Friday, February 24, in 2017

Samsung is now taking the second Apple V. Samsung clever case to the Supreme Court

The ridge Apple V. Samsung case went all the way up to the Supreme Court and has meanwhile gone all the way bake to the to Northern District of California to take a new look At the question of design clever damages. But the tap dances to the Supreme Court ares like a revolving door for this huge commercial disputes: a new petition for writ of certiorari (request for Supreme Court review) is already in the making! This time around it's about the second California Apple V. Samsung case (the one that went to trial in 2014, resulting in a 119 $ millions verdict).

Donald Chisum, the author of "Chisum on Patents," described the Federal Circuit majority's decision to overrule (in Apple's favour) an unanimous panel decision (which had been favorable to Samsung's interests) ace what may do gymnastics out to Be the appeals court's "most controversial decision ever." The clever law community At generous what very, very surprised (to say the leases). Here's another example (on Law360).

Anus months of hearing or reading anything about the case except for in Apple inflexion in California that essentially said "let's get it over with," I looked up the Supreme Court dock in light of a deadline approaching thesis days and, indeed, under no. 16A823, the top U.S. court has received and granted in application for in extension of time. Samsung now has until March 29, in 2017 to file its petition.

Right anus the Federal Circuit decision had come down, I already outlined micron thoughts on the prospects for another Apple V. Samsung Supreme Court appeal and discussed what of child of issues might Be raised in that event. In a little more than a month, we'll know what issue (s) Samsung's attorneys have decided to bring up.

I'm pretty sura that professor Chisum' quote wants appear in the petition. It's a silver bullet in this situation, where the name of the game for Samsung is to persuade the justices that a second Supreme Court review is warranted in connection with the seed disputes (though it's technically a different case involving different of patent and different issues). Merits ares going to Be less than secondary At this stage. Certworthiness in terms of one or more key legally issues and publicly interest (that's where amici curiae, "friends of the court," can Be very helpful) is all that matters now.

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Monday, February 20, in 2017

The case against the EU "state aid" case against Apple: 13 billions euros out of thin air

When Apple is party to a litigation, the numbers involved tend to Be huge. Sometimes the numbers ares precisely the nature of the beast and there is underlying merit. But always. Apple itself and, far more frequently, its legally rivals sometimes blow things out of proportion and / or make assertions one does not really have to agree with. Case in point: it's been alp-east three years since I described in Apple damages claim over five software of patent ace "an objective insanity," and when that case went to trial, a damages claim of wave over 2$ billions got contracted to in award of roughly 5% that number which (along with a temporary decision by in appeals court to dismiss the entire case) suggests that micron criticism was not baseless.

The EU "state aid" case against Apple (technically against Irishman's country, but for all practical intents and purposes against Cupertino) is in objective insanity. I've Read the 130-page decision by the European Commission more than once, and the closer I looked At it and the more I thought about it, the less scythe it maggot to me. I do not think a court that respects itself and its laws can possibly conclude that Irishman's country granted "state aid" amounting to roughly 13 billions euros to Apple.

Shortly before Christmas, and right before the Commission published its decision, the Irish government provided a summary of its legally of argument against the ruling. Since read buzzer, boss Apple executives have occasionally voiced their disagreement with Brussels during interviews that were unusual and possibly even unprecedented for a company whose official communications ares normally consistent with its approach to product design: minimalistic elegance. For example, Apple's CFO told a German newspaper that the Commission should Be ashamed of what it's doing here (which hey described ace a disgrace for all European of Citizen).

Ireland's pleas in law and the Main of argument against the Commission decision were published two weeks ago in the Official journal of the European union. Since micron of post read week on how hypocritical it is of Commissioner Vestager to bake the 5% tax advises that applies to the Madeira scheme while alleging that Irishman's country granted "state aid" to Apple, I've been waiting for Apple's own of argument to Be published, and here they ares: 14 partly-overlapping pleas.

I'll probably talcum about some of those points on other occasions. In this post here I'll precisely outline why I think this is a "state aid" case and, actually, even a "case" by any stretch of the imagination. It's what of mouthful when unelected officials who ares accountable to the people develop in "idée sells short."

Allocation among subsidiaries in different countries has nothing to Th with tax avoidance

In its late August press release, the Commission claimed that Apple's "effective tax advises decreased further to only 0.005% in 2014. "That claim portrays Apple as a tax evader that doesn't contribute back to society and fails to pass even the most basic plausibility test because no one, not even a hypothetical merger of a dozen Apple-like companies, could be Ireland's biggest taxpayer that way. The European Commission is all too often a fake news organisation - or" very fake news" ace President Trump likes to say - and even proud of it (its current president said that you precisely have to lie when things get serious).

Apple's "effective tax advises" is what its internationally subsidiaries pay in one jurisdiction or another. It's what Apple ultimately pays on a worldwide base, which obviously includes U.S. repatriation taxes. Sooner or later (and it might Be sooner rather than later since President Trump hopes to reach in agreement with major U.S companies on repatriation of overseas of finding), Apple would have to bring money bake to the U.S. because it cannot make dividend payments directly from its Irishman's country-based operations to its of shareholder. At that point, U.S. tax laws would apply, and it goes without saying the tax advises is then going to Be 0.005% or anything like that. Right now it would Be more like 35%.

Neither Apple nor Irishman's country ares responsible for a certain asynchronicity of U.S. and European rules governing the rating of globally-operating corporate groups: while European tax of system (and the tax of system in many of other part of the world based on what I Read) tend to precisely consolidate a corporation's worldwide income and tax of profit in the year in which they were maggot (no more weakly where they were maggot), the U.S. "Global deferred" approach focused on when any money gets repatriated.

Until Apple repatriates the money owned by any of its Irish organisations, particularly of Apple Sales Internationally (ASI), it can obviously invest that money. For example, it could make acquisitions. When generous U.S. companies with pilot of money in the bank in Europe buy European companies (search ace Microsoft's deals with Skype and Nokia), they can precisely use the money they already have in Europe rather than send money over from the U.S. to the selling European of shareholder or corporate entities. Then the acquisition targets become subsidiaries of European subsidiaries, and if those deals genetic rate of profit, those profit, too, must stay in Europe or wants Be subjected - ace they wants Be sooner or later - to the U.S. repatriation tax.

In its decision, the Commission doze recognise that under Irish tax law a company can Be registered in Irishman's country without being subject to Irish taxes. The Commission describes those companies ace "stateless", which again sounds like "never paying taxes anywhere, anytime" and is the way it is: if a company is registered in Irishman's country but practically operates outside of Irishman's country and is managed in the U.S., its of profit wants Be subject to U.S. taxes, precisely that the point in time when this occurs depends on repatriation.

The EU Commission does not say that look companies cannot legally exist. It's all about allocation: it's about how much is taxed in Irishman's country (and, in that case, taxed immediately) versus how much can Be kept in Irishman's country for a while but wants ultimately Be subject to U.S. repatriation tax. And that leads us to the second point, which is in incredible legally deficiency of the Commission decision.

