FRAND fairy tales: Google, Motorola, Microsoft and numbers.

First read this:

CNN: Google Wants Huge Royalties Every Time Apple Sells An iPhone

Now let’s ignore for the moment the obvious wrongness wrt Android copying iOS etc and instead focus on the claim that 2.25% is not FRANDish enough according to the self-acclaimed expert in thsi field, Mr. Florian Mueller.

This same Mr. Mueller is working on a “research project” to find out how FRAND is the best way for the IT world etc. Hint: that research is payed by Microsoft 😉

Hm. A simple search and replace gives me:

“Microsoft wants huge royalties every time {HTC, SAMSUNG, Motorola, Huawei, … } sells an Android Phone.”

#justsayin

MSFT wants between 5-15US$ per device according to various sources. With a unit price of, say, 200 US$ this means a range between 2.5% and 7.5%. Which AFAICS is a bit more (up to 3x) as what Motorola asks for. Now do the math with a more realistic unit price between 80-150 US$ to see who is the bully here.

That’s why I would even go as far as saying that 2.25% ratio is more fair, reasonable and non-discriminatory compared to a fix sum regardless of the unit price. 😉

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3 thoughts on “FRAND fairy tales: Google, Motorola, Microsoft and numbers.”

  1. Some things wrong with the calculations:
    1) $200 is the subsidized price that consumers pay; the carriers typically pay the rest. Actual phone costs are in the $500 – $600 range.

    2) Motorola is asking for 2.25% of an entire product for only 1 (or 2?) patents that, being standards-essential, is required to be FRAND licensed. Microsoft licenses a whole bunch of patents for the (alleged) $5 – $15 fee on Android devices. The actual number of patents is not public, but seeing that they brought about 6 patents in their suit against B&N, the absolute minimum number in a license would be around that. However, given that:
    a) they pretty much created the home PC industry;
    a) they have a giant patent portfolio as a result of patenting everything along the way; and
    c) modern smartphones/tablets are basically miniaturized PCs (I would argue the smartphone revolution would not have been possible without the home PC revolution) and hence would infringe a significant portion of their portfolio;
    I’d guess the real number is anywhere between dozens and low 3-digits.

    3) The Microsoft patents being infringed by Android are not standards-essential, and hence they have no obligation to license them at any rate, let alone FRAND ones. As these patents are not standards-essential, infringers are free to implement work-arounds, invent their own alternatives, or not implement those bits at all.

    By offering a license, Microsoft is actually playing the better game, since it could always have chosen to do like Apple and try to stop competitors outright. Motorola, by enforcing non-FRAND licensing on standards-essential patents is playing a risky game… most governments frown on that, and I can’t help but wonder why they think they’ll get away.

  2. I did check the prices for unsubsidised smartphones. They range from 100 US$ for below-par cheap ones with small, bad displays to 600 US$ for top-notch devices. The market itself distributes these devices in a typically 75-25 ratio. 75% rather cheap devices “for the masses” and 25% for those willing to spend more.

    Also note the differnece between retail price and wholesale price. Thus the 200 US$ median seems to be in the right ballpark.

    If a standard does not offer an a-priori statement of needed licenses (and ideally their price) the standard body should rethink their policy in that regard. The fact that FRAND is undefined and can mean a lot of things from one-time payment to running royalties based on units or value etc. clearly shows that we need a discussion that leads to a working definition of FRAND.

    The one single policy that has proven to work and foster innovation is the very simple approach of Royalty Free. It made the internet what it is today. And without internet I doubt we even would have smartphones at all.

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