The Troll Toll

Royalties paid by smartphone makers to license patents are costing almost the same as the BOM, says a report written by Intel’s vp and associate general counsel Ann Armstrong  and two private practice lawyers.

“We estimate potential patent royalties in excess of $120 on a hypothetical $400 smartphone—which is almost equal to the cost of the device’s  components,” say the lawyers.

LTE royalty rates are, per $400 device:

$

Qualcomm. 13

Motorola. 9

Alcatel- Lucent. 8

Huawei.  6

Ericsson.  6

Nokia.    6

Nortel.  4

ZTE.  4

Siemens. 3.2

Via Licensing 2.10

Sisvel 1.36

These account for $54 of the price of the $400 smartphone and, in addition, there are other companies with necessary LTE patents which have not announced their LTE royalty rates like Samsung, InterDigital and LG.

Patent holders have been selling or licensing patents to companies which then use the patents to sue people and make a profit for themselves and the original patent holder. An example is MobileMediaIdeas  owned by Sony and Nokia.

Such companies are called ‘Patent Privateers’ and are favoured by struggling companies, says the report. Their net effect is to drive up royalty rates. However their success rates in litigation are low.

Of 58 cases relating to standard essential patents (SEPs) necessary to manufacture a smartphone which were initiated  by Motorola, InterDigital and Samsung, only 7 were found valid, 18 found invalid, 17 found not infringed, and 16 were withdrawn or dismissed.

Tech companies  are plagued by trolls’ lawsuits, says the report. Apple has had 191 in the last five years, Samsung 152, HP 150, AT&T 147, Dell 140, Google 127, Amazon 125, Sony 125, Verizon 124, LG 117, HTC 115.

These figures do not include demands for royalties that never got to court.

The net result of all  this trolling activity is, says the report, a reduction of profitability in phone manufacturing, the limitation of phone manufacturing to companies which already have a large patent portfolio and a consequent reduction in the smartphone industry’s competitiveness.

 

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5 Comments

  1. david manners
    June 04, 2014 14:19

    Silverman,
    Standard Essential Patent
    Fair Reasonable And Non-Discriminatory
    For patents which are necessary to make a particular product and FRAND describes the terms on which the patents should be licensed

  2. SilverMan
    June 04, 2014 13:59

    David, what do the terms SEP and FRAND stand for?

  3. Mike Bryant
    June 04, 2014 08:42

    Agreed – but it hardly makes them a troll. They do spend a fortune on R&D and then others try to patent some tiny marginal thing and expect to get the same payment as Apple

  4. david manners
    June 02, 2014 20:25

    Well I’m grateful for all that SEP and FRAND stuff Mike, if it weren’t there big companies would sit on all the IP and trickle out innovation at a snail’s pace just to suit them.

  5. Mike Bryant
    June 02, 2014 19:19

    Well the ones you list are hardly trolls. I’m sure Apple would rather not licence it’s IP at all but is forced to do so.

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