Will be very interesting to find out where the truth lays. Reading this, it very much looks like Apple is in the right, but I'm sure the truth will be much more in the middle.
From my understanding almost every phone with CDMA uses a Qualcomm chip.
So why was CDMA adopted if there was only one supplier of the technology?
Telco's and manufacturers hate to have one supplier of anything, because it means the supplier can haul them over a barrel. Sounds like Apple's complaint is that they overpaid Qualcomm for CDMA components (among other things) after they introduced a CDMA iPhone.
So why was CDMA adopted at all if Qualcomm controls the patents and (seemingly) is the sole/dominant supplier of CDMA modems?
CDMA doesn't seem to be better than GSM in any technical respect.
The article points out that Apple did switch to an Intel manufactured modem at one point, but they allege Qualcomm retaliated by withholding a rebate payment to Apple. I'm assuming that Qualcomm has a list price for their chips, but negotiates a rebate on that price if a contract is fulfilled, or some other generic business promise is arranged.
It also goes on to suggest that the portion of payment Qualcomm received from each phone sold is a percentage of the retail or wholesale price of the phone, pointing out that increasing the storage capacity of a phone from 128GB to 256GB, which I assume does not alter the bill of materials supplied by Qualcomm in any way, results in a larger payment to Qualcomm. Your point that Apple should not have developed a CDMA phone makes sense, but it also means that millions of people would be stuck on a network without an iPhone. Apple got so much shit from the public for having an exclusivity agreement with AT&T here in the states, which in large part drove early jailbreaking progress to open the carrier lock, that it makes good business sense to try and reach those potential customers. I would imagine that Apple reluctantly agreed to a contract for CDMA modems that was less than favorable to Apple in hopes of renegotiating at a later date when Apple became more of a dominant customer, and has since failed in all of their tactics.
There's a part of me that "enjoys" this. When patents hit small fishes - like X-Plane - (and for no reason), nobody seems to care. When a $630B company pays too much in patent royalties, it's big news. Perhaps Apple could deploy parts of its capital towards changing the system, but for everyone - not just for their fees.
>CDMA doesn't seem to be better than GSM in any technical respect.
CDMA is vastly superior to TDMA in spectrum utilization, although OFDMA (LTE) fairs better than both of them. For this reason all of the 3G standards including GSMs own UMTS were CDMA-based.
It's a way more complicated story, and it's important to disambiguate between "CDMA" the standard and "CDMA" the channel access method.
The core issue was that in the 2G era, "CDMA" (the Qualcomm name for IS-95/IS-2000) was built on CDMA (code division multiple access), while GSM was built on TSMA (time division multiple access). CDMA (the channel access method) is more spectrum efficient than TDMA, and has some other nice properties. When the time came for carriers in many countries to deploy their 2G networks, it seemed like a win to use CDMA (the standard) because they could support more subscribers with the same amount of spectrum. Companies other than Qualcomm did make CDMA chips in this era.
In the 3G era, the GSM standard also moved onto CDMA ("UMTS"). But this was a pretty serious migration effort, so carriers that had already deployed IS-95/CDMA typically moved along to the 3G variant of CDMA (IS-2000), which required buying less new equipment.
As the 4G networks starting showing up, Qualcomm saw the writing on the wall so they (a) got on the GSM/LTE bandwagon and (b) started investing heavily in their SoCs, which could be bundled with their basebands for smartphones. Since they happened to also be the only remaining baseband manufacturer that was making CDMA support, they also had a tremendous selling point: use our chips in your smartphones and you can still support 2G/3G CDMA networks, which at this point were widely deployed. Plus Qualcomm has so many patents on LTE that you're probably going to end up paying them quite a bit of money even if you don't buy their chips. So today even companies like Samsung which make their own SoCs make variants of their phones with Qualcomm chips to support CDMA carriers.
Qualcomm fans/employees will often mention that this really all goes back to the 80s/90s, when Europe forced everyone to use GSM (which just so happened to be hugely reliant on Europe-owned patents). CDMA never really got a fair shake at world domination. Perhaps if the FCC had just picked one cell phone standard (perhaps CDMA) like they did for TV and radio things would have worked out differently. China briefly tried coming up with their own cell standard (TD-SCDMA) for similarly protectionist reasons and it didn't really work out.