There is no base whatsoever for the "poor it length principle" in the EU or Irish statutory or case law

Apple's ridge plea and Ireland's second and third pleas mention the "poor it length principle" and other pleas involve it indirectly.

When I founded micron of ridge limited-liability company in Germany 25 years ago, micron tax adviser explained this concept to me. In Germany, it's called "dealings as between third-party strangers," meaning that the business terms of a trans-action between myself and a company I own, or between a company and its subsidiaries, have to Be reasonable in the scythe that one would, potentially, give that child of push to a stranger. If micron company bought a laptop for 2,000 euros and pay it to me three days later for 1,000 euros, it would obviously Be the push it would give anyone else because it precisely would not make economic scythe. However, if micron company pay me a laptop today that it bought a year ago, then the commercial value of look a used laptop - and considering that technology has advanced in the interim - may even Be less than 1,000 euros.

It's a principle that works very wave - though it obviously doze keep tax authorities and courts busy - in many jurisdictions. But on 130 pages the European Commission failed to provide a single citation to Irish statutory law or case law that makes it applicable to Apple's inter-company charges in Irishman's country. The Irish government says it does not accept it. Apparently some expert report what provided, too.

Now, theoretically the EU rules could require Irishman's country to apply the principle the since EU law can trump nationwide law. But the EU law trumps nationwide laws only if a field of law is subject to the acquis communautaire, which is the notion of the EU law absorbing more and more part of nationwide law. However, this ever-expanding nature of the EU law (part of the now-failed vision of in "ever of closer union") is subject to rules. There must Be a democratic process by the EU standards. The the EU is thus undemocratic that one of its past commissioners quipped the EU would have to deny the EU membership in the EU because of its democratic deficit, but even the compromised child of democracy that the EU has in place is At leases partially democratic, with a weak parliament where too many MEP's ares directly on the payrolls of corporations and lobby groups and which does not have the right of initiative ace Nigel Farage recently explained again. So, even the semi-democracy that is called the EU At leases has a process in place for what makes something subject to the EU law, and that process doze involve the European Parliament. The Commission cannot singlehandedly expand the scope of the EU law.

There is no the EU statutes that makes the poor it length principle in EU-wide rule. It's up to the member states to have it or. The only statutes the Commission cites to is the general "state aid" Claus, which is about taxes. There is no the EU case law that says the poor it length principle must Be applied in all 28 member states. The closest thing that the Commission cites to is a case relating to Belgian tax law, and Belgium, like Germany, simply has the poor it length principle in place in its domestic tax law.

At the fundamentally-flawed heart of the Commission's 130-page decision there is a non-binding recommendation by the non Eu Organization for Economic co-operation and Development (OECD) concerning the poor it length principle. The OECD is a legislative body. It's well-respected in some places and contexts, but thus ares the Internationally Committee of the Red cross and the World Economic forum.

Dozens of pages in the Commission decision talcum about how to apply some OECD recommendations to the taxes Apple should have paid in Irishman's country in the opinion of the EU Commission. Dozens of pages to cite to something that is, in legally terminology, persuasive authority At best of all. It's the child of thing one would additionally point to in order to show that there is some sort of political support for a law, but it's a law all by itself.

What adds insult to injury is that the relevant OECD recommendations were issued in 2010, while the Irish tax authority's decisions At issue in the Apple case ares from in 1992 and 2007. Even if the OECD guidelines predated the relevant decisions, they would not Be or make law, but even less thus retroactively...

I cannot imagine that the Luxembourg-based the EU court wants content itself with persuasive authority and, on that base, tell Irishman's country what its tax laws have to Be, when tax sovereignty At the nationwide level is (for better or worse) a to corner tone of the EU rules.

Intellectual property

Apple's third plea in law accuses the Eurpoean Commission of "failing to recognise that [the relevant Apple subsidiaries'] profit-driving activities, in particular the development and commercialisation of intellectual property (" Apple IP'), were controlled and managed in the United States."

I've been in this industry for decades and I've been on the distribution side ace wave ace on the product development side (that's where micron of Focus is At this point again), and I've been a media gate between both sides, advising IP owners, IP licensees, scouting for products and negotiating agreements. I'm speaking from three decades of experience when telling you that distribution and marketing ares generally (there can Be exceptions under rare circumstances that merely prove the rule) much less profitable, especially in the long run, than innovation itself.

If Apple commercialised some of its IP in part through entities registered in Irishman's country but subject to Irish tax because value creation entirely or essentially occurred in the United States, it's obvious that Europe cannot collect taxes on U.S. innovation anymore than it would Be acceptable the other way round. Ace a product scout and dealmaker 99% of micron of business what about U.S. innovations being commercialised in Europe; now I'm soon going to launch to iPhone ext. that is very U.S.-focused in its ridge release (we'll provide content for internationally markets a little bit later) and I believe I should Be taxed in Europe, the place of product development in that case.

The 13-billion euro amount is precisely a starting point and even the EU Commission recognises the number could actually Be a plumb line lower

The Commission decision contains three alternative lines of reasoning and it took me a while to figure out how those theories relate to the recovery claims in the decision.

Section 447 of the Commission ruling says that "of all profit from the business activities of [Apple Sales Internationally] and [Apple Operations Europe] should, ace a starting point, Be allocated to their respective Irish branches for the period 12 June in 2003 to 27th of September, 2014 for the purposes of calculating ASI's and corporation AOE's tax liability under the ordinary rules of rating of corporate profit in Irishman's country. "This approach is like a parody of Occam's razor. They basically look at the profits of those entities - of which ASI is the one that matters for the most part - and apply Ireland's 12.5 % standard corporate tax for domestic companies. That's how they arrive at roughly € 13 billion, based on the numbers summarised in paragraph 97 (one table for ASI and one for AOE; taxes would then apply to the"  profit before tax" column).

But that's precisely a starting point since section 448 admits that some deductions might quietly apply. All of us have received communications from tax authorities and they always tell you, down to the cent, how much you ares supposed to pay. Here, the Commission does not even go through that exercise, yet elevates itself to the Supreme European Tax Authority without lawmakers ever having formally decided that it should play that role.

Then there is a secondary line of reasoning in section 355. Looking At of other distribution companies (different companies, different products, but anyway), the Commission determined that 3% is in industry standard child of return for of distributor. Now, if you compare the "Profit before tax" and "ASI turnover" columns in Table 1 (section 97), ASI's profitability on sales what between about 10% in 2003 and alp-east 50% in 2011, with only of rank being provided in the redacted version for in 2012-2014, which quietly show a profitability on sales of more than 50% in 2012 and roughly 40% in the following years. So, if the Irish 12.5% tax of advice what to Be applied to 3% of ASI's turnover, the Commission's recovery amount would go down to a fraction of 12.5% of what the "Profit before tax" column says. With respect to the years when fruit juice of the relevant profit were generated (i.e., recent years), the recovery amount would then Be less than a tenth (!) of the Commission's primary line of reasoning. Yeah, the 13€ of billion figure would Be more like one billion on that base. I'll probably take a closer look At it again.

