Moderator: 3ne2nr Mods
B. Firms Should Not Evade Their FRAND Obligations by Transfers to NPEs
As the FTC recognized in N-Data, a firm that acquires a patent subject to a FRAND commitment may violate Section 5 of the FTC Act if it knowingly breaches the FRAND commitments of its transferor or predecessor-in-interest and such repudiation was not anticipated before the market-wide adoption of the standard. Similar logic applies where firms make explicit promises not to stack royalties on their portfolio of SEPs and then split up the portfolio of SEPs among NPEs who seek royalties in violation of the transferor’s anti-royalty stacking pledge. For example, a firm that pledges that it will not seek more than x% royalties for its portfolio of SEPs no matter how many standards are licensed should not be permitted to sell its portfolio to NPEs— or anybody else—who then seek x% for each standard that is licensed, if the transaction poses the requisite threat of anticompetitive effects. This is especially true where the transferor maintains an ownership interest in the royalties collected by the transferee.
Consider, for example, the case of Nokia, which in 2010 announced that it would license its SEPs for no more than 2% of the sales price of a licensee’s end-user device “irrespective of the number of wireless standards deployed in such a device.” 31 In other words, Nokia committed itself to a royalty cap of 2% and no royalty stacking. This pledge, like others before it, was plainly designed to induce the adoption of Nokia’s technology. By providing a legally binding commitment on which implementers justifiably thought they could rely for protection, Nokia convinced implementers that they could safely manufacture products reading on Nokia’s IPR.
In September of 2011, Nokia transferred more than 1,200 SEPs declared essential to GSM, UMTS/WCDMA and LTE to an NPE named MOSAID Technologies Inc. 32 Because NPEs are immune from counter-suit and have no interest in cross- licensing or maintaining a good reputation before SSOs, they frequently charge royalties that are well in excess of the amount needed to incentivise innovation. Indeed, by some accounts the aggregate direct costs of patent assertion by NPEs amounted to $29 billion in 2011. 33
Implementers who adopted Nokia’s technology in reliance on Nokia’s 2% royalty cap/no-royalty-stacking commitment now face the disturbing prospect of having to pay whatever royalty rate MOSAID decides to charge. And all signs point to MOSAID charging a lot. According to MOSAID, the acquired patents represent “one of the strongest standards-essential wireless portfolios on the planet,” and will generate licensing fees on “$500 billion in mobile device revenues” over the next five years. 34 Indeed, Microsoft, which curiously has an ownership interest in the transferred Nokia patents, claims that this transaction “unlocks the considerable value” of the Nokia patents, which provides rather clear evidence that Nokia and Microsoft believe that MOSAID will be able to charge more for these patents than Nokia could prior to the transfer. 35 Even more disconcerting, manufacturers who refuse to accede to MOSAID’s royalty demands may have their products enjoined from entering the country under Section 337. 36
The MOSAID agreement harms implementers and consumers—and raises Nokia’s and Microsoft’s rivals’ costs—for two distinct reasons. First, the agreement enables Nokia to evade its 2% licensing commitments by outsourcing its patents to an agent with a greater incentive and ability to assert those patents aggressively. MOSAID is required to “monetize the Assigned Patents and to maximize the Royalty.” 37 MOSAID also must meet “royalty milestones” payable to Nokia and Microsoft, otherwise it must pay the difference through short fall payments. If the payments are not made, Nokia and Microsoft may force MOSAID to assign the patents to a third party. And, perhaps most flagrantly, MOSAID officials have confirmed that MOSAID will retain one third of the revenue generated by the transferred patents, leaving Nokia and Microsoft to share in the remaining two thirds. 38 Thus, Nokia maintains a direct, ongoing financial stake in these patents and can derive royalties in excess of its 2% commitment.