As it is...well, the world finally ended up settling on LTE.
> The core issue was that in the 2G era, "CDMA" (the Qualcomm name for IS-95/IS-2000) was built on CDMA (code division multiple access), while GSM was built on TSMA (time division multiple access). CDMA (the channel access method) is more spectrum efficient than TDMA, and has some other nice properties. When the time came for carriers in many countries to deploy their 2G networks, it seemed like a win to use CDMA (the standard) because they could support more subscribers with the same amount of spectrum.
Okay, so I have a stupid follow up question. The company I work for does a lot of work in developing countries (sub-saharan Africa) and outside of major cities 2G is the only thing you're gonna find.
But to my knowledge, there is no CDMA to be found anywhere in these countries, despite what you've said about spectrum efficiency.
So, why is it that CDMA (meaning IS-95/IS-2000) was only ever successful in North America?
Or am I being dense? Could it be that carriers in sub-saharan Africa are actually installing 3G/LTE base stations but limiting the connectivity to handsets to 2G because of tower-tower throughput?
> use our chips in your smartphones and you can still support 2G/3G CDMA networks, which at this point were widely deployed.
So I've heard that a number of US providers (AT&T at least) have already shut off their 2G networks. Does this mean that Apple no longer requires CDMA modems in iPhones because the number of CDMA networks is declining?
You mention that Sprint and Verizon have significant CDMA networks. What is their migration strategy for 4G? To my knowledge the only 4G standard in use is from GSM.
Voice is another wrinkle here. On Sprint/Verizon, LTE is used for data but voice calls are over the old 3G CDMA network. They're migrating to VoLTE but it's taking time. Also, there are still some places that have CDMA coverage but not LTE. LTE-only phones are coming but it will be a while before phones can drop CDMA support.
Couple things. GSM phones are cheaper because they have many manufacturers and require less powerful processing. But moreover, the developing world has a lot more spectrum availability. Rich countries have 100 years of legacy, spectrum-inefficient radio technology they need to support.
Indeed, the latest iPhone 7 actually comes in two models, one with CDMA support and one without.
Sprint and Verizon (and other CDMA carriers) ultimately are going to shut their CDMA networks down and be LTE only. Same is true of GSM carriers; they'll be shutting down their 3G/UMTS/WCDMA support as LTE devices become available everywhere.
>You mention that Sprint and Verizon have significant CDMA networks. What is their migration strategy for 4G? To my knowledge the only 4G standard in use is from GSM.
I think you are confusing the terms. GSM is a family of standards some of which are based on CDMA, like aforementioned UMTS which is the most widely deployed network standard in the world right now. Because UMTS was not based on TDMA it was a very costly upgrade for most operators since it required entirely new equipment. LTE on the other hand is yet another completely different beast (OFDMA) not compatible with any existing infrastructure so everyone has exactly the same migration strategy to LTE regardless if they are CDMA or TDMA based.
> So why was CDMA adopted if there was only one supplier of the technology?
Other way round: Qualcomm lobbied for the adoption of CDMA precisely to create this situaion. GSM is somewhat uncommon in being a standard not dominated by a particular manufacturer. GSM has a patent pool under FRAND terms; see the history section of https://pure.tue.nl/ws/files/2477048/375588270387968.pdf on how European IP policy avoided these problems.
American public policy is to allow one company to win in the market and then use intellectual property to capture overwhelming market share and share of the value generated. This is called a "free market" for some reason.
It's a bit complicated, but I'll try to address the issues.
First, let's say that you want to make an isosceles triangle on a sheet of paper with the base parallel with the bottom of the page (as part of a triangle standard). Nokia owns a patent on lines being parallel to a side of the page. Ericsson owns a patent on figures with two sides of equal length. Qualcomm owns a patent on angles less than 90-degrees. In order to make your triangle, you need all three patents. You can't just go to Nokia and say, "wonderful, you own one of the patents and I want to make a triangle according to this standard and I'm going to compare your bid against the bids of Qualcomm and Ericsson." Nope, you need a license from all three.