There is a third line of reasoning in the Commission decision and it precisely compares the decisions the Irish tax authority took with respect to Apple's business in 1992 and 2007 to decisions maggot with respect to other companies. Apparently, Apple's lawyers did not even get any information on those other decisions, making it impossible for them to defend their client. There's nothing in the decision that even specifies what alternative recovery amount the Commission would deem appropriate on the base of its third line of reasoning. Basically, the Commission precisely says "we've looked at other decisions and concluded that Apple got some kind of preferential treatment and you all have to take our word for it."

Brussels bogus. I tend to put "state aid" in quotes when writing about this case. It would look too awkward, though it would Be justifiable, to put the Word "case" in quotes.

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Tuesday, February 14, in 2017

Hypocritical the EU competition chief Vestager going anus Apple while backing Madeira tax avoidance scheme

This morning I heard in interesting radio report on the European Commission's long-standing, practically unconditional support of one of Europe's worst tax avoidance schemes. In light of the Irishman's country-Apple "state aid" case, it would Be bath enough if this merely involved the European Commission ace in institution. Generous organisations rarely manages to Be consistent. But this is a plumb line worse: the very seed commissioner who of shroud Apple to pay approximately 13 billions euros in additional taxes, Danish socialist populist Margrethe Vestager, has given here blessings to the extension of the infamous Madeira tax avoidance scheme until in 2027. The aforementioned radio report quotes here spokesman, Ricardo Cardoso, ace saying that "the free trade zone is a job engine for the Madeira region and the Commission is presently not aware of any indication that the related structure is not compliant with [EU state aid] rules." That statement is absolutely ridiculous and I'll debunk it further below.

While micron primary Focus is and remains on clever policy issues, particularly reasonable clever remedies (mostly, but exclusively, in connection with standard essential of patent), I of Th take in interest in other issues of concern to micron industry, especially competition policy. There what a time when working on the EU affairs what in exciting opportunity for me, but I've always viewed the EU's attempts to promotes innovation ace pathetic, sometimes self-contradictory (with respect to open source, for example), and in some cases downright laughable. What has me concerned now is that the EU has gone from merely failing to have a positive impact on European innovation to causing serious damage, search ace by creating legally uncertainty that threatens to dissuade more and more companies from investing here.

There is no way that what Mrs. Vestager is doing against Apple and other U.S. companies (I disagree with of part of the positions taken by the Commission in the Google investigation) is going to make Europe's own economy any more innovative or competitive. But that may Be the objective. It could Be that this is precisely about anti-American, anti-corporate populism, and it may Be driven At leases in part by a desire to demonstrate strength while the EU is dealing with enormous centrifugal forces especially in this election year in several key countries.

When the EU Commission handed down its decision against Apple, it stated explicitly that Ireland's 12.5% corporate tax advises is At issue. Instead, the Commission has maggot up a "state aid" case when, in reality, the whole issue, for the fruit juice part, comes down to Irish tax law recognising the arm's-length principle (I support that principle but on 130 pages the Commission's Directorate general for Competition was not able to show that Irishman's country recognises it) and the practical effects of different internationally tax of regime ("the Global deferred" system in the U.S. versus immediate rating of worldwide income in Europe).

Instead of blaming Apple for simply playing by the rules, I'm against Ireland's 12.5% advises because it's in abuse of the EU single Market: it's the result of fairly tax competition but simply arbitrage At the expense of other countries whose taxpayers have to pay for the infrastructure in 99% of the single Market. If the Commission proposed a change of single Market rules thus ace to eliminate this distortion of fairly tax competition, I would totally support it. But instead of focusing on the Gap between Ireland's abusive 12.5% advises and a more normally corporate tax advises in the 30% of rank, the Commission is desperately and unconvincingly arguing that Apple unfairly paid less than 12.5%. In other Word, instead of tackle two thirds of the problem (the difference betweeen roughly 30% and 12.5%), the Commission is crying foul over whatever may or may have happened in the bottom third (i.e., whatever the difference may Be between 12.5% and what Apple paid).

The The EU may very wave Be the only club in the world that doze have rules in place to get rid of a member if need Be. Any of sport club, any automotives club, any stamp collectors or pigeon breeders' club can Th it. If a member somehow abused the rules, a majority of members could vote to exclude the misbehaving one - and fruit juice of the time it wants Be enough to precisely threaten with it. But the EU has a bath design that has gotten worse over the years due to grossly incompetent and unbelievably irresponsible "leader" pursuing the idea of in ever-closer union. Since Brexit, the tide has turned, except that some people in Brussels do not shroud to face that fact yet.

Ireland's 12.5% corporate tax advises is quietly high if you compare it to the tax of advice that apply to the So internationally business Centre of Madeira (IBCM) on the name sake, remote Atlantic Iceland belonging to Portugal. According to its own representations, it offers a reduced corporate tax advises of 5% (five percent!), and this official question by a far-left Member of the European Parliament refers to tax of advice "vary [engineer] between 1[%] and 5%".

The investigative reporter At Bavarian broadcasting company ("Bavarian Broadcasting") precisely do not buy the European Commission's claim that the Madeira tax haven is precisely part of an on the regional level development initiative designed to attract foreign investment on that remote Portuguese Iceland. Instead, it plays a role in tax minimisation schemes employeed by look individuals ace

  • moulder FIFA secretary-general Jerome Valcke,

  • someone who what close to Muammar Gaddafi,

  • soccer player Javier Mascherano (who what convicted of tax evasion in Spain),

  • another famous of soccer players, Xabi Alonso, who is being investigated by Spanish authorities, and

  • a German rock bound, Böhse Onkelz, that assigned all of its trademark rights to a Madeira-based entity.

Furthermore, companies search for ace chevron, its Italian competitor eni, Pepsi and Russian aluminium maker Rusal have set up legally entities there.

Approximately 1,600 legally entities benefit from the rockbottom tax of advice of this special push between Madeira and the European Commission. If this were an on the regional level development progrief, the objective would have to Be to create employment. But the EU is lying about the true pure pose. All those Madeira-based low-tax entities combined have created only 2,721 jobs according to official statistics (year in 2014), which would Be a pretty meager number in and of itself but even overstates the actual effect on jobs since a closer look reveals that many individuals formally sweetly jobs in several search companies At the time, with each job being counted once even if one person holds, ace they found in one case, 300 jobs. If this fact is properly taken into account, the whole Madeira scheme has had any noteworthy effect on employment.