Second, the MOSAID agreement fosters royalty stacking by atomizing Nokia’s SEP portfolio. Even if MOSAID adhered to Nokia’s promise not to charge a royalty greater than 2%, that would still represent a 100% increase over the price that implementers expected to pay for a license when, relying on Nokia’s FRAND commitment, they decided to adopt the technology. Prior to Nokia’s transfer to MOSAID, manufacturers expected to pay 2% for a license to all of the patents in Nokia’s SEP portfolio. Now, even if MOSAID “honors” Nokia’s 2% undertaking, both MOSAID and Nokia can collect that 2% from alleged infringers. Implementers thus face the prospect of paying a 2% royalty for a license to Nokia’s (remaining) SEPs, and a further 2% royalty for a license to Nokia’s (transferred) SEPs. Especially in light of Nokia’s prior promises about limiting total per device royalties to "a modest single digit level,"39 that increase from 2 to 4% represents a significant -- and abusive -- repudiation of Nokia's commitments. And if this practice is allowed, there is potentially no limit to the degree to which a patentee like Nokia could divide its portfolio, leading to an ever more prohibitive royalty stack.
Nokia's repudiation of its FRAND commitments in this manner constitutes a clear violation of Section 5 of the FTC Act under the principles articulated in N-Data. As in N-Data, Nokia and MOSAID's conduct is inherently oppressive and coercive. Nokia and MOSAID's conduct threatens to raise prices for an entire industry and undermine the standard-setting process. Even more egregious than in N-Data, this is not a case where the repudiation is the mere unilateral decision of an opportunistic transferee or successor-in-interest. Rather, the abuse in the instant case is being effectuated by a joint scheme between the original FRAND-obligated licensor (Nokia) and a third party transferee (MOSAID) brought in to help the licensor creatively repudiate its FRAND obligations. This conduct should be condemned under Section 5.
Second, despite Apple’s complaints to the contrary, MMI’s request for a 2.25% royalty on the price of a handset, tablet or similar mobile device implementing MMI’s SEPs is well within industry norms of reasonableness. For example, MMI’s approach is quite similar to the licensing policies of Nokia (which charges 2% of the end-device implementing the standard), Alcatel-Lucent (which charges 2% of the end-device implementing the standard), Ericsson (which charges 1.50% of the price of the end-device implementing the standard) and Qualcomm (which charges 3.25% of the price of the end-device implementing the standard). 20
Significantly, MMI did not immediately seek an injunction against Apple. To the contrary, MMI spent more than three years attempting to negotiate with Apple, which categorically refused to make a counter-offer. 21 It was only after Apple began its patent war against the Android ecosystem, suing patent-poor HTC in an effort to leverage a settlement or adverse judgment against MMI and other Android OEMs and making clear that it had no intention of paying FRAND royalties unless sued, that MMI first sued Apple in both district court and the ITC. 22
Third, it is clear that neither Google nor MMI have taken actions prohibited by N-Data, Rambus or any other relevant precedents: they have not repudiated their FRAND obligations with respect to the patents in suit, nor have they increased the rates that they are seeking above that which SSO participants believed they would have to pay at the time they included MMI’s technology as part of the applicable standards. Thus, the basic condition necessary for patent hold-up as described in the FTC’s June 6, 2012 Statement on the Public Interest is simply not met: MMI has not sought “high royalty rates and other favorable terms, after a standard was adopted, that [it] could not credibly demand beforehand.”23
It is no accident that the firms that are petitioning the government to alter that successful status quo were not significant participants in the development of the standards in question. To the contrary, both Apple and Microsoft are dominant providers of proprietary operating systems who have invested little time and money in contributing cellular standard essential patents.13 Their clear incentive is to minimize the amount of money they pay to those who have invested billions in building open telecommunication protocols while maximizing the amount they can charge users of their own proprietary operating systems. These efforts, like prior rejected efforts to change ETSI’s IPR policy to disfavor innovative SEP holders, threaten innovation and the ability of SSOs to incorporate robust technologies.14
Sky wrote:*sigh*
What happened to everyone growing the best melons they can and lining up in the market...
If anyone come and tell me that's how it is, that's business, I will curse you.
