Motorola Requested 2.25% Patent Licensing Royalty on iPhone Purchases

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Late last year, Motorola Mobility requested Apple pay a potential royalty of 2.25% on its iPhone sales in recently unsealed litigation from last year. The royalty would amount to more than $1 billion in 2011 alone, though there is no indication which specific iPhone models would be covered by the license nor if it would be retroactive to the initial launch of the iPhone in 2007.

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The patents appear to be covered under the FRAND standard, which requires patents to be licensed for "fair, reasonable and nondiscriminatory terms". The 2.25% request that Motorola offered was in response to a demand for a FRAND pricing offer from Apple.

Florian Mueller, writing about the issue, offers some additional insight:

I assume this relates to Apple's sales and to all of MMI's standard-essential patents, though the context is only one patent (the one over which Motorola has already forced Apple, temporarily, to remove certain products from its German online store. Assuming in Motorola's favor that this was a license to all standard-essential wireless patents, the amount still appears excessive to me given how many companies hold patents on such standards and what royalty rate this would lead to in the aggregate.

A quote in the Wall Street Journal from the chief executive of the Epicenter IP group, which helps companies license patents, noted that "there is no debate that Motorola was the inventor of the mobile phone" and its patents could be broad and necessary for a phone maker.

This is only one more step in the long and drawn-out patent battle between the two companies, but the licensing rate for patents is typically a closely held competitive secret. The 2.25% rate would be a significant amount of money, given the tremendous sales Apple is generating from its iPhone business.

Top Rated Comments

HiRez Avatar
117 months ago

The 2.25% rate would be a significant amount of money, given the tremendous sales Apple is generating from its iPhone business.

The amount of money generated should be irrelevant. The question is, how fair is 2.25%? What % are other similar FRAND patents typically licensed at? Are there guidelines or limits placed on these?
Score: 14 Votes (Like | Disagree)
kdarling Avatar
117 months ago
A few information tidbits for the thread:


* Re: Motorola's 2.25%. Samsung had asked Apple for 2.4% for their patents.


* It's probable that one reason other companies aren't making as much profit on their phones as Apple, is that they're paying far more in license fees, some of which Apple has been avoiding as long as possible.


* Motorola first asked Apple for royalties a month after the iPhone went on sale in 2007. Reportedly Apple stalled four years to respond with a counter-offer. (Similar to what they did with Nokia.)


* Over 150 companies belong to the GSM FRAND alliance. Unknown how many get license fees.


* Fee example: in 2007, Broadcom won an ITC import injunction on certain Qualcomm chips. Verizon ended up themselves paying the $6 patent fee per CDMA phone to Broadcom for a while, just to be able to import phones into the US and not run out of stock.


* FRAND does NOT mean that everyone, big or small, new or old, must get the same terms. Quantity, length of contract, cross licensing of patents, all these and more are factors.


Score: 5 Votes (Like | Disagree)
Andronicus Avatar
117 months ago

Motorola almost went out of business a few years ago. They make junk and now they want to steal from Apple, wow! All that CPU business they lost from Apple has to really hurt when all your other products suck, specially all the consumer junk they make.

-Mike


Obviously you're an apple......enthusiast, but Motorola has been making phones a lot longer than apple and it's not surprising that they have patents that apple is using and if so then apple should pay.
Score: 5 Votes (Like | Disagree)
Kevlar Avatar
117 months ago

Motorola almost went out of business a few years ago. They make junk and now they want to steal from Apple, wow! All that CPU business they lost from Apple has to really hurt when all your other products suck, specially all the consumer junk they make.

-Mike


Well Apple is stealing from Moto. Moto developed a lot of technology back in the early days and has patents on it. They deserve to make money back on it (based on the current patent system).

Now how much money is the question. And since they are patents considered to be FRAND patents, we will have to wait and see what the judge says when he see's what Moto gets from other companies that have licences the patents.
Score: 5 Votes (Like | Disagree)
samcraig Avatar
117 months ago

Maybe they could use some of them to make products that don't suck.

Never mind, I have a better idea. They could give them to Apple and have *them* do it.

Patents are paper. But they need to make money somehow, right?


They don't have to do anything with them. They can sit pretty and just keep suing Apple if they want. Just because you don't like it doesn't matter. Just like Apple doesn't have to give to charity or care about anyone else but themselves. Motorola is a business - and if they can make money suing for violations of their patents - good for them. You should be happy, LTD - they are doing exactly what you think companies should do. Taking care of their own best interests...
Score: 4 Votes (Like | Disagree)
Steve121178 Avatar
117 months ago

This isn't the Motorola of 30 years ago, nor is it 30 years ago. Time to move on.

Nor do I particularly care at this point that Moto invented the mobile phone technology or whatever the hell they did. That isn't helping them NOW, nor do consumers give a sweet damn about it. What Moto did in the caveman days of consumer mobile tech is irrelevant. Barely anyone remembers. And why should they? Moto is just another dinosaur that deals more in patents than great products.

There real tragedy here is that Sanjay Jha is still CEO *and* Chairman. Not that it really matters at this point.


Dress it up how you want, Apple still stole their IP & must pay.
Score: 4 Votes (Like | Disagree)

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