Now, they've agreed to license the technology under FRAND (fair, reasonable, and non-discriminatory) terms. But what does that mean? The idea is that the patents of these three companies are all needed by the standard. If I want to implement that standard, I shouldn't get a license from Nokia and Ericsson for their patents and then during negotiations with Qualcomm be told that they want 99% of all my profits. That would mean the standard would go nowhere because people would be holding it hostage. The idea is that none of the patent holders should be able to exercise market power due to its patents being used as part of the standard.
But given that some patents are more valuable to a standard than others, how do we know which ones should cost what? We don't. Therein lies the problem. Most of the time, companies like Apple negotiate bilateral agreements with companies like Nokia, Ericsson, and Qualcomm. The only thing keeping those three in check is the specter of court action - court action that might look very unfavorably upon them.
But we still don't have a great definition of how exactly FRAND licensing should work. Ultimately, I think this is a new challenge for the world that we're trying to figure out.
--
Now, on to CDMA. CDMA is a standard and while Qualcomm is often thought of as the owner, the case is actually that it owns a high share of standard-essential patents on 2G CDMA. They own a smaller share of 3G CDMA patents and an even smaller share of LTE patents (to the point that they aren't the #1 holder of LTE IP).
Qualcomm has committed to FRAND licensing on its standard-essential patents for CDMA. As such, CDMA isn't really single source - Qualcomm doesn't even own all the IP for CDMA.
But the FTC is alleging that despite Qualcomm's FRAND commitment, it isn't licensing its standard-essential patents to competing baseband developers. The FTC is also alleging that Qualcomm is getting paid a lot more in royalties than OEMs have to pay other holders of equivalent standards-essential patents.
--
Let's say that consumers need a BLT sandwich to use mobile networks. I own a patent on bacon, you own a patent on lettuce, and someone else owns a patent on tomatoes. I say that bacon is really the hero of the sandwich and demand 3x more for my patent. Is that reasonable? Maybe. I decide that I won't license bacon to anyone unless they're willing to let me manufacture the sandwich on my bread (bread having no patent). I'm capturing a lot of money for my bread business, but I'd committed not to exercise market power like that when the standard agreed to use my patent. But I am. You want a BLT, you're going to need to buy it from me as I manufacture it using my bread.
More, let's say that it's 1901 and I'm the only company that makes non-stale bread. Your customers don't want stale bread - at least not the rich ones where you earn your money. So, I tell you that if you buy bread from other companies for your peasant BLTs, you'll have to pay me extra money for all those peasant BLTs or I'll stop giving you my bread for your rich customers. Maybe the other companies could make non-stale bread with capital investment, ...
> Let's say that consumers need a BLT sandwich to use mobile networks.
Haha, yes! BLTDRM? The world needs more BLT sandwich requirements :)
Thanks for taking the time to write up such a great response. Not being very familiar with this topic, your simple examples made this much more approachable and were a joy to read.
I don't believe Nokia suing Qualcomm had anything to do with the demise of their mobile devices unit. You'll also be hard pressed to find any analysis of the Nokia meltdown that would suggest this, though I'm happy to be proven wrong.
The article you've linked also notes that Qualcomm and Nokia already had a prior agreement, but once it expired couldn't agree and ended up in court. That's not what is going on between Apple and Qualcomm.
I didn't know forbes blocks ad block. I dislike pay wall links but we post those. And the mods chime in when people complain. Maybe one of them can make a verdict here too.
Why are you blaming the OP for your broken ad blocker?
Forbes has more money to spend on blocking ad-blockers than the ad-blockers have to spend catching up. This a game of cat-and-mouse, and you chose the side with fewer resources. What did you expect?
For years Apple has insisted on charging royalties for app features they have nothing to do with. When I make my app better and raise the price of my app, a bigger fee goes to Apple.
Now all of a sudden, Apple finds royalties oppressive?
I am sick of large corporations getting better treatment than consumers. If consumers can't sue pharmacy companies for using patents to set a high price for a life saving drug, then neither should Apple be able to sue Qualcomm for using patents to set a high price for CDMA chips not available elsewhere.
