Apple Asks EU Body to Set Rules on FRAND Licensing Of Essential Patents

News | Saturday February 4 2012 12:05 AM | Comments (0) Tags: , , , , , , ,

reports that Apple filed a letter with the European Telecommunications Standards Institute, asking for governing rules on the FRAND (fair, reasonable and nondiscriminatory) licensing of patents essential to manufacture a mobile phone.
. Many of these patents have, over time, become a part of industry-wide standards which most mobile devices support. Standard bodies require these patents to be licensed on FRAND terms, but Apple , in the letter, says that there is a lack of consistency in the licensing terms of such patents.
Apple said in its letter–which was dated Nov. 11, but not previously disclosed–that the lack of clarity on what is fair, reasonable and nondiscriminatory has led many companies to ask unusually high rates and sue one another claiming they infringed on one another’s patents.
“It is apparent that our industry suffers from a lack of consistent adherence to Frand principles in the cellular standards arena,” wrote Bruce Watrous, Apple ‘s intellectual property head.
Apple additionally says that, FRAND
shouldn’t be used to seek injunctions on certain products.
It also proposes a framework wherein these patents are licensed at an “appropriate royalty rate,” with a common royalty base.
Apple defines an appropriate royalty rate as one that is computed after taking into account, the proportion of essential patents (granted or pending) held by a company as compared to the total essential patents involved in the same technology.
Generally royalties are levied in terms of percentage. For example,
. Apple proposes that a common base exist, against which this royalty is applied.
Let’s assume BMW builds a 50,000 euro car that comes with a built-in UMTS-capable computer system. Now let’s take Motorola’s 2.25% royalty demand as an example. What is it they want to get 2.25% of? The entire car? That would be more than 1,000 euros for a few wireless patents. The computer system? Or wouldn’t it actually make sense to multiply that percentage just with the cost of the baseband chip, the component that provides basic telecommunications functionality and is sold at a per-unit price between $10 and $15 including all of the relevant patent rights?
Apple ‘s letter proposes the latter: “This common base, as between two negotiating parties, should be no higher than the industry average sales price for a basic communications device that is capable of both voice and data communications.”
Apple ‘s late entry into the mobile market puts it in a bad state when it comes to patents in the wireless industry. Recently
, when Motorola obtained an injunction against Apple .
To read the entire letter, head over to
, where Florian Meuller explains Apple ‘s proposed solution to the FRAND problem in great detail.

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