The patent war is in progress but the outcome is no suspense

Technology Daily reporter Liu Yan

Qualcomm’s third quarter 2017 results showed a significant drop from the same period of last year. Some people attributed this to legal disputes between Apple and Apple and even questioned Qualcomm’s profitability model and sustainability.

In this regard, Qualcomm CEO Steve Molenkov said: “Our semiconductor business performed better than expected this quarter. We believe that we have a great advantage in the dispute with Apple. We will We will continue to actively defend our business model and protect corporate technological innovation to obtain fair value."

Whether it's a "hard-to-hard" contest or a "stuff" or a "needle-in-the-money" for you, the patent litigation between the communications industry is, after all, a struggle between technical contributions and commercial returns. Perhaps it is precisely because of this that although some people called Qualcomm’s performance in the quarter as a “clutter-fall”, they cannot question Qualcomm’s continued profitability.

Both sides upgraded their patent disputes

Apple’s patent fees with Qualcomm, a chip technology company, are escalating. Apple proposed to the US court on June 20 that its patent license agreement with Qualcomm was invalid, which would instigate Qualcomm’s existing charging model.

Apple believes that it only needs to pay for the technology behind the chip provided by Qualcomm. Qualcomm believes that the use fee covers a wider area and exceeds the scope of a single chip.

In the complaint, Apple emphasized that it is very unreasonable to use the unit price as a unit of royalty calculation. The unit price is used as the calculation of the royalty, just as it is for Apple’s innovation and forced taxation. For example, Apple’s recent revolutionary innovations such as Touch ID and Retina screens, which are not related to Qualcomm's patents, have to pay higher royalties due to the increase in overall machine prices.

Apple pointed out that Qualcomm's charging model violates the FRAND principle (Fair Fairness, Reasonable Reasonable, And Non-Discrimination Non-discrimination), and Qualcomm’s business model, in the light of recent jurisprudence, also violates US patent law.

Rosenberg, Executive Vice President and General Counsel of Qualcomm, publicly responded by saying: "Qualcomm's innovation is the core of every Apple product, and it can make these devices play the most important role and function. About Qualcomm is trying to pair with Qualcomm Technology. It's not true that unrelated Apple innovation charges user fees."

Once Apple expands the scope of the lawsuit against Qualcomm, the impact on Qualcomm will be even greater, and it will not be known if Qualcomm will further counterattack. It is understood that Apple has previously expressed its support for the foundry's foundry. It will continue to support all suppliers in the future and provide necessary assistance for patent-related issues. Because Apple and Qualcomm’s lawsuits in the United States will require full documentation and consultation with experts and trials, it is expected that it will take at least two to three years. During this period, the production processes of foundries and component suppliers will not be affected.

Charge model into the focus of dispute

As a leader in the global mobile chip field, Qualcomm owns a number of core patents. Its main revenue comes from the licensing of technology patents, which is also Qualcomm's core business model. At present, most Android smartphones on the market use its chips.

According to reports, Qualcomm’s patent licensing pricing model is that every mobile phone manufacturer that uses its chips pays an additional license fee of approximately 5% to 6%, in addition to Qualcomm’s chip costs, for the entire unit’s price. Qualcomm, this patent licensing model is called “high-pass tax” in the industry, and the actual collection rate will vary from 2% to 3% depending on different manufacturers.

In recent years, the “high-pass tax” has been controversial in the industry and has even become the target of public criticism. However, due to its status as the “boss”, many manufacturers have had to choose to accept it.

In this regard, Analysys International mobile phone industry researcher Xu Wei said in an interview with a reporter from the “China Sankei Shimbun” that mobile phone manufacturers are actually not willing to pay “high-pass tax”. This is mainly due to the obvious advantages of Qualcomm chips in the smart phone market. Qualcomm’s leading edge in baseband support is very prominent, and there are a large number of patents in this area. If handset manufacturers want to support CDMA or CDMA2000, they all need to choose Qualcomm or get Qualcomm's authorization. For this reason, if handset manufacturers want to build a mobile phone, they must contact Qualcomm. In addition, Qualcomm is a representative of high-end model chips. In the era of the “national flagship” in the mobile phone market, Qualcomm chips will become a bright spot in mobile phone promotion and a big selling point for attracting users.

"Is Qualcomm's patent charge rate too high? Is the charging standard based on the price of the equipment or parts used?" The above is the focus of this litigation debate.

This is not Qualcomm's unique charging model. It is a common practice in the mobile industry to set authorization rates on the basis of the total value of a mobile phone. Companies such as Ericsson, Huawei, and Samsung are all based on the equipment to collect patent licensing fees.

This is not the first time that Apple has challenged the "high-level tax." From the beginning of 2015, Apple initiated a lawsuit against Ericsson and prosecuted Nokia at the end of 2016. The reasons for the lawsuit were similar. They all ended in a lawsuit settlement. Apple paid and renewed the patent licensing agreement according to the charging standard of the whole machine.

Respect for "invisible" input

In fact, prior to the release of Qualcomm's results, Apple and Qualcomm’s patent litigation has long been a concern. Although the package lawsuit is difficult to produce results in the short term, from the previous cases, it will eventually be settled by mutual settlement.

The patent disputes between the two giants are actually the “fighting codes” often performed by the communications industry.

The communications industry has always been the most intense field of patent competition, and possessing patented technology capability is an important core competitiveness of the company. Nokia's ability to defeat Apple lies in its large number of patents with excellent quality.

Wang Yanhui, secretary-general of China Mobile, said that "invisible" technology investment has become the lifeblood of mobile phone companies.

However, technical input is time consuming and costly. It is difficult to create revenue for the company in the short term. Although significant, it is not affordable for all companies. Like Qualcomm's patent licensing model, although everyone is longing for it, not all companies can imitate it.

Wang Yanhui said: “Every company is aware of the importance of R&D and focuses on the investment in core technologies. However, finding a partner to obtain technology and patent authorization is also a good choice for a company that is not as strong.”

People in the communications industry, Bai Song, said: “It is not easy to carry out the underlying core technology for decades. We respect such enterprises. But their risk is that the uncertainty of this innovative model is not only a huge investment in the early stage, but also more dependent on The degree of recognition and recognition of intellectual property protection in the society. For example, Apple has been defending its patents and intellectual property in the past. Now it does not respect other people's patents and intellectual property.”