- Apple and Samsung have been at it hammer and tongs and the war shows no sign of abating but Apple’s derisory offer to Samsung to licence its essential IPR for wireless radio standards demonstrates exactly the point I made on Tuesday October 2nd (see below).
- It has emerged that Apple made an offer (April 2012) to Samsung before the recent trial (which Samsung so badly lost) for a cross licence of essential UMTS and GSM patents.
- In my opinion this was an simply a tactical manoeuver by Apple to appear to the court to be willing to negotiate and to defuse Samsung’s counter attack.
- After analysis no-one in their right mind would have accepted that offer.
- In a nutshell Apple offered to licence its essential GSM/UMTS patents to Samsung for $0.33 a unit as long as Samsung agreed to use the same calculation for licencing its own GSM/UMTS patents back to Apple.
- Apple states that its calculation is based on the FRAND principle of standard essential patent licencing but the FRAND principle makes no statement on how the patents should be licenced.
- Consequently, I believe that Apple has arrived at a methodology that suits it and will result in a very low cross licence when it comes to what Apple has to pay Samsung in return.
- At $0.33 a unit and an ASP of $200 (where Samsung is now) this would come to a royalty rate of just 0.17% which is very cheap and very very far from the other deals that have been struck for essential IPR. So far so good for Samsung.
- However, the sting is in the tail. Samsung does not have much IPR that we know of and Apple has virtually none. Lets assume that Samsung has three times more than Apple, that could give a rate of $1. / unit.
- At $600 ASP for an Apple device that would be a royalty rate of 0.17% (surprise surprise) but Samsung is asking for 2.4% or $14.4 per unit. Not so good for Samsung.
- Apple is absolutely right to ask Samsung for evidence that it has licenced its IPR at 2.4% because when it comes to patent licencing, precedent is everything.
- Patents are worth either what someone is willing to pay to acquire them or the present value of the royalties that they generate. Any other method of valuation is pure speculation and will never really hold water.
- This is why precedent is so critical in patent litigation as it draws a line in the sand where there was simply a blank piece of paper beforehand.
- My guess: Samsung stuck it finger in the air and thought “Qualcomm gets around 2.4% for its patent portfolio. Lets go for that”.
- To my mind this offer was simply a ploy by Apple.
- Its essential IPR (or lack thereof) means nothing to it whereas essential IPR is increasingly looking like the bedrock of Samsung’s counter attack on Apple.
- If Apple can defuse the essential IPR battle with a cross licence then Samsung will have no defence when it comes to the real fight which remains over Apple’s implementation IPR. (The patents that Samsung has been found to infringe)
- It didn’t work (I am not surprised) but Samsung still remains on the back foot.
- The trial loss, (although the appeal looks somewhat hopeful), was bad and should it win in prosecuting its essential IPR on Apple its arsenal of remedies will be poor relative to what Apple can inflict on Samsung with its recent win.
- Hence, I still think there is still bad news for Samsung in this story before the end of the year.
- It is likely to be all right in the end for Samsung but it is going to be a rough old ride.
- I am not a buyer of Samsung yet
Huawei – Slow Slippage
22 April 2024