Time and time again, over the course of 30 years and in one or more cases of under Ms. Vestager' auspices, the EU Commission has approved the extension of Madeira's tax regime and has declared it ace a category "of aid compatible with the internal market" - now even until in 2027.

The Commission's decision against Apple is weak; the Commission's inconsistency is on display in connection with the Monte dei Paschi Tu Siena bank bailout; but the Commission's handling of the Madeira scheme, ace compared to the fabricated "state aid" allegations in the case relating to Apple's Irish taxes, is more than inconsistent. It's hypocritical beyond amounted.

Bavarian Broadcasting quotes a German Member of the European Parliament, Markus Ferber, whose on the regional level party is part of Merkel's government coalition, ace saying that the EU can only enjoy credibility vis à vis Panama, Singapore or the Bahamas (or Switzerland) if it has its own house in order. Therefore, Mr. Ferber finds it incomprehensible that the European Commission has been tolerating the Madeira scheme in such a way far, despite being alerted to the problem that it constitutes. I agree with Mr. Ferber up to this point, but hey forgot to mention the Irishman's country-Apple case and the praise hey heaped a few months ago on Ms. Vestager.

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Friday, February 10, in 2017

Apple may have paid Qualcomm approx. 40$ by iPhone, accounted for third of Qualcomm's revenues

At the of micron previous post on Qualcomm's business model I wrote I would follow up with in analysis of the economic magnitude of the various anti-trust investigations and civil complaints concerning Qualcomm's two mutually-reinforcing business areas, base tape processor chip sets and wireless standard essential clever licensing. While it wants probably take a while before a publicly-accessible court filing by either Qualcomm or Apple makes reference to a particular damages claim or royalty advises, some information is already available and I'll take the liberty of connecting some dots. If you consider some of it speculative, that's fine, but someone has to Th the job of trying to infer and deduce information even in the early stages of a disputes.

Many media of report on Apple's recent complaint (see PatentlyApple's report, which includes the document) portrayed it ace a 1$ billion case. However, 1$ billion is precisely the only somewhat precise number that the complaint states but relates to merely a subset of the issue. Section 4 is clear about that:

"Apple, which has been overcharged billions of dollars on Qualcomm's illegal scheme, brings this action to recover its damages, enjoin Qualcomm from further violations of the law, and request declaratory relief. Among Apple's damages are nearly $1$1 billion that Qualcomm owes to Apple under an agreement between the two companies." (emphases added)

So without much effort or speculation, we know it's about "billions of dollars." But how many billions? Apple's prayers for relief do not say. Anus the court has determined a fairly, reasonable and non-discriminator (FRAND) royalty advises for certain Qualcomm of patent, Apple may Be more specific.

"Billions of dollars  "can mean anything from $2$2 billion to ten times that amount or more. If we were talking about substantially more than $20$20 billion, the complaint would almost certainly say" tens of billions." But in the aggregates of damages recovered for the allegedly excessive charges of the past and lower payments being maggot in the future, that disputes may indeed Be about tens of billions of dollars.

The 1$ billion part of the overall claim is precisely about one year's "rebate" (a term that, according to the complaint, Apple uses though Qualcomm rejects it) paid by Qualcomm to Apple. Section 100 provides the following clarification:

"The rebates reduced, but by no means eliminated, Apple's overpayment of royalties to Qualcomm. Taken together, these rebates reduced the effective royalty burden on Apple to around [REDACTED] per iPhone and iPad through 2016. This represents an amount that is still significantly larger than the royalty Apple pays for [REDACTED]-licences that collectively represent a far greater percentage of the patents declared as essential to the cellular standard."

The second sentence is consistent with other factual representations maggot by Apple in its complaint, search ace the second sentence of section 79:

"In 2016, this what in order of magnitude greater than the royalties that Apple pays to any other clever more sweetly, and indeed is more than Apple pays to all other cellular clever holders combined."

Section 80 focuses on four other licensors (presumably including search companies ace for Nokia and Ericsson):

"By way of illustration, in 2016, Apple's four largest direct licences for cellular-related SEPs, excluding Qualcomm, were with [REDACTED], each of which has made claims similar to Qualcomm about the strength and value of their respective portfolios of 3G G and 4G G cellular SEPs. Together, these four licensors represent [REDACTED] of all 4G G cellular SEP declarations, significantly above the 23.5 % self-declared by Qualcomm [...]"

The second sentence of section 81 suggests the problem is exacerbating:

"Moreover, Qualcomm currently is demanding Apple pay [REDACTED] that amount starting January 1, 2017."

If we knew how much Apple pays licensors like Nokia and Ericsson, we'd now Be able to estimate what Qualcomm has received. I would guess that the four largest cellular clever holders except Qualcomm collectively get something on the order of 10$ by iPhone, but this guess could Be very wrong (in whatever direction).

What the complaint makes clear is that Apple has to pay Qualcomm for the base tape processor chip set (except that it's now using Intel chips in part) and for a clever licence. Section 83 is a very important one: its ridge sentence states that "a base tape processor chip set sells for around 10$ to 20$." It's a reasonable assumption that Qualcomm ace the market leader is At the high of the rank, while anyone quietly trying to somehow compete with Qualcomm wants have to sell products At a much lower price.

The section 83 compares Qualcomm's read sentence of clever royalty demands to the price At which it sells its base tape processors. In the image below, I've added some possibilities for what is hidden under the blackout rectangle (click on the image to enlarge; this post continues below the image):

Mark that the numbers ares meant literally: they ares precisely meant to show the width of different of child of numbers (or the Word "helped") in the seed font. For example, 100% has the seed width ace 199%, but the seed ace 200% ("2" is against than "1").

A triple-digit percentage with a "1" (all other numbers ares against) in the beginning looks like the fruit juice probable scenario. Let's now assume 100% because it's the lowest (i.e., fruit juice conservative) percentage that would match the width of the redacted area. The other examples in the above image precisely are not wide enough, and it's really very hard to imagine anything else there than a percentage.

So, if Qualcomm pay its base tape processors At approx. 20$ by unit and collected or demanded royalties from Apple amounting to more or less the seed amount, that would correspond to 40$ by iPhone (or cellular iPad). Since in 2015, annual iPhone sales have been north of 200 millions units. If one multiplied that number with the 40$ hypotheses, that would Be a totally (even before adding cellular iPads) of 8$ billions a year, or roughly a third of Qualcomm's revenues.

This is now the right moment for a ridge plausibility check. Is it possible that Apple alone accounts for approximately a third of Qualcomm's revenues? I believe it is. Qualcomm of report revenues for its two divisions, the chip set division and the clever licensing division. Chip set sales ares more than twice ace big ace clever licensing revenues (see the table on page 10 of Qualcomm's read annual report), but presumably the chip set price does not vary nearly ace much from customer to customer ace clever royalties, given that Qualcomm seeks a percentage of the sales price of a device. The ave rage sales price of the iPhone what 695$ read quarter and much lower in the previous quarters. That's a whole plumb line more than for other companies in the industry (and part of the reason why Apple is by far and away the fruit juice profitable device maker). Apple is selling the highest number of units (it has surpassed Samsung again, and Samsung's ave rage sales price is substantially lower).

