
What's Reasonable to Qualcomm Isn't to Apple - heisenbit
https://www.bloomberg.com/view/articles/2017-05-08/what-s-reasonable-to-qualcomm-isn-t-to-apple
======
Declanomous
Given how important standards are in the realm of computers, I think the
degree of protection patents provide is ludicrous. Patents ostensibly exist to
benefit society while allowing the inventor to benefit from their invention. I
feel like in the digital world the balance has tipped too far in favor of the
inventor.

If we look to the industrial revolution for example, we have the conversion of
linear motion to reciprocating motion. This is an incredibly important
development for getting useful work out of steam engines. The most common
solution is the crank and flywheel, but when James Watt was designing his
steam engines he found that the crank was patented by James Pickard. Rather
than license the crank, he invented the Sun and Planet gear[1]. The Sun and
Planet gear was less efficient than the crank, but it was a suitable
workaround which allowed Watt's engines to be competitive.

When it comes to computers, you either have the ability to interact or you
don't. If you don't have the right radio, you cannot build a cell phone. If
you don't have the right codec, you cannot build a web browser. Functionally,
these patents are effectively more like patenting the _concept_ of changing
linear motion into rotational motion than patenting a particular mechanism for
doing so.

I'm glad Apple is forcing Qualcomm's hand on this one.

[1]
[https://en.wikipedia.org/wiki/Sun_and_planet_gear](https://en.wikipedia.org/wiki/Sun_and_planet_gear)

~~~
gcb0
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.

~~~
madeofpalk
These are all FRAND patents that the dispute is over. In short, Apple is
claiming that they aren't priced reasonably, which is a reasonable claim to
make.

Why should Apple pay Qualcomm more for a radio in a 128GB iPhone than a 32GB
iPhone?

~~~
gcb0
because the royalties are proportional to the profit. since the patent claim
is the profits wouldnt exist without the original work. it's just like tax
works. a judge cannot declare that illegal without criticizing all of tax law.

------
wyldfire
> There is pretty much no way that Qualcomm could ever get an injunction to
> stop sales of iPhones... Qualcomm is planning to ask the federal government
> to ban imports of iPhones. This is the technology equivalent of a Hail Mary
> pass.

It was unclear from the article why this is a Hail Mary, so I looked it up. It
initially seemed to me that if Qualcomm offers Apple a licensing agreement,
Apple agrees to it, and later decides not to adhere to the agreement, they
should be able to seek injunctive relief. The relevant precedent is probably
eBay Inc. v. MercExchange [1], which SCOTUS used to establish a four-factor
test. Among the four are "that [the party seeking injunction] has suffered an
irreparable injury;" and "that the public interest would not be disserved by a
permanent injunction." Public can't live without that sweet new iPhone stuff
;) and QCOM can always get paid later.

[1]
[https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L...](https://en.wikipedia.org/wiki/EBay_Inc._v._MercExchange,_L.L.C).

[2] [https://www.scribd.com/document/337216142/1-Apple-v-
Qualcomm...](https://www.scribd.com/document/337216142/1-Apple-v-Qualcomm-
Lawsuit-Patently-Apple)

~~~
Animats
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...](https://apps.americanbar.org/litigation/committees/intellectual/roundtables/1106_outline.pdf)

~~~
wyldfire
> it would force Apple to manufacture in the US.

But wouldn't a decision to support the ITC injunction just bring Apple back to
the negotiating table? Seems hard to believe that Qualcomm would go scorched
earth on a customer like that. Especially one from whom it's getting big
royalties from.

~~~
Animats
Cisco has done that to Arista in the past. Apple has done that to Samsung.
Samsung tried to do it to Apple, but Obama overruled that. (The President can
block ITC injunctions.)

Usually what happens is a very fast settlement by the infringing party.

------
Glyptodon
So... is obligatory patent licensing subject to patent exhaustion? If so, what
prevents a 3rd party factory from building chips and licensing tech, then
selling chips and becoming the only party to pay royalties, and only on the
cost of the chips, rather than on the final product? Is there some kind of
legal differentiation of patent exhaustion based on who the purchaser is?

~~~
petra
>> 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.

~~~
Glyptodon
Only if that's part of the standard compulsory license agreement, and if any
such agreement somehow gets around patent exhaustion. Which is more or less
what I was curious about.

------
MBCook
I'm an Apple fan and agree with their position here... but isn't this close to
Apple's claim against Android or Samsung? That Apple's patents around touch
screens are so important that they should get a cut of the full phone?

I think Apple's position against Android or Samsung was much stronger than
Qualcomm's against Apple... but I see a sneaky similarity and they appear to
be switching sides.

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

~~~
tooltalk
doesn't really matter. SEP/FRAND doesn't mean cheap, as Apple seems to
believe. Apple can't demand Samsung to pay the moon only because their patents
aren't SEP either. While there are no firm rules, most courts look at value
the patented features creates (market driver) as the basis of reasonable
rates.

------
cbanek
So this article talks all about pricing, and how the case might affect the
price of an iPhone, but gives no numbers.

Have to give it to them on mentioning 5G posturing though, which I think is
what this is.

From another recent article ([https://www.cnet.com/news/qualcomm-apple-iphone-
patents-roya...](https://www.cnet.com/news/qualcomm-apple-iphone-patents-
royalties-manufacturers-chips/)):

In Apple's case, the iPhone maker pays Qualcomm's licensing fee through its
manufacturers. Apple doesn't have a direct license of its own. The fee is
based on the total value of the device ($650 in the case of the iPhone) versus
the value of the chip (closer to $20), but it's capped at a certain level.
Neither company has disclosed the limit, but it's lower than the actual $650
price of the iPhone.

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

[http://fortune.com/2017/01/23/qualcomm-royalty-apple-
under-s...](http://fortune.com/2017/01/23/qualcomm-royalty-apple-under-siege/)

~~~
tooltalk
is that after rebate or before?

------
microcolonel
> If Apple loses, patent licensing practices will continue to throw sand in
> the wheels of commerce -- and cost consumers money.

This metaphor is a bit weird. I know that throwing sand to the wheels of a
train is helpful (generates traction). Prettymuch all freight trains throw
sand in the wheels deliberately. Maybe they got it the wrong way around.

------
asafira
Not to hijack this thread (ok, maybe to hijack this thread), does anyone know
how Qualcomm is doing? It always seemed to me that their processors never
really caught up to Apple's tech (with almost all benchmarks), and I was
wondering if it had to do with the company just not doing so well nowadays
(people leaving, etc.)

~~~
Mathnerd314
I found some generic tech strategy report:
[https://www.qualcomm.com/media/documents/files/a-deeper-
dive...](https://www.qualcomm.com/media/documents/files/a-deeper-dive-into-
qualcomm-s-iot-portfolio-and-strategy.pdf), 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...](https://www.technologyreview.com/s/603964/qualcomm-wants-your-
smartphone-to-have-energy-efficient-eyes/)

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](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/...](http://linuxplumbersconf.com/2016/ocw//system/presentations/3693/original/LPC-%20EAS%20for%20Android.pdf)

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...](https://www.fool.com/investing/2017/03/06/should-qualcomm-inc-worry-
about-xiaomis-new-chips.aspx) 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.

------
mrout
Patents should be abolished. Anything less has no practical purpose.

------
EGreg
Each side argues that the other is theft.

Either theft of intellectual property, or legal theft of money they didn't
earn by not executing.

