Apple Pushes for Clarification on Licensing of FRAND Patents

Dow Jones Newswires reports that Apple filed a letter with the European Telecommunications Standards Institute (ETSI) last November pushing for clarification on how standards-essential patents are intended to be licensed. These standards-essential patents are currently required to be licensed under fair, reasonable and non-discriminatory (FRAND) terms in order to promote competition in the marketplace, but Apple claims that there is too much confusion in the industry about how such licensing should be handled.

Apple said in its letter--which was dated Nov. 11, but not previously disclosed--that the lack of clarity on what is fair, reasonable and nondiscriminatory has led many companies to ask unusually high rates and sue one another claiming they infringed on one another's patents.

"It is apparent that our industry suffers from a lack of consistent adherence to Frand principles in the cellular standards arena," wrote Bruce Watrous, Apple's intellectual property head.

Apple has requested that the ETSI set "appropriate" royalty rates for FRAND patents in the wireless industry in order to help companies compete on a relatively even field with a clearer understanding of the costs involved in competing in the market. The company has also requested that FRAND patents not be used as the basis for requests for injunctions that would remove products from the market, given that those patents are intended to be licensed and that any negotiation roadblocks are related to the details of that licensing.

Apple certainly has a vested interest in seeing simplified FRAND patent licensing terms, given that it was a relatively late entrant into the mobile phone industry where the vast majority of patents covering the basic technologies are owned by other companies. While Apple has primarily relied on claims of design infringement and specific user interface functionalities in its efforts to block smartphone sales by its competitors, it has been the target of lawsuits based on more fundamental inventions.

apple motorola logos
In one example, Apple briefly pulled all of its 3G-capable iOS devices with the exception of the iPhone 4S from its German online store last week in the wake of a victory by Motorola Mobility in the ongoing patent dispute between the two companies.

That injunction was quickly suspended pending Apple's appeal of the ruling, with Apple arguing that the patents in question are subject to FRAND licensing requirements that are not being met by Motorola. Apple claims that Motorola has "demanded" a royalty rate of 2.5% to license the patent, a figure that would have resulted in Motorola receiving roughly $1 billion from Apple in 2011.

Top Rated Comments

Torrijos Avatar
124 months ago
One thing I don't understand is how the licensing fees aren't part of the chips built to use the standards (Qualcomm chips right).

How come the percentage is calculated on the total sum of the device?

Say Apple build its phones in gold and sapphire, the percentage due to the FRAND licenses owners shouldn't benefit from others design choices...

It should be like a constant fee, that why it would seem more logical for it to be part of the price of the components created to employ the standard.
Score: 17 Votes (Like | Disagree)
vrDrew Avatar
124 months ago
Why is still people using that absurd analogy?

Why is that absurd?

The iPhone has all sorts of functionality built into it beyond its ability to access wireless networks. You can build a 3G-enabled dumb phone for less than $30 in costs, whereas the iPhone has a BOM cost of more than $300 - most of which has to do with things like the touchscreen; camera; case; and battery. Why does Motorola take a whack at those costs?

The important thing about FRAND is that it implies the royalties be a) reasonable and b) non-discriminatory. Motorola basing their demands on the cost of the entire device essentially discriminates against manufacturers who put extra functionality into their products. Thats what stifles innovation.
Score: 16 Votes (Like | Disagree)
nagromme Avatar
124 months ago
This isn’t the latest info, but as of about a year ago, Apple was the most-sued tech company—and that wave of attacks on Apple began with the iPhone in 2008:

http://www.tomshardware.com/news/lawyers-lawsuit-legal-steve-jobs,11721.html

So Apple’s the bully?

Of course, the number of suits isn’t important, it’s the merits. Hard to judge for armchair lawyers (who exactly was sued for nothing more specific than a “rectangle”?) but:

1. Are others abusing FRAND to attack Apple? If so, that’s wrong.

2. Did others re-use designs (and more importantly, underlying tehcnologies—it’s not just about cloning looks) that were never seen on Earth before Apple? Is that somehow mere coincidence or is it others profiting from Apple’s work?

3. If Apple’s designs are the “only way” to make a tablet/phone/touch OS/whatever, then why were they never seen before the iPhone/iPad?

4. Everyone copies/borrows, and that’s often a good thing. But is any amount of copying always OK, or is there a limit to what Apple should accept, if they have legal grounds?

5. Did Apple in fact invent some useful things with the iPhone? Would Android devices truly exist in anything like their current form without Apple to copy? (Android started as a BlackBerry clone, a heritage still seen in sluggish graphical performance.)

6. Did Apple really create the current business reality (which is nothing new) where companies use IP against each other? Could they choose not to play the game and just sit back and let themselves be sued, or do they have to play the game the same as their competitors?

And most importantly:

7. Wouldn’t we love to see the innovations and choice that would happen if more companies innovated, and fewer copied Apple? What if Samsung, for instance, was like Microsoft/Metro? Instead of parroting Apple right down to the packaging, the charging brick, and the me-too addition of white faceplates, we’d have something more unique/new in the market! Isn’t THAT a better kind of competition?
Score: 15 Votes (Like | Disagree)
gnasher729 Avatar
124 months ago
That guy is making a tablet and it's a rectangle! SUE THIS GUY TO OBLIVION.

Nobody has ever been sued for making a tablet that is a rectangle. There are plenty of people making that ridiculous claim, but that doesn't make it true.
Score: 15 Votes (Like | Disagree)
Kaibelf Avatar
124 months ago
Why is still people using that absurd analogy?

People "is" making a sound analogy there. Motorola isn't entitled to a certain percentage of a finished product, they are entitled to a flat fee like everyone else, especially with FRAND.
Score: 14 Votes (Like | Disagree)
vrDrew Avatar
124 months ago
One of the most important arguments raised in Apple's letter is the call for a common royalty base.

Motorola (and Samsung) are basing their demands for royalties on the cost of the entire device, not just the part that utilizes their communications functionality. This is absurd. Are they going to ask for 2.25% of the cost of a $60,000 automobile that has an on-board navigation and computer system?

People make all sorts of claims that Apple is guilty of "stifling innovation." If anyone is guilty of such behavior it is the Samsungs and Motorolas of the world.
Score: 12 Votes (Like | Disagree)

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