Billion dollar corporations should be left to their own negotiations without government interference and allowed to screw over each other (as long as they follow the law). The government should instead focus on stopping these same corporations from screwing over consumers and small businesses.
Thanks for saying this so eloquently. I saw the headline and rolled my eyes, because as a consumer, I have absolutely no recourse for Apple's extortion.
If Apple loses this suit, then we could feel smug that they have tasted their own damn medicine. But that doesn't improve the situation for consumers.
The only recourse we have is to sustain a boycott, or change the laws to protect consumers. Neither option seem very plausible.
All sorts of cool innovations are locked up in Apple's patent portfolio. Nobody else is allowed to use these features in their products, at any cost, without getting sued. As a consumer, if I want those features, I can only buy from the one manufacturer. This feels like extortion to me.
Which patents are you concerned about? When I think about why I use Apple products, it's not for the things they do that competitors don't—there are a few, but most get adopted within a year or two—it's the things that everybody does, that Apple does better.
It costs money to charge users credit cards. If your app is $1, and you were handling the credit cards yourself, that could easily be $0.30 (and increases for higher prices). Apple gets better pricing than that obviously.. but they also have to maintain the servers that handle/store the credit card data, etc.
And they have to review your app.. which has a real labor cost.
If your app is $50, I could understand the outrage over the price.. but most apps are a dollar or two, and sell little to nothing.. the profits on that have to be insignificant or nonexistent.
> It costs money to charge users credit cards. If your app is $1, and you were handling the credit cards yourself, that could easily be $0.30 (and increases for higher prices). Apple gets better pricing than that obviously.. but they also have to maintain the servers that handle/store the credit card data, etc.
Credit card processors charge in the ballpark of $.30/transaction + 3%. And Apple could make a single credit card charge totaling every purchase through Apple for the month, which would make the fixed portion a fraction of what the credit card companies charge. If Apple was charging $.10 + 3% or 5% there would be hardly any objection.
And at Apple's scale, all the rest of that stuff costs them something like a penny per transaction.
> And they have to review your app.. which has a real labor cost.
I'm happy to do that part myself, or go price shopping for reviewers on the open market. How do I do that?
> If your app is $50, I could understand the outrage over the price.. but most apps are a dollar or two, and sell little to nothing..
And yet they charge the same percentage for the $50 app, which is why you don't see many of those on iOS -- the people who would make $50 apps make them for PCs instead because Dell doesn't demand a third of their revenue.
> the profits on that have to be insignificant or nonexistent.
If the profits are so low, why don't they leave the market and let some other saps compete to provide app stores?
This is exactly what government and regulatory bodies are for. Markets aren't always free, and customers/consumers/individuals don't always have a choice to 'vote with their dollar'.
It doesn't have to be an either/or scenario. The government can work for both billion dollar corporations and for individuals. It's not the fault of government – as governments in some other countries do precisely this. It's the fault of American businesses, American government and American people that things are like this.
When the LTE standard was created, all of the companies agreed that their patents would be available under FRAND (fair, reasonable, and non-discriminatory) terms. If they didn't agree, they'd be left out of the standard. Qualcomm agreed that it wouldn't use its patents to push market power. That's an essential part of this.
When a standard is created, companies want their patents to be used in the standard because it means they get a cut of an entire industry. To get this cut, they have to agree that the cut will be small and that they won't exercise market power. Basically, they should get a somewhat reasonably objective amount of compensation for what they've provided.
Apple never agreed to that for the App Store. The app store wasn't a standard that everyone had to implement. Google runs a completely independent app store as do Microsoft and Amazon (on different platforms). Apple doesn't get a cut of those other app stores.
The thing is that Qualcomm is (allegedly) not following the law. That's the issue here. Qualcomm (allegedly) had agreed that its patents couldn't be used that way in order to ensure that its patents would be incorporated into standards that would give them a cut of an entire industry. Corporations are left to their own negotiations - but in this case, the complaint is that Qualcomm isn't following the law and therefore requires intervention.
