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.

  • http://www.sublogic.net Android Sucks

    You can enter a market and reinvent it like you did with the iPhone, but you can’t reinvent the patent system, you’d think Apple would have dropped this once Steve kicked the bucket, but I guess he is even bent on taking people out from beyond the grave, even if it brings Apple down with him.

    • Paradox

      Apple is the one being sued by motorola. Why/how would they drop this? Aside from paying billions of dollars to motorola, they have no way out but to either drop the product line completely, or fight them in the courts. There is no just dropping it.

  • Robert

    Wonder if motorola will start sueing other companies for using the 3G patent with out permission

  • http://acclaimedmovers.com Janey Samson

    Motorola is demanding too much from apple when they should be grateful that Apple is even considering partnering up with them. Apple can do well without Motorola, but Motorola will fall behind without Apple, FACT.

    • Mike

      shut up Apple fanboy . I don’t feel sorry for Apple they go around suing companies and people and this time they got a taste of there own practices .

  • Hmmm?

    Not sure if it is high or not. To some it seems like a huge amount but that’s only because of the large total of iPhones already sold. Since it’s a 3G patent (not exactly sure for what though) it seems like a vital part for the phone.

  • Honest Joe

    Perhaps if/when we know what Motorola charged the rest of the field we can make an informed decision about the legitimacy of a $2.08 BILLION licensing fee, without that info though there is no context and really no discussion. Speculation on my part would be this is way higher than they charged anyone else because they have the benefit of a retroactive calculation.

    • Paradox

      I would have to agree with you Joe.

      I think Motorola will be under quite a bit of scrutiny when this information is released. I won’t be surprised if none of the other companies were charged a dime; considering this strategy began after Apple began suing everyone.

      Both parties need to drop all these ridiculous law suits and allow for some reasonable competition in the industry.

      As for the 2 Billion dollar calculation… Fortune made a huge mistake in this one, or being I don’t have exact figures I could be in error. But the lawsuit is a German one; hence the only revenue Motorola can claim the 2.25% on is that revenue acquired within the German marketplace. I would find it hard to believe that the penalty could cover global sales, as patents are awarded per country not globally. Thats why China is able to steal so many technologies from other countries. They have no patent laws protecting proprietary technology.

  • http://myspace.com/nsereko_joseph Prof Nsereko Joseph

    But what convincing products have they made other than crap,I mean the Chinese !!!

  • Honest Joe

    Prof. They make it quicker, cheaper and in higher volumes then the products they are “copying” that in itself is pretty industrious, don’t you think?

  • Chris

    The dollar amount may seem high, but the percentage is reasonable, especially given how integral the patent is to the basic operation of the phone.

    Alternatively, if the 4S wasn’t pulled because of it using different chips, you would think Apple would simply switch to Qualcom chips in all phones that they sell.