Because while they fight that fight, instead of trying to make the best, see all that 2%, 1,5% and 3%?
WE PAY THAT, NOT THEM!
Conrad wrote:Sky wrote:*sigh*
What happened to everyone growing the best melons they can and lining up in the market...
If anyone come and tell me that's how it is, that's business, I will curse you.
Because while they fight that fight, instead of trying to make the best, see all that 2%, 1,5% and 3%?
WE PAY THAT, NOT THEM!
SHADUP!
The phone in meh pocket (WHAT I PAID FOR) gives me right to argue extensively how superior my company is to the alternative brand.
Daran wrote:The truth is the Apple Iphone5 is a bit underwhelming, not because of the hardware mind you.....which is top of the line as usual.......but because of the lack of innovative IOS6 updates.
I'm personally disappointed with today's revelations despite my Iphone 4s being my preferred phone in my collection (I have an S2, S3, BB Bold 9900 and a Iphone 4s......the S2 & 9900 are for sale btw, PM if interested).
But that doesn't stop me from appreciating my S2 and S3....they are both VERY impressive phones and better in many ways over my 4s. However over time I've grown used to the iOS interface and find it more intuitive in many ways over Android....but that comes down to personal preference really.....which lends credence to my main point.
If I a stout Apple fan can honestly appreciate and prefer Android for many things, then Apple is trouble with the Iphone 5.....the game is a lot closer now than before.....and Apple did not come out guns blazing this round as they should.
In the background, many don't know it, but RIM is working closely with Google on porting BIS and BES platforms to Android.... BBM on Android would be the end game for Apple's dominance in many countries (Not US though).
In the next two years I foresee a market place split in the following way.
Apple - 20 to 30% (Not a huge drop in market share, but a drop nevertheless)
Android - 50 to 60%
Win8M - 10% (could be more, but time will tell)
RIM - <5% (if still surviving)
Duane 3NE 2NR wrote:LOL @ the "panic"
as I posted in a previous thread - iPhone 5 is not just the phone you hold in your hand, it is part of a bunch of other things that support it.
the Lumia, S III and iPhone 5 are very similar spec wise.
Just the OS is different: Windows Phone, Android and iOS respectively.
It is great to know that consumers have a choice of 3 top phones with 3 different OS platforms to choose from. Choice is good!
What i think is going to make the difference here is the ecosystem.
Apple already has the AppStore and iTunes plus the "works with iPhone / iPod" that tons of 3rd party electronics come with including most new cars.
Then added to that the whole AirPlay thing which is leaps ahead of bluetooth sharing - AirPlay lets you share HD video also (listening to a song or movie on your phone and you show it on your TV with one click with zero setup) and AirPlay is now being offered on wireless speakers, A/V receivers, car stereos, HDTVs etc.
Duane 3NE 2NR wrote:Wireless cameras, security and home automation systems work with iPhone and iPad more than they do with Windows Phone and SIII directly.
Duane 3NE 2NR wrote:And then there is the tablet market that will create a "larger screen experience" for the phone users.Sure the Lumia will work great with MS Surface, and Galaxy SIII with a Galaxy Tab, but iPad has over 85% of the tablet market and 94% of the corporate tablet market according to Forbes and they have lots more to share with.
Duane 3NE 2NR wrote:The iPhone 4 and 4S already syncs wirelessly to mac or pc without plugging it in while iCloud lets you share and securely sync everything.
Duane 3NE 2NR wrote:So with all 3 devices almost the same, the battle will be with the ecosystem that supports the phone.
Duane 3NE 2NR wrote:So while the iPhone 5 may have not had the massive tech jump that previous models may have had, over the past year the ecosystem has grown tremendously with more powerful AppleTVs, iPads and MacBooks that also use Retina and AirPlay and iCloud and AppStore etc etc and add that to SIRI, Apple Maps and great app support - THAT is what makes the iPhone 5.
pete wrote:From my experience, iTunes on a PC sucks ballz
pete wrote:Ways, from how they've been talking I thought maybe since I stopped using iTunes a little under a year ago they've made it better. It must be awesome on a mac though.. right?
pete wrote:From my experience, iTunes on a PC sucks ballz
thank you for your contributionachillies wrote:And on another note, if the ecosystem is so good, why do users Jailbreak???