The thing about wireless is that you need broad compatibility. That means that everyone has to implement the same stuff using the same patents. With operating systems, people can and do use different ones. No operating system vendor agreed to FRAND licensing in exchange for getting a piece of everything (albeit a smaller piece of more items).
I certainly understand the annoyance. Apple has substantial market power, but that market power came about because consumers chose Apple's products, not because Apple's products were blessed as an industry standard. Consumers do have alternative choices in a way that they don't with mobile standards. It might not be enough choice. Apple may still hold more power than you'd like, but Apple never agreed to FRAND licensing.
With a mobile standard, it uses the IP of many companies like Qualcomm, Ericsson, Nokia, and Samsung. When creating the standard, they all agree that they'll license under FRAND terms or be excluded from the standard. That way, no one can screw up the standard with patent claims.
When a drug company creates a new drug, it's usually 100% their IP. So, they haven't made an agreement on IP costs. That's not to say that drug prices aren't problematic, but because drugs are wholly owned there isn't the issue of one company of many IP holders deciding a year later to charge a lot more for their IP.
Let's say one takes 5 different drugs. You don't have to take all 5. You can take 4 and get many of the benefits of the 5. With a wireless standard, you can't implement 4 of 5 patents and be able to communicate. That's what necessitates the FRAND terms. Without them, a standard would be agreed, but never actually rolled out because each patent holder would want to be the hold-out. Oh, you've licensed the other 4 patents? Now pay ALL THE MONEY for my last patent! With drugs, the idea is that you can take 4 of the 5 and then that 5th gets zero money from the patients that don't use it.
Now, drugs are still a very problematic market since, as you note, they can be life-saving and there can be only one choice. But because there isn't the same bundling of patents together, it's a very different problem to solve. You're not worried about someone getting their patent into a bundled drug and then being an ass. You're worried about price accessibility of single, a-la-carte patents.
It's certainly very problematic, but it's a different problem and different problems require different solutions. With drugs, par...
38 comments
[ 4.8 ms ] story [ 92.5 ms ] threadApple vs Qualcomm https://regmedia.co.uk/2017/01/20/apple_v_qualcomm.pdf from https://www.theregister.co.uk/2017/01/21/apple_sues_qualcomm...
So why was CDMA adopted if there was only one supplier of the technology?
Telco's and manufacturers hate to have one supplier of anything, because it means the supplier can haul them over a barrel. Sounds like Apple's complaint is that they overpaid Qualcomm for CDMA components (among other things) after they introduced a CDMA iPhone.
So why was CDMA adopted at all if Qualcomm controls the patents and (seemingly) is the sole/dominant supplier of CDMA modems?
CDMA doesn't seem to be better than GSM in any technical respect.
It also goes on to suggest that the portion of payment Qualcomm received from each phone sold is a percentage of the retail or wholesale price of the phone, pointing out that increasing the storage capacity of a phone from 128GB to 256GB, which I assume does not alter the bill of materials supplied by Qualcomm in any way, results in a larger payment to Qualcomm. Your point that Apple should not have developed a CDMA phone makes sense, but it also means that millions of people would be stuck on a network without an iPhone. Apple got so much shit from the public for having an exclusivity agreement with AT&T here in the states, which in large part drove early jailbreaking progress to open the carrier lock, that it makes good business sense to try and reach those potential customers. I would imagine that Apple reluctantly agreed to a contract for CDMA modems that was less than favorable to Apple in hopes of renegotiating at a later date when Apple became more of a dominant customer, and has since failed in all of their tactics.
CDMA is vastly superior to TDMA in spectrum utilization, although OFDMA (LTE) fairs better than both of them. For this reason all of the 3G standards including GSMs own UMTS were CDMA-based.
The core issue was that in the 2G era, "CDMA" (the Qualcomm name for IS-95/IS-2000) was built on CDMA (code division multiple access), while GSM was built on TSMA (time division multiple access). CDMA (the channel access method) is more spectrum efficient than TDMA, and has some other nice properties. When the time came for carriers in many countries to deploy their 2G networks, it seemed like a win to use CDMA (the standard) because they could support more subscribers with the same amount of spectrum. Companies other than Qualcomm did make CDMA chips in this era.
