Linked by Thom Holwerda on Mon 2nd Jun 2014 12:45 UTC
PDAs, Cellphones, Wireless

iTnews points to a study performed by Joseph J. Mueller and Timothy D. Syrett of IP firm WilmerHale, and Ann Armstrong of Intel, which concludes that for an average $400 smartphone (no subsidies), patent royalty costs may be higher than component costs.

Indeed, the royalty data shows that the potential royalties demands on a smartphone could equal or even exceed the cost of the device's components. To be sure, for the reasons described above, many of the so-called "headline" rates on which these royalty figures are based may not withstand negotiation or litigation, but they have nonetheless been sought (and received) from some licensees. With the addition of royalties for the components/technologies for which we did not have sufficient data to include royalty figures, the total potential royalties would increase. Without access to the actual royalty figures paid by smartphone suppliers it is impossible to know for certain their magnitude. But our research demonstrates that they are likely significant. Indeed, the available data suggest that the smartphone royalty stack may be one important reason why selling smartphones is currently a profitable endeavor for only a small number of suppliers.

Let me repeat that last line for you - savour it and let it sink in.

Indeed, the available data suggest that the smartphone royalty stack may be one important reason why selling smartphones is currently a profitable endeavor for only a small number of suppliers.

Bingo. This is exactly why the patent system will never change: this construction benefits the large players immensely. Smaller players will have a hard time keeping up with the patent costs, since they most likely won't have much to barter with patent-wise. The result is less competition for established players.

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Re:
by kurkosdr on Mon 2nd Jun 2014 14:08 UTC
kurkosdr
Member since:
2011-04-11

On one hand, I am not naive enough enough to believe that standards like 802.11ac and LTE would have been invented if the incentive of receiving patent royalties didn't exist. Nobody would embark in costly research activities such as studying MIMO and beamforming, just to "scratch and itch".

On the other hand, ISO and IEEE have been known to shove certain patents in standards which could have been avoided/worked-around, or don't offer than much to the standard anyway, since standard bodies are in part controlled by big corps. Just look how the "b-frames" patent (a patent touted as essential by the MPEG) was elegantly worked around by WebM, using "compound prediction".

Anyway, anybody who doesn't want to pay royalties should put his/her money where his/her mouth is and invent a royalty-free standard, like the DisplayPort folks did, or like Google did with VP8.

Edited 2014-06-02 14:14 UTC

Reply Score: 1

RE: Re:
by hobgoblin on Mon 2nd Jun 2014 16:12 UTC in reply to "Re:"
hobgoblin Member since:
2005-07-06

Hard to say. The basics for packet radio was pretty much laid because they wanted to link various research locations in Hawaii, iirc.

The framework for GSM came out of NTNU in Norway, as part of a effort to come up with a pan-european digital mobile network standard.

And i think coax Ethernet came about because the scientists at Xerox PARC wanted to link their Altos together.

Hell, the steam engine was pretty much the epitome of "scratch an itch". In that case, finding a more effective way at getting water out of deep coal mines.

Reply Score: 4

RE: Re:
by ilovebeer on Mon 2nd Jun 2014 16:49 UTC in reply to "Re:"
ilovebeer Member since:
2011-08-08

Nobody would embark in costly research activities such as studying MIMO and beamforming, just to "scratch and itch".

Scratch an itch. I don't agree that without royalty incentives this stuff would never get done. It all depends. Sometimes it is in a companies interest to take on such endeavors if its a necessity to their long-term goal(s). The payoff isn't always in direct compensation.

Reply Score: 4

RE: Re:
by Kochise on Mon 2nd Jun 2014 20:56 UTC in reply to "Re:"
Kochise Member since:
2006-03-03

Check your facts before getting Google in high esteem :

http://appleinsider.com/articles/13/03/07/google-admits-its-vp8webm...

Kochise

Reply Score: 1

RE: Re:
by unclefester on Mon 2nd Jun 2014 23:52 UTC in reply to "Re:"
unclefester Member since:
2007-01-13

WiFi was developed by Australian government radioastronomers at the CSIRO. They wanted to transmit data wirelessly within their own buildings.

Reply Score: 3

RE[2]: Re:
by kurkosdr on Tue 3rd Jun 2014 10:15 UTC in reply to "RE: Re:"
kurkosdr Member since:
2011-04-11

WiFi was developed by Australian government radioastronomers at the CSIRO. They wanted to transmit data wirelessly within their own buildings.


Yes, the original -slow- WiFi. I am talking about all the inventions that evolved WiFi, just read my previous posts.

They could, there's no way to know. What we do know is that the 70's and 80's, and even the centuries before that, saw rapid scientific advances. In fact, scientific advances have been happening at an increased rate for a long time even before the patent system existed.

Rule of diminising returns. For example, inventing the original WiFi was relatively easy. Just use frequency hopping or DSSS, put a CSMA/CA system, and there, it's practically ready.