Do you live under the rock or in it?
Duane 3NE 2NR wrote:thank you for your contributionachillies wrote:And on another note, if the ecosystem is so good, why do users Jailbreak???
Do you live under the rock or in it?
jailbreaking has been greatly reduced per iOS device over the years - most people jailbreak today so they can get free apps. And jailbreaking is to allow the device to do something the manufacturer "locked" out, clearly not something the device is totally incapable of.
Most of your anti-airplay rant dealt with DNLA, which the iPhone is capable of with apps that support it - however AirPlay is FAR smoother for the very reason that the devices are streamlined for each other - which is why developers of apps such as VEVO, Pandora, Netflix etc all use AirPlay instead on the iOS devices. No network ready HDTV (no need to buy a new TV) or DNLA compliant devices needed. AppleTV is $99.
Anyways it seems you guys are really passionate about bashing apple based on the amount you post in the apple threads. But to me after all this talk and attempts at convincing, it seems the sales numbers are still very high.
Dont get me wrong, when the next best thing comes along I'm ready to jump ship.
I'm a daily windows user, so WP8 looks very tempting. I am a Google fan, but Google Apps work flawlessly with iOS as well ,so no need to an Android device.
And thanks for the vocab lesson, I'm going to feed my iPhone now.
I've used an SII, Note and other devices that use DNLA including a NAS and PS3 to stream media and it always take a lil while to connect, handshake issues, works after a couple retries, TV OS is slow and I've never gotten mirroring to work with a phone and DNLA. AirPlay is technically already setup from factory so it just works immediately - but that is an advantage of developing for any device vs developing for only your own devices.achillies wrote:Good point on the price of an Apple TV versus buying a TV that is DLNA compliant, but I don't get the far smoother comment, what smoothness are you referring to exactly, I have streamed Blu Ray Rips over my LAN connection, I have streamed content in HD from my phone to the television, please expand on that point, and it was not an anti airplay rant, it was merely pointing out what you speak of is easily done outside of the Apple ecosystem, emphasis on easy
why not talk about it? market share and sales are excellent markers of a products continued performance.achillies wrote:The sales numbers will always be high, why is that always a retort of an iUser, I can carry on a discussion without saying that Android has the highest market share, can you???
I see the fragmentation and million flavours as a disadvantage - there is a learning curve when switching from Motorola or HTC to Samsung and vice versa because of this, however every iOS user, iPad, iTouch or iPhone can pick up any other device for the first time with no feeling of confusion.achillies wrote:My point is and will always be iOS has zero advantages over any other choice of mobile OS, whether you want to take the ecosystem into consideration or not....
Duane 3NE 2NR wrote:^ yup we said that earlier
the discussion is about the things that make it better.
why can't he?achillies wrote:Duane 3NE 2NR wrote:^ yup we said that earlier
the discussion is about the things that make it better.
It's not about what's better, it about what is better for you or me or him or her
I have recommended Apple devices to users already, just today someone called to ask if he should get a Playbook or an iPad 3, that was easy
I have a co worker who wanted an S2 badly, he has always been fascinated with my phone, always asked to use my phone whenever he is up at my office, he was torn about which to get, the 4S or the S2, after hearing what he had to say, and after he told me how he has everything tied up in iTunes because of his iPad, I recommended that he get the 4S, not because the 4S is better, but because it was better for him, he does not have the phone he wants, he has the phone he had no choice but to buy, he was not prepared to leave the ecosystem, and that IMO is crazy, I can't live like that, now he is in the same quandary again, with the same issues, he badly wants the S3, apparently he has access to someone who owns one, can he buy it, yes, would he, no he can't
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