In the 3G era, the GSM standard also moved onto CDMA ("UMTS"). But this was a pretty serious migration effort, so carriers that had already deployed IS-95/CDMA typically moved along to the 3G variant of CDMA (IS-2000), which required buying less new equipment.
As the 4G networks starting showing up, Qualcomm saw the writing on the wall so they (a) got on the GSM/LTE bandwagon and (b) started investing heavily in their SoCs, which could be bundled with their basebands for smartphones. Since they happened to also be the only remaining baseband manufacturer that was making CDMA support, they also had a tremendous selling point: use our chips in your smartphones and you can still support 2G/3G CDMA networks, which at this point were widely deployed. Plus Qualcomm has so many patents on LTE that you're probably going to end up paying them quite a bit of money even if you don't buy their chips. So today even companies like Samsung which make their own SoCs make variants of their phones with Qualcomm chips to support CDMA carriers.
Qualcomm fans/employees will often mention that this really all goes back to the 80s/90s, when Europe forced everyone to use GSM (which just so happened to be hugely reliant on Europe-owned patents). CDMA never really got a fair shake at world domination. Perhaps if the FCC had just picked one cell phone standard (perhaps CDMA) like they did for TV and radio things would have worked out differently. China briefly tried coming up with their own cell standard (TD-SCDMA) for similarly protectionist reasons and it didn't really work out.
As it is...well, the world finally ended up settling on LTE.
Okay, so I have a stupid follow up question. The company I work for does a lot of work in developing countries (sub-saharan Africa) and outside of major cities 2G is the only thing you're gonna find.
But to my knowledge, there is no CDMA to be found anywhere in these countries, despite what you've said about spectrum efficiency.
So, why is it that CDMA (meaning IS-95/IS-2000) was only ever successful in North America?
Or am I being dense? Could it be that carriers in sub-saharan Africa are actually installing 3G/LTE base stations but limiting the connectivity to handsets to 2G because of tower-tower throughput?
> use our chips in your smartphones and you can still support 2G/3G CDMA networks, which at this point were widely deployed.
So I've heard that a number of US providers (AT&T at least) have already shut off their 2G networks. Does this mean that Apple no longer requires CDMA modems in iPhones because the number of CDMA networks is declining?
You mention that Sprint and Verizon have significant CDMA networks. What is their migration strategy for 4G? To my knowledge the only 4G standard in use is from GSM.
Indeed, the latest iPhone 7 actually comes in two models, one with CDMA support and one without.
Sprint and Verizon (and other CDMA carriers) ultimately are going to shut their CDMA networks down and be LTE only. Same is true of GSM carriers; they'll be shutting down their 3G/UMTS/WCDMA support as LTE devices become available everywhere.
I think you are confusing the terms. GSM is a family of standards some of which are based on CDMA, like aforementioned UMTS which is the most widely deployed network standard in the world right now. Because UMTS was not based on TDMA it was a very costly upgrade for most operators since it required entirely new equipment. LTE on the other hand is yet another completely different beast (OFDMA) not compatible with any existing infrastructure so everyone has exactly the same migration strategy to LTE regardless if they are CDMA or TDMA based.
Other way round: Qualcomm lobbied for the adoption of CDMA precisely to create this situaion. GSM is somewhat uncommon in being a standard not dominated by a particular manufacturer. GSM has a patent pool under FRAND terms; see the history section of https://pure.tue.nl/ws/files/2477048/375588270387968.pdf on how European IP policy avoided these problems.
American public policy is to allow one company to win in the market and then use intellectual property to capture overwhelming market share and share of the value generated. This is called a "free market" for some reason.
First, let's say that you want to make an isosceles triangle on a sheet of paper with the base parallel with the bottom of the page (as part of a triangle standard). Nokia owns a patent on lines being parallel to a side of the page. Ericsson owns a patent on figures with two sides of equal length. Qualcomm owns a patent on angles less than 90-degrees. In order to make your triangle, you need all three patents. You can't just go to Nokia and say, "wonderful, you own one of the patents and I want to make a triangle according to this standard and I'm going to compare your bid against the bids of Qualcomm and Ericsson." Nope, you need a license from all three.