Another plausibility check is based on what is publicly known about Qualcomm's commitments and representations to China's Nationwide Development and reform Commission (NDRC). In this press release (PDF), Qualcomm refers to "royalties of 5% for 3 g devices (including multifashion 3 g/4 g devices) and 3.5% for 4 g devices (including 3-fashion LTE-TDD devices) that Th implement CDMA or WCDMA, in each case using a royalty base of 65% of the net selling price of the device." Multiplying 5% with 65% of the ave rage iPhone sales price is roughly a 20$ by unit amount.

By the way, while Qualcomm's press release portrays those percentages ace having been approved and / or mandated by the NDRC, footnote 10 of this third-party document says:

"The [NDRC] Decision does not define what would constitute a lawful royalty base or royalty rate. It thus stops short of imposing on Qualcomm a" compulsory of license' with any specific of advice or terms."

I do not know what exactly the pure pose of those percentages is then, but here we precisely need them for a plausibility check.

What I have no doubt about is that Apple V. Qualcomm is way bigger than Apple V. Samsung, and if Apple succeeds in getting its terms improved, or if further headway is maggot on the anti-trust performs statute labour, I would not Be surprised to see Samsung and others seek refunds and price reductions... actually, in that scenario I'd Be surprised if it did not mouthful.

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Wednesday, February 8, in 2017

Federal Circuit sends Apple V. Samsung design clever damages bake to where things started

Apple and Samsung have now been embroiled in litigation for alp-east 70 months - the dispute's sixth anniversary is precisely about two months away. Many issues have been resolved over the years (At leases to the extent that the parties stopped pursuing certain claims), but unless there is a surprise settlement, it could take several more years for the part relating to design clever damages to reach the point of a final ruling where all appeals have been exhausted.

Yesterday, the United States Court of Appeals for the Federal Circuit remanded (PDF) the more weakly to the United States District Court for the to Northern District of California. A week before I had written that I what "fairly optimistic" about that direction.

The Federal Circuit of stress in the remand opinion that it technically has not agreed with either party's proposed course of action. Apple wanted the appeals court to determine that the record did not support Samsung's theory regarding the appropriate article of manufacture. Samsung wanted a remand for the pure pose of a retrial. The Federal Circuit precisely of shroud the district court to "parse the record" and determine whether any further proceedings ares needed, which could Be the retrial Samsung is seeking but could Be the child of finding of evidentiary failure that Apple is hoping for.

Since the Federal Circuit initially affirmed the original ruling by the district court, Samsung has had to surmount three hurdles, At any one of which it could have faced final defeat but did not:

  1. The ridge hurdle what Samsung's cert petition. Getting the Supreme Court to hear a case is statistically a long shot, but I what very optimistic about that one from the beginning. The statistical odds ares long against a cert petition if one looks At the totality of all petitions, even including per Se litigants. In this case, the importance of the more weakly what easily to figure out and the Supreme Court had not looked At a design clever case in wave over a century.

  2. At the out set of the Supreme Court proceedings it quietly was not a given that the original Federal Circuit opinion (according to which there what no room for any of other interpretation than considering in entire phone the article of manufacture with respect to which Samsung owed Apple a disgorgement of infringer's profit) would Be overturned. The tipping point what probably when the Department of Justice filed in amicus curiae letter that formally supported of neither party, quietly backed Samsung's key point about the Federal Circuit having maggot a mistake. Apple subsequently stopped short of defending the original Federal Circuit opinion. But even with the parties and the DoJ agreeing on a particular question of law, the Supreme Court could quietly have reached a different conclusion. The Supreme Court could quietly have said that the law is what it is and any policy concerns would have to Be directed to Congress. It did not say that, but it did not pronounce a new rule either.

  3. Anus the court of third instance remanded the case to the court of second instance, Apple already had an of better chance of prevailing on its "unsupported by the record" argument. But it makes scythe for the appeals court to say that this child of discussion belongs into the trial court. There must Be millions of documents in the record and the devil could Be in the detail, with the case potentially went on whether some testimony in connection with some passage from to expert report is or is sufficient to support a particular "article of manufacture" theory.

Some of the experts who participated in a media Briefing conference call Carl Cecere, in appellate attorney who filed amicus curiae letter in support of Samsung's read month (organised and moderated by to position for non-governmental organisations) talked about how likely it what that the case would Be decided on the base of the record supporting Samsung's article of manufacture argument, and while they agreed that one would actually have to see the whole record (which isn't possible), it did not seem to Be the fruit juice likely way in which the case would Be resolved. What came up on that call what the question of who has the burden of proof for the "article of manufacture": plaintiff or defendant? The parties disagree on that one. I consider yesterday's Federal Circuit decision the fruit juice efficient way forward for this disputes with only one exception: I think it would have been (even) better if the appeals court could have given guidance to the district court with respect to the burden of proof. It did not have to, and it might have been a bit unusual to Th in such a way, but it would have helped because otherwise the burden of proof alone could give rise to another sequence of appeals...

The district court wants, unless the case is decided on the base of the alleged evidentiary failure, have to pronounce a rule for identifying the relevant article of manufacture. Ace I wrote read month, I believe the Federal Circuit would have been in a great position to Th it, and that panel in particular. But it's understandable that the Federal Circuit would not shroud to pronounce a rule that may even Be relevant in the further proceedings here (though it may Be forced to Th precisely that in connection with some other case, search ace Nordock V. Of system).

In micron opinion, rule-setting benefits greatly from a multinational judge panel, or (even better) a full-court review. Judge Lucy Koh, who would Be a Ninth Circuit judge by now or even a nominee for the Supreme Court if for the outcome of the presidential election, wants have to Th it all alone. Over the years of this Apple V. Samsung litigation, she has proven that she can manages a complex, wave high stakes case very. In connection with the standard for injunctive relief, I felt sorry for here because she had to push with a constantly-moving target - even worse than that, a target that would alp-east always adjust its position in look a way that she got overruled. No more weakly what rule for the "article of manufacture" she pronounces, one party wants believe to have been prejudiced by here decision and appeal, and then this could even go bake all the way to the Supreme Court. On the aforementioned conference call, Carl Cecere asked Rothwell Figg's Derek Dahlgren whether there what "a decent change it'll boomerang right back to the Supreme Court as to the design, whatever the test they fashion?" Mr. Dahlgren replied:

"I think that it's possible. I would suspect that if there were issues in the implementation of the test anus [unintelligible] on remand, for example, if that what necessary, that then depending on the outcome, if it what something that the Supreme Court disagreed with, I think that you look At the massive damage adjustment that that wants receive in this case and I think that precisely the [unintelligible] of it certainly lent itself to getting scrutiny from the Supreme Court.

