in the software space where embedded platform providers charged a percentage of the net license / maintenance for the entire ISV solution. The whole "zero down payment" approach seems a good deal if you're a startup, have no cash, and want to get to market quickly. And then it eats you alive.
Anyhoo, it seems like Apple needs to prove QCom is a monopoly or is somehow using exclusionary tactics (like Intel). Otherwise, they'll need to stop using the QCom tech or renegotiate the agreement (which is what this is really about). Maybe Apple can prove QCom intentionally stalled the renegotiations, but I'm not sure how far that would get them.
But FRAND patent deals are subject to specific rules. As the original poster pointed out, the deal Qualcom is trying to enforce has been ruled illegal under the FRAND agreement many times. So this isn't a standard deal, it is one done under specific rules and those rules say that you cannot charge a royalty based on the entire value of the device, just on the price of the part incorporating the patent.
So if that is in Qualcom's contract terms, that is an illegal contract and it can't be enforced. There are plenty of examples of illegal contracts and of special rules around contracts so this is entirely normal. For example many jurisdictions have special rules around buying some products so that a consumer who buys something and within a certain period (say 3 days) regrets the choice, they can return the goods. The seller cannot contract out of that provision in the law. This is similar, the rules say and case law backs it up, that Qualcom cannot charge royalties as they are attempting to do, Apple is entirely within its rights to withold payment and Qualcom will not be able to enforce the payments under an illegal contract.
Company A buys parts from Company B.
Company B pays an IP license fee to Company C.
Company A doesn't pay Company B the full amount.
Company B doesn't pay Company C the full amount.
Company C takes Company A to court.
How does that fit in the contractual world of business to business trading?
Mostly if you buy a CPU or RF chip, that's all you pay. The idea that you also pay a royalty based on the final equipment retail price is what Qualcomm enforces. AMD, Intel, Samsung, ARM, Analog Devices, Texas Instruments etc would love that?
Actually very many patents should be invalidated as they are not to protect a companies production of anything, but simply to cream off money from real manufactures, especially as many of the patents don't meet any reasonable criteria. Anything obvious to someone schooled in the art, or that already exists (not novel) or is software or mathematics should not be patentable.
Many Telecom "FRAND" patents (and others, but I worked in Telecom) were set up as a Cartel pool to keep out new entrants and various standards have been inferior due to lobby to have particular IP included (a better way that didn't use existing IP would be thrown out by standards committee)
If the manufacturers withhold patent royalty payments, then how can they possibly manufacture? Won't the police raid their plants and shut them down, just as if they were making pirated DVDs? And not all the lawyers Apple could hire should be able to change that.
Of course, patent law didn't always work that way, which was why RCA was able to manufacture radios using the superheterodyne principle without first paying, in full, whatever patent royalties Edwin Armstrong chose to charge - leading to his tragic premature death.
But I thought it was changed now, otherwise patent trolls wouldn't be able to make money out of patents that ought to be invalid. That, not being a nonpracticing entity, should be the test of whether one is a patent troll; inventors should not have to own manufacturing plants to assert their rights.
"We've been trying to reach a licensing agreement with Qualcomm for more than five years but they have refused to negotiate fair terms..."
Translation:
"God alone knows what they're smoking, but Qualcomm expect us to pay them. This isn't the way we do things at Apple, where we expect other companies to just be fucking grateful that their shitty technology is allowed into our wonderful products."
If the contract stipulates payment in terms of a percentage of the products resale value, apple is screwed. Don't like the terms? Re-negotiate. Otherwise get stuffed.
As for Apple telling their chip manufacturers to stop paying. Not sure how that is supposed to work. As said above, seems like they would be susceptible to a shutdown order.
No, if the contract specifies those terms it is unenforceable because that specific term is not permitted in a FRAND patent license deal.
You need to remember that this deals with FRAND (Fair, Reasonable, And Non Discriminatory) patents that typically are required where a technology is approved by a standards body. Qualcom accepted the work being accepted as a standard and must therefore abide by the rules set. They cannot impose a royalty based as a percentage of the entire product unless they remove the patent from the standard - which would let a competing product become the standard.
Also worth remembering that in the end Apple don't really pay the fees, their customers ultimately do.
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