Now, they've agreed to license the technology under FRAND (fair, reasonable, and non-discriminatory) terms. But what does that mean? The idea is that the patents of these three companies are all needed by the standard. If I want to implement that standard, I shouldn't get a license from Nokia and Ericsson for their patents and then during negotiations with Qualcomm be told that they want 99% of all my profits. That would mean the standard would go nowhere because people would be holding it hostage. The idea is that none of the patent holders should be able to exercise market power due to its patents being used as part of the standard.
But given that some patents are more valuable to a standard than others, how do we know which ones should cost what? We don't. Therein lies the problem. Most of the time, companies like Apple negotiate bilateral agreements with companies like Nokia, Ericsson, and Qualcomm. The only thing keeping those three in check is the specter of court action - court action that might look very unfavorably upon them.
But we still don't have a great definition of how exactly FRAND licensing should work. Ultimately, I think this is a new challenge for the world that we're trying to figure out.
--
Now, on to CDMA. CDMA is a standard and while Qualcomm is often thought of as the owner, the case is actually that it owns a high share of standard-essential patents on 2G CDMA. They own a smaller share of 3G CDMA patents and an even smaller share of LTE patents (to the point that they aren't the #1 holder of LTE IP).
Qualcomm has committed to FRAND licensing on its standard-essential patents for CDMA. As such, CDMA isn't really single source - Qualcomm doesn't even own all the IP for CDMA.
But the FTC is alleging that despite Qualcomm's FRAND commitment, it isn't licensing its standard-essential patents to competing baseband developers. The FTC is also alleging that Qualcomm is getting paid a lot more in royalties than OEMs have to pay other holders of equivalent standards-essential patents.
--
Let's say that consumers need a BLT sandwich to use mobile networks. I own a patent on bacon, you own a patent on lettuce, and someone else owns a patent on tomatoes. I say that bacon is really the hero of the sandwich and demand 3x more for my patent. Is that reasonable? Maybe. I decide that I won't license bacon to anyone unless they're willing to let me manufacture the sandwich on my bread (bread having no patent). I'm capturing a lot of money for my bread business, but I'd committed not to exercise market power like that when the standard agreed to use my patent. But I am. You want a BLT, you're going to need to buy it from me as I manufacture it using my bread.
More, let's say that it's 1901 and I'm the only company that makes non-stale bread. Your customers don't want stale bread - at least not the rich ones where you earn your money. So, I tell you that if you buy bread from other companies for your peasant BLTs, you'll have to pay me extra money for all those peasant BLTs or I'll stop giving you my bread for your rich customers. Maybe the other companies could make non-stale bread with capital investment, ...
Haha, yes! BLTDRM? The world needs more BLT sandwich requirements :)
Thanks for taking the time to write up such a great response. Not being very familiar with this topic, your simple examples made this much more approachable and were a joy to read.
Apple needs to win with technology and innovation, not lawyers
The article you've linked also notes that Qualcomm and Nokia already had a prior agreement, but once it expired couldn't agree and ended up in court. That's not what is going on between Apple and Qualcomm.
Forbes has more money to spend on blocking ad-blockers than the ad-blockers have to spend catching up. This a game of cat-and-mouse, and you chose the side with fewer resources. What did you expect?
Now all of a sudden, Apple finds royalties oppressive?
I am sick of large corporations getting better treatment than consumers. If consumers can't sue pharmacy companies for using patents to set a high price for a life saving drug, then neither should Apple be able to sue Qualcomm for using patents to set a high price for CDMA chips not available elsewhere.
Billion dollar corporations should be left to their own negotiations without government interference and allowed to screw over each other (as long as they follow the law). The government should instead focus on stopping these same corporations from screwing over consumers and small businesses.
Sorry about the sarcasm but c'mon. This place is about sharing info. Put in the 5 mins and explain the difference. Thanks in advance!
If Apple loses this suit, then we could feel smug that they have tasted their own damn medicine. But that doesn't improve the situation for consumers.
The only recourse we have is to sustain a boycott, or change the laws to protect consumers. Neither option seem very plausible.
