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

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