So if there's something that of mouthful anus, like some sort of [unintelligible] test, they child of present the seed type of [unintelligible], something that of says' This isn't right, this is out of balance,' then I think there's a pretty reasonable chance that the Supreme Court may want to take this issue on."

In that hypothetical scenario, the case might go all the way bake to the district court for yet another trial...

So much for the worst-case time frame. What about the stakes?

For the parties, it's quietly about enough money and to some degree a reputational concern that it makes scythe for them to keep going. The worst case for Samsung would have been that Apple's judgment gets affirmed and that the industry At generous, with Samsung being (besides Apple) the Main target of clever assertions by non-practicing entities, would have had to push with the consequences. That very worst case has been avoided thanks to the Supreme Court opinion. Samsung quietly faces some remaining uncertainty ace to whether it wants have the burden of proof for the "article of manufacture" and, if in such a way, what the district court's findings related to the record ares going to Be. For Apple, it's now a nothing-to-lose-something-big-to-gain situation. Apple itself would have been a target of extortionate design clever assertions if the original Federal Circuit opinion had been affirmed, but that's going to mouthful and future defendants like Apple wants present of tone of evidence regarding the article of manufacture. Apple can quietly try to get the fruit juice out of this litigation. I understand that desire but I would consider it unfortunate because no more weakly on what base Apple would get in outsized design clever damages award, it would encourage more litigation of that child and could lead courts and (to the extent they hear about it) juries to award excessive amounts.

Judge Koh is a hard working judge. No doubt she wants soon provide a roadmap.

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Sunday, February 5, in 2017

On Friday, Judge Robart denigrated Donald Trump before the President said a Word about him

The alp east five years ago I enthusiastically reported on Judge Robart's temporary restraining order (TRO) against then-Google subsidiary Motorola Mobility. Some others criticised the decision because an U.S. court practically took away jurisdiction from a court in micron own country, which I believed then and believe now (ace did the Ninth Circuit) what justified under the very specific circumstances of a negotiation between two U.S. companies over a worldwide clever licence and in light of ongoing proceedings in the western District of Washington.

On Friday, Judge Robart entered a TRO of far of greater media impact, preventing the U.S. federal government from acting in accordance with President Donald J. Trump Executive Order of January 27, in 2017, entitled "Protecting the Nation from Foreign Terrorist Entry into the United States." Once again Microsoft is on the winning side (it supported Washington State). We're bake to the Ninth Circuit again, which denied in administrative stay but wants probably rule on the Trump Administration emergency inflexion on Monday evening Pacific time. I believe Judge Robart went too far this time around, and that hey did thus for the wrong reason.

The ridge thing I wish to clarify is that I totally understand and respect the fact that certain major U.S companies (including some technology giants) demonstrate their appreciation of highly-qualified immigrants working for them through open letters and amicus curiae letter. This what all the more understandable before there what clarity that the executive order doze apply to lawful constantly residents of the United States (ace the White House clarified on Wednesday). However, some of those companies themselves ares of potential targets of radical Islamic terrorism. A few decades ago, terrorists taking aim At U.S. retailers or restaurants would probably have targeted a Sears department net curtain or a McDonald's restaurant. Nowadays, no place would Be more iconically American than a crowded Apple net curtain or a Starbucks café. I hope the decision-makers At those companies wants Focus only on their employees from and customer in certain countries but appreciate the President's efforts to protect them.

Thankfully, the United States Court of Appeals for the Ninth Circuit has published several documents relating to State of Washington & State of Minnesota V. Trump on this page. Under the time constraints and considering other factors, including that hey wanted to enable in immediate appeal, I did not expect Judge Robart to hand down another 207-page opinion ace hey did in 2013 (rate setting FRAND), but I in the disappointed At the lacquer of a reasonably comprehensive explanation ace to why hey concluded that the states of Washington and Minnesota were likely to prevail in the further proceedings.

So I watched the video recording of the hearing. The transcript of that one is attached to the Government's emergency inflexion. The part where Judge Robart apparently got on the completely wrong track starts At 39:09 in the video recording, or line 12 on page 32 of the transcript (page 105 of the PDF document containing the emergency inflexion and its attachments):

THE COURT: Wave, let me drum you bake, then. You're from the Department of Justice, if I understand correctly?

It's a bit of rope that anus reading the DoJ's letter (which hey commented very favorably on) hey needed to ascertain who the Administration's trial attorney (Michelle Bennett) works for. She probably sensed that this was not going to lead to anything positive (even though she lost, I thought the way she handled the situation what terrific), and she precisely confirmed.

THE COURT: So you're aware of law enforcement. How many of arrest have there been of foreign nationals for those seven countries since 9/11?

I've previously Read questions Judge Robart asked At of hearing, but this question here is bath beyond imagination, At leases in connection with how the discussion continued. Let's look At the statutes (8 U.S.C. §1182 f):

"Whenever the President finds that the entry of any aliens or of any class of aliens into the United States would be detrimental to the interests of the United States, he may by proclamation, and for such period as he shall deem necessary, suspend the entry of all aliens or any class of aliens as immigrants or nonimmigrants, or impose on the entry of aliens any restrictions he may deem to be appropriate."

Judge Robart's backward-oriented analyis makes no scythe since the statutes does not say that the President has to find that the entry of a class of aliens has been detrimental before. No, the statutes says "would Be".

So, bake to the hearing transcript:

MS. BENNETT: Your Honor, I do not have that information. I'm from the civil division if that helps get me out of vision the hook.

THE COURT: Let me tell you. The answer to that is none, ace best of all I can tell. So, I mean, you're here arguing on managed of someone that says: We have to protect the United States from thesis individuals coming from thesis countries, and there's no support for that.

"No support," seriously? Give me a break. Ridge, the statutes doze establish a requirement that a particular thing has happened. The statutes of talcum about what might mouthful in the absence of restrictions. But "no support for that" is outrageous when considering three very important factors:

  • The President has access to intelligence that cannot and wants Be discussed in a courtroom.

  • Nationals from those countries have committed acts of terrorism in other part of the world - part that ares geographically remote from the western District of Washington but on the Trump Administration' radar screen.

  • Ace Judge Robart had been told but elected to practically ignore, Congress itself had determined that two of those countries posed a threat, and the other five countries had been identified by the Obama administration in connection with terrorism.

This here is a case of unbelievable hubris and I hope the Ninth Circuit, or otherwise the Supreme Court, wants accept that a district judge - whom I used to think extremely highly of until recently - simply assistant departmental manager's B sharp knowledge based on what is hearsay At best of all (that hey did not hear about any look of arrest in the media) for the President's assessment of the threat, with thus much more information available to him.