Android, Windows.
And they have to review your app.. which has a real labor cost.
If your app is $50, I could understand the outrage over the price.. but most apps are a dollar or two, and sell little to nothing.. the profits on that have to be insignificant or nonexistent.
Credit card processors charge in the ballpark of $.30/transaction + 3%. And Apple could make a single credit card charge totaling every purchase through Apple for the month, which would make the fixed portion a fraction of what the credit card companies charge. If Apple was charging $.10 + 3% or 5% there would be hardly any objection.
And at Apple's scale, all the rest of that stuff costs them something like a penny per transaction.
> And they have to review your app.. which has a real labor cost.
I'm happy to do that part myself, or go price shopping for reviewers on the open market. How do I do that?
> If your app is $50, I could understand the outrage over the price.. but most apps are a dollar or two, and sell little to nothing..
And yet they charge the same percentage for the $50 app, which is why you don't see many of those on iOS -- the people who would make $50 apps make them for PCs instead because Dell doesn't demand a third of their revenue.
> the profits on that have to be insignificant or nonexistent.
If the profits are so low, why don't they leave the market and let some other saps compete to provide app stores?
It doesn't have to be an either/or scenario. The government can work for both billion dollar corporations and for individuals. It's not the fault of government – as governments in some other countries do precisely this. It's the fault of American businesses, American government and American people that things are like this.
When a standard is created, companies want their patents to be used in the standard because it means they get a cut of an entire industry. To get this cut, they have to agree that the cut will be small and that they won't exercise market power. Basically, they should get a somewhat reasonably objective amount of compensation for what they've provided.
Apple never agreed to that for the App Store. The app store wasn't a standard that everyone had to implement. Google runs a completely independent app store as do Microsoft and Amazon (on different platforms). Apple doesn't get a cut of those other app stores.
The thing is that Qualcomm is (allegedly) not following the law. That's the issue here. Qualcomm (allegedly) had agreed that its patents couldn't be used that way in order to ensure that its patents would be incorporated into standards that would give them a cut of an entire industry. Corporations are left to their own negotiations - but in this case, the complaint is that Qualcomm isn't following the law and therefore requires intervention.
The thing about wireless is that you need broad compatibility. That means that everyone has to implement the same stuff using the same patents. With operating systems, people can and do use different ones. No operating system vendor agreed to FRAND licensing in exchange for getting a piece of everything (albeit a smaller piece of more items).
I certainly understand the annoyance. Apple has substantial market power, but that market power came about because consumers chose Apple's products, not because Apple's products were blessed as an industry standard. Consumers do have alternative choices in a way that they don't with mobile standards. It might not be enough choice. Apple may still hold more power than you'd like, but Apple never agreed to FRAND licensing.
With a mobile standard, it uses the IP of many companies like Qualcomm, Ericsson, Nokia, and Samsung. When creating the standard, they all agree that they'll license under FRAND terms or be excluded from the standard. That way, no one can screw up the standard with patent claims.
When a drug company creates a new drug, it's usually 100% their IP. So, they haven't made an agreement on IP costs. That's not to say that drug prices aren't problematic, but because drugs are wholly owned there isn't the issue of one company of many IP holders deciding a year later to charge a lot more for their IP.
Let's say one takes 5 different drugs. You don't have to take all 5. You can take 4 and get many of the benefits of the 5. With a wireless standard, you can't implement 4 of 5 patents and be able to communicate. That's what necessitates the FRAND terms. Without them, a standard would be agreed, but never actually rolled out because each patent holder would want to be the hold-out. Oh, you've licensed the other 4 patents? Now pay ALL THE MONEY for my last patent! With drugs, the idea is that you can take 4 of the 5 and then that 5th gets zero money from the patients that don't use it.
Now, drugs are still a very problematic market since, as you note, they can be life-saving and there can be only one choice. But because there isn't the same bundling of patents together, it's a very different problem to solve. You're not worried about someone getting their patent into a bundled drug and then being an ass. You're worried about price accessibility of single, a-la-carte patents.
It's certainly very problematic, but it's a different problem and different problems require different solutions. With drugs, par...