But developing something like 802.11n or 802.11ac and make it work in the real world is much more complicated, and requires much more R&D, and R&D will get more expensive as years pass.

Edited 2014-06-03 10:21 UTC

Reply Score: 0

RE[3]: Re:
by unclefester on Tue 3rd Jun 2014 11:47 UTC in reply to "RE[2]: Re:"
unclefester Member since:
2007-01-13

For example, inventing the original WiFi was relatively easy. Just use frequency hopping or DSSS, put a CSMA/CA system, and there, it's practically ready.


What a load of nonsense. The 'original' wif-fi specification was unusable in the real world. It required radioastronomers to develop novel methods to deal with 'smeared' signals caused by reflections. Only then could wi-fi be commercialised.

If you were around in the mid 90s you would be aware there was a frantic laying of co-axial and fibre cables in the ceilings and ducts of universities and offices to deal with the WWW and email. Wi-fi was considered almost a miraculous solution when it first arrived.

Reply Score: 3

BlueofRainbow
Member since:
2009-01-06

From what I gather from this rather thorough document is that the royalities on patents for a $600 smart phone (at retail) is close to $125, or around 20%.

Not bad for a commercial venture which does not have to put billions of dollars in chip fabricating facilities, flat panel display manufacturing facilities, or an assembly lines in remote corners of the world.

It is hoped that one day, sooner than later, some common sense will be imparted to the whole area of intellectual property rights and how they are handled in real life.

Reply Score: 4

anda_skoa
Member since:
2005-07-07

I personally find it mind boggling that people would think that potentialy monetarization is necessary for research to happen.

This kind of "research for profit" is a very recent development in human history, tens of centuries of research were done without that.

Research is not just the search for solutions to a problem, it is a means of gathering understanding of why and how things happen.

As one of my professors at Universitay put it: a thesis doesn't have to come up with a solution to a problem, eliminating a number of possible solutions is equally valuable research.

Reply Score: 4

CapEnt Member since:
2005-12-18

It's indeed a very recent development. And this scientific and industrial revolution coincides with the greatest revolution in economics of the history of mankind, indeed, was fueled by it. In this short period of one century we surpassed by far what was done in the last 20 thousands years of recorded history.

I agree with you that we don't need a drive for profit to engage in research, but profit is a powerful drive for innovation.

I don't like the current patent system, but replacing it with some fancy utopia is just as bad as keeping it as is today.

The patent system is arguably idiotic in dealing with genetics, software, pharmaceuticals, nanotechnology, educational research... and the list goes on.

But the world is not only that. The world is also about washing machines, dishwashers, juice extractors, water pumps, tupplewares, bottles, hygienic paper, toothbrushes, tables, fancy decorative stuff... and other little things that exist around you (or was used to produce it) just because someone wanted to make a life, not out of altruism.

Innovators (in particular, individual ones that does not even have a company) needs some sort of protection if their product becomes a hit instead to let them fend for themselves if someone larger than himself do a exact copy and market his product.

Reply Score: 1

kurkosdr Member since:
2011-04-11

@CapEntĀ 

I wish I could upvote you, but you know, OSnews doesn't allow if you have posted.

Some people don't realise how much money is spent in research and development nowadays. They think MIMO and beamforming would have happened anyway by people experimenting in their basements or by universities, just like in the '70s and early '80s. Yeah, under such regime, said inventions would have happened 20 years from now or so, which is how long patents last anyway. Corps (and universities that patent their work) just do research and development much faster nowadays, deal with it.

Or they think that companies would bear the cost of making an invention (like the ones mentioned above) just to have their invention copied in matter of months.

There is a difference between opposing junk patents (hint: almost all soft-patents are such, because patents forbid patenting ideas, they only allow patenting inventions), and opposing patents in general.

Edited 2014-06-02 23:57 UTC

Reply Score: 2

Soulbender Member since:
2005-08-18

They think MIMO and beamforming would have happened anyway by people experimenting in their basements or by universities, just like in the '70s and early '80s.


They could, there's no way to know. What we do know is that the 70's and 80's, and even the centuries before that, saw rapid scientific advances. In fact, scientific advances have been happening at an increased rate for a long time even before the patent system existed.

Reply Score: 3

tylerdurden Member since:
2009-03-17


Innovators (in particular, individual ones that does not even have a company) needs some sort of protection if their product becomes a hit instead to let them fend for themselves if someone larger than himself do a exact copy and market his product.


The current system does nothing of the sort, so perhaps the one proposing an "unrealistic utopia" could very well be you.

Reply Score: 4

The Shenzen solution
by unclefester on Mon 2nd Jun 2014 23:48 UTC
unclefester
Member since:
2007-01-13

The small Chinese 'mushroom' manufacturers simply avoid paying the royalties. That's how they can sell so cheaply.

The current patent system won't last much longer because China, India, Russia and other emerging economies will refuse to cooperate.

Reply Score: 3