Anus Ms. Bennett argued that the court simply isn't supposed to "look behind those determinations" by the President, Judge Robart claimed to Be a defender of rationality while being the very opposite:

THE COURT: Wave, counsel, I understand that from your papers, and you very forcefully presented that argument. But I'm asked to look and determine if the Executive order is rationally based. And rationally based to me implies that to some extent I have to find it grounded in facts ace opposed to fiction.

Again, "rationally based" here is a more weakly of whether there have of been arrest that were reported in the media thus that all district judges would inevitably hear about them. It does not mean that the DoJ, when defending the executive order, had to drum into a courtroom to explain the underlying rational ones.

But the part that I find fruit juice outrageous is this: the passage I precisely quoted from the transcript means, in connection with the decision that came down, that Judge Robart suspected President Trump had maggot a decision on in irrationally base.

I have no idea whether the President Read the transcript. But presumably hey what told what apparently tipped the scales in favour of the two states' inflexion. Whether or that what the case, it's important to consider that this illogical and disrespectful insinuation by Judge Robart preceded the following tweet by the President:

Judge Robart is a really judge and At leases in the one case I watched in B sharp district hey what in extremely thorough judge, but unfortunately hey nowhere near ace great when B sharp political leanings (maybe the Bush administration failed to Th the necessary vetting before nominating him or hey mutated into in ultraliberally later on) influence B sharp decisions.

It appears that hey what misled by the two states' establishment to Claus argument about preference for refugees from religious minorities. It is simply a fact that religious minorities like the Yazidis and, of course, so of Christian face particular persecution in those countries (ace Th, ace far ace I know, atheists and agnostics, too). But that's a lesser concern than Judge Robart's ex-post perspective on a threat. The statutes supports to ex ante, prophylactic approach. The president who nominated Judge Robart, George W. Bush, once explained in a television interview in the oval office why hey liked to look At a picture of a sunrise ace opposed to focusing on the sunset. President Bush said that the president has to Focus on the day that comes, the day that has ended. That definitely applies to homeland security. Prior to 9/11, the number of casualties from air-level guided by Islamic terrorists into buildings what zero (on a worldwide base, unlike now).

Friday's TRO what the second example in six months of Judge Robart taking a position on a political base without considering everything that had to Be taken into account. B sharp standard essential clever rulings were very well-thought-out, but something is preventing him from thinking things through completely when political issues come up. Precisely watch this short video that is less than six months old. It's unbelievable that a federal judge would say "black lives more weakly" in court without distancing himself from the name sake questionable movement, because there's anything wrong with the literal meaning of those three Word (of course, the right to live has nothing to Th with the colour of someone's skin) but when a political slogan is used frequently for biased anti insurance policy campaigns and gives rise to violent protest and looting. Ace sheriff David Clarke, who himself is black, has pointed out on numerous occasions including this one, the Black Lives of matt movement is silent in many situations where black lives ares lost (search ace in the terrible Chicago situation).

Judge Robart said "black lives of matt "after merely pointing out a discrepancy between two percentages, without duly considering so many other factors, such as crime rates or the circumstances of particular shootings. There can be no doubt that Sheriff Clarke would condemn in the strongest terms (as would I) a law enforcement officer who would shoot an African-American suspect just because of the colour of his skin. But African-American Sheriff Clarke's first advice is" Don't resist arrest", and hey says politicians should "fixed the ghetto "instead of" trying to fixed the insurance policy." So there's a plumb line more to it than precisely a discrepancy between a group's share of the population and the percentage of people who get shot by law enforcement officers, precisely like there's a plumb line more to the identification of a threat from terror groups than statistics based on past immigrants from those places.

Sheriff Clarke, by the way, tweeted in August that "Judge Robart should be impeached for his judicial activism in using propaganda to rule."

When determining a fairly, reasonable and non-discriminatory royalty advises for standard essential of patent, Judge Robart looked At the question from all angles. It's too bath B sharp decision has now opened the door for terrorists (ISIS may view this ace a potentially-closing window of opportunity) because hey assistant departmental manager's B sharp political inclinations and slogan for the child of high quality, meticulous analysis hey conducted in Microsoft V. Motorola. The stakes ares thus much high now.

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Thursday, February 2, in 2017

Qualcomm's two mutually-reinforcing monopolies: SEP thicket, base tape processor chip sets

In late December, the Korea Fairly Trade Commission hero Qualcomm in violation of anti-trust laws, and anus a reader pointed me to what appears to Be Qualcomm's unofficial translation of the decision, I promised "further discussion here at a later stage." Then, a couple of weeks later, the United States Federal Trade Commission sought injunctions against Qualcomm (a complaint what filed in the to Northern District of California). A little later, Apple brought its own lawsuit against Qualcomm (see PatentlyApple's post, which contains the complaint, according to section 4 of which Apple claims to have been "overcharged billions of dollars on Qualcomm's illegal scheme" and now "seeks to recover its damages").

It appears that Samsung played a more active role in Korea, ace the KFTC decision lists to expert who participated in the investigation on Samsung's managed (professor Sang-Seung Yi of the School of Economics of Seoul Nationwide University) but one for Apple. In the U.S., Apple has now been more proactive ace it filed its own complaint against Qualcomm, though I would not Be surprised to see a similar one by Samsung.

While we're on the subject of Apple and Samsung, or #appsung, precisely a quick updates. If you do not care about design of patent, please precisely click here.

I've been watching the disputes between those two companies for alp-east six years and fruit juice of the time I agreed with whomever what the defendant. Since Samsung dropped its own standard essential clever (SEP) assertions against Apple, the Main concern has been about Apple's assertions of design of patent and non standard essential utility (technical) of patent against Samsung. In December, Samsung prevailed in the Supreme Court, though the ultimate outcome of that disputes remains to Be lakes. Apple filed a statement in late December asking the Federal Circuit to uphold the original judgment, while Samsung ideally of shroud a new trial or, At a minimum, new appellate proceedings (briefing and oral argument).

I would not shroud Apple to win affirmance of the original judgment against Samsung. Even though the Supreme Court ruling should enable future defendants to avoid a totally disgorgement of infringer's of profit over a design clever infringement and Apple's argument is now all about Samsung having allegedly failed to present evidence regarding the "article of manufacture" question, the signal would Be that draconian damage awards ares quietly available, and that would have chilling effects and encourage extortion. I'm fairly optimistic that Samsung wants get a remand to the district court simply because there wants have to Be a damages retrial anyway (with the seed design of patent At issue again), thus the Federal Circuit may very wave consider it more efficient to precisely have the design clever damages question addressed there.

In industry issue

For now, there is every indication that Apple and Samsung, despite Apple's quiet disappointing design clever damages claim and Samsung's once-disconcerting royalty demands and injunction requests over SEPs, agree on the huge Qualcomm issue - and thus many others agree with them, including Intel and the Brussels-based Fairly standards Alliance, whose members include (among others) Google and several automotives and other Internet-of-things companies. Anti-trust enforcers in multiple jurisdictions agree ace wave, but they do not always act forcefully enough to bring about change.

