Admittedly, the patent wars can be dry, boring news full of legal jargon and complicated nuances in how each side is conducting its litigation. Personally, I find most of those stories interesting, but I do understand that most of you don’t really care about a lot of the details. But like any long story, there is an interesting part every now and then. Today Qualcomm released a statement slamming Apple for its abuse of the patent system. The main issues being discussed here are the SEP’s (Standard Essential Patent) and if they are being licensed according to the FRAND (fair, reasonable and non-discriminatory) guidelines. These two acronyms are essential to the consumer electronics industry. For example, if Motorola happened to have the patent on LTE chips embedded in mobile processors (they don’t, but stick with me) that would be considered an SEP. Its a patent that must be licensed because without it things like LTE networks or even WiFi networks couldn’t become standardized. Each OEM would have to have its own version of WiFi or Bluetooth or whatever and you’d live in a world where your Motorola phone only works with Motorola routers on a Motorola cell network etc. Obviously this would be bad for consumers and for the electronics industry as a whole. On the other hand, Motorola also has a right to charge a licencing fee to whoever uses its patents, because Motorola is the one that put the time and money into developing this new technology. The conflict between Apple and Motorola is over what constitutes “fair and reasonable.” Another issue at stake is weather or not Apple will licence many of its patents at all. Apple is refusing to let other companies licence technology that it holds patents for, but Apple has also declined to pay licencing fees to companies like Motorola who hold several SEP that are used in the iPhone and other products.
Earlier this week Motorola (Google) attempted to reach an agreement with Apple over licencing a plethora of Motorola’s patents to Apple. This would mean an end to litigation between the two companies and it might even set a precedent that would end the patent wars altogether. But Apple walked away from the deal at the last moment, much to the dismay of many who are following the case. Qualcomm had this to say on the issue:
“Of course, Apple’s premise of ‘a willing licensee with a good-faith disagreement who wants nothing other than for a disinterested party to determine what terms are FRAND’ is itself a sham and a pretext. At the recent proceedings before Judge Crabb in the Western District of Wisconsin, Apple’s ‘willing licensee’ mask fell off, when it absolutely refused-even at the cost of having its case dismissed-to commit to take a license to Motorola’s SEP portfolio on whatever terms the court might determine to be FRAND. Having literally walked away, minutes before trial, from an opportunity for an adjudication as to whether Motorola had offered FRAND terms to Apple, Apple should be embarrassed-but apparently is not-to demand that the Commission divest itself of jurisdiction unless and until a ‘U.S. Court has determined [the relevant license terms] to be FRAND’.
If Apple is not a willing licensee, and in any event there is no risk of an exclusion order (or injunction) shutting down a truly willing licensee, what is the real agenda? It is to shelter the unwilling licensee-the infringer that, like Apple, has no interest at all in paying market-validated royalty rates. It is to ensure that SEP infringers can only be called to account under rules, and in fora, in which they may gain yardage, but can never lose.”
The correct response to the quote above is “Oh, SNAP!” Qualcomm goes on to use all types of fancy words to accuse Apple of manipulating the patent system for its own gain. One more important fact: Apple is one of Qualcomm’s biggest customers. Qualcomm has supplied broadband base chips for every wireless Apple product since the iPhone 4S and the first 4G iPad. So why would Qualcomm risk angering Apple? Qualcomm makes the vast majority of its money from SEPs. If Apple were to change the game and set a precedent that would encourage other OEMs to either refuse to licence SEPs or to charge exorbitant amounts of money for them, Qualcomm would stand to lose something close to 90% of its revenue. It’s not that Qualcomm is necessarily sticking up for the little guy, or voicing concerns over Apple’s obvious hypocrisy, its really about Qualcomm protecting itself.
But that doesn’t invalidate what Qualcomm is claiming. The patent system was created to foster innovation. It was not created as a tool to be used to extract money from a company’s competitors. Apple has gone so far as to get certain Samsung products banned from sale. This isn’t about Apple protecting itself from products that might confuse a consumer, this is about Apple trying to stop other companies (like Samsung) from making vastly superior products and selling them for a much lower price. Apple hasn’t innovated since the release of the first iPod, and somewhere deep inside, the people that run Apple know they are peddling an inferior product to naive customers with more money than sense. The people that run Apple aren’t dumb, they know that consumers will eventually figure it out. But instead of investing billions into research and development into new products or features, they have spent billions trying to keep their competitors from bringing better smartphones and tablets to the consumer. Apple has strained an already over loaded judicial system, it has created a new breed of ‘patent trolls’ and it has used its resources to hurt every consumer instead of using that money to help improve their out-dated products. Qualcomm is right, it is a shame and in the end only the lawyers win.