Motorola Demanding 2.25% of Apple’s iPhone Sales Revenue For Standard-Essential Wireless Patents

Apple vs Motorola

Yesterday, we were quite surprised when Apple had to briefly remove their 3G iOS devices from their online store in Germany.

The removal was related to the enforcement of the injunction that Motorola had won back in December that prevented the sale of 3G iOS devices that infringed on Motorola’s patent.

It raised couple of questions:

1. How much royalty is Motorola demanding from Apple for the standard-essential wireless patents?

Apple had tried to use the “FRAND” defense, claiming that the patent was essential to the 3G standard and needed “fair, reasonable, and non-discriminatory” terms for licensing it, but had failed to convince the judge last time round as their offer to Motorola to use their patent was deemed insufficient by the regional court.

Apple made a new offer to Motorola, which helped Apple to secure a temporary suspension of the injunction.

FOSS Patent has now found out that Motorola is demanding 2.25% of Apple’s iPhone sales up to and including the iPhone 4. As Fortune points out, revenue from those iPhone sales totaled $92.64 billion, which means that Motorola is demanding $2.08 billion for its 3G patent.

FOSS Patents’ Florian Mueller feels that the amount is too much.

Assuming in Motorola’s favor that this was a license to all standard-essential wireless patents, the amount still appears excessive to me given how many companies hold patents on such standards and what royalty rate this would lead to in the aggregate.

Apple is apparently filed a series of discovery motions aimed at finding out how much Motorola charged Nokia, HTC, LG and Ericsson for the same technology. Motorola may get into trouble if Apple finds out that Motorola is demanding more money from them than its competitors.

2. Why was iPhone 4S not removed from the online store?

Apple has started using Qualcomm’s baseband chips in iPhone 4S. Since Motorola has a patent cross-license agreement with Qualcomm, Apple may be licensed by extension, based on the concept of patent exhaustion.

This was probably the reason Apple did not remove iPhone 4S models from its German online store yesterday.

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