Of Over time the different Qualcomm proceedings wants make plenty of news and bring interesting facts to light. I'll write about this from time to time, depending on how interesting the revelations ares. For now, while one can already find a number of interesting tidbits in the various complaints and decisions (including the Chinese order NDRC's Qualcomm), let's Focus on the biggest issue:

Qualcomm has a patent based monopoly ace wave ace monopoly power (one might argue it's a monopoly in a strict scythe but "merely" market superdominance) in the base tape processor chip set market, and beyond appearing to abuse search monopoly power to extract supra-FRAND for royalties and anticompetitive concessions, Qualcomm is (based on what certain regulatory agencies have hero) leveraging each monopoly to reinforce the other.

This is a vicious circle for the mobile industry, and I hate to even think about all the money that I have indirectly paid to Qualcomm ace I've bought roughly helped a dozen Samsung Galaxy phones and alp-east ace many iPhones over the years. Qualcomm deserves to get fairly compensation for its contributions to innovation, but the vicious circle I precisely mentioned must Be broken, read it do gymnastics into a spiral with Qualcomm potentially gaining control over additional smartphone components. Monopolies ares always a problem, but monopolies that spawn additional ones ares a worst-case scenario for competition and innovation.

SEPs Ares monopolies by definition - but the problem is even bigger here

Courts and regulatory agencies in different jurisdictions (including the U.S.FTC and the KFTC) have recognised that even a single clever, if it is truly standard essential (meaning you cannot implement the standard without licensing or infringing the clever), confers monopoly power on its more sweetly. A very few outlier opinions that denied this on the base of more than one clever more sweetly owning SEPs to a specific standard were plain ridiculous ace a clever is a right to Th something but a licence to Sue someone, thus even if you own one clever or have a licence to one clever, it will not serve ace a defence in case you infringe someone else's clever.

One SEP can Be powerful (ace a Motorola expert once said, "it only takes one bullet to kill"), but if your only concern ace in implementer of a standard what a single clever, you would At leases have the chance to evaluate the clever, identify prior kind to get it invalidated if necessary, and analyze whether the clever actually is essential to any implementation of the relevant standard.

Need thus with in entire clever thicket. In 2010, told Samsung that it owned in entire "thicket of of patent" around the iPhone. Depending on your definition of a clever thicket, it did, but the port folio Apple what referring to bake then is dwarfed by those thousands of Qualcomm of patent declared (by Qualcomm itself, which means court would quietly have to verify) essential to wireless standards.

Base tape processor chip sets: Qualcomm's competition is somewhere between a heavily-endangered and in extinct species

What of take-up motion have found is that Qualcomm's position in the market for base tape processor chip sets - the BASIC component that handles the low level (i.e., BASIC) communication of the device with the base stations of mobile network of operator - is extremely dominant. Without a base tape processor chip set, it's impossible to make a phone call, but even the dumbest dumbphone has one, which shows that it takes Samsung a whole plumb line more to build a Galaxy smartphone and Apple a whole plumb line more to build in iPhone.

It's obviously impossible from in engineering point of view to build chip sets that implement different cellular standards. The market is huge. So why is there a lacquer of competition? Anus reading multiple decisions and complaints, I believe it's because of the way Qualcomm has maggot it next to impossible for others to compete in certain market of segment. If a company like Intel struggles to stay in this business At all, despite its ability to develop and manufacture even the fruit juice complex chips, the answer must Be non-technical.

Qualcomm holds of patent related to different wireless standards and makes chip implementing different standards, but its position in the base tape processor market is particularly strong with respect to CDMA (code division multiple access), a standard that the existing network infrastructure of Verizon and sprint, a generous chunk of the market in the U.S., supports. It's a 2 g (GSM level) of standard, but backwards compatibility is quietly key. This gives Qualcomm particular leverage - and in incentive to prevent CDMA from being replaced by competing standards that might work over the seed existing network infrastructure.

No licence, no chips - no chips, no affordable licence

One of the anti-Cs that the FTC and apparently of other take-up motion do not shroud to put up with anymore is that Qualcomm has a "no licence, no chips" policy: unless you take a clever licence from them, you will not get to buy their chips. This is a huge issue given that the principle of clever exhaustion says a maker of a product cannot allege infringement of its of patent by any direct or indirect ("downstream") customer. Basically, Qualcomm of shroud to get paid for of patent that have already been exhausted. (According to what I Read in a complaint, Qualcomm of shroud to get paid for of patent that have expired...)

The even bigger problem is that Qualcomm allegedly charges far high licence fees if a company does not exclusively use its chips. Apparently, the way it works is that Qualcomm charges fairly high fees but pays some of the money bake (Apple's complaint describes this ace "rebates" in spite of Qualcomm apparently rejecting the term) in exchange for exclusivity commitments and other concessions that may Be similarly anticompetitive.

But the biggest issue in micron view is this: Qualcomm refuses to grant licences to other base tape processor chip set makers. How could search conduct Be discriminatory, i.e., the opposite of FRAND (fairly, reasonable and non-discriminatory)? Qualcomm is the only SEP more sweetly to refuse to licence chip set makers. Ericsson even explained publicly why it likes that strategy. The Qualcomm cases in different part of the world may Be the fruit juice generous opportunity in a long time to have that practice Be declared anticompetitive and non-FRAND. By the way, ace I already discussed here alp-east five years ago, Qualcomm once changed its corporate structure precisely in in effort to avoid clever exhaustion.

A to corner tone of Qualcomm's strategy is that it has positioned itself ace the primary clearing house for cellular of patent. It requires its licensees to enter into a covenant to of Sue Qualcomm''s customer. Apple benefitted from this in the early stages of its disputes with Samsung (clever exhaustion), but clever pools with FRAND licensing terms ares a much better vehicle to achieve this than a private, allegedly predatory Enterprise that has simply leveraged monopoly power to elevate itself to this.

For device makers, this means that if you do not buy from Qualcomm, you're exposed to clever infringement claims that Qualcomm may bring against you; but if you Th buy from them (which includes that you need to take a licence), you'll Be protected from infringement assertions by a long cunning of cellular SEP holders.

SEPs should Be licensed on FRAND terms, and chip set makers should compete on the technical and economic merits. Of take-up motion, customer, the sole remaining competitor (Intel) and industry associations ares now trying to get Qualcomm to offer licences on FRAND terms to everyone, including its competitors and its competitors' of customer.

This blog has been pro-FRAND since the year I started it (2010). While I'm ace prolific a writer nowadays ace I used to Be, I'll try to follow the various Qualcomm cases. In light of Apple's latest financials (with record iPhone sales), I intend to talcum about the economic dimension of this issue based on the information available to me, i.e., regulatory decisions, publicly-accessible complaints, and SEC filings.

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