The USITC postponed its decision on Samsung’s complaint against Apple until May due to raised issues regarding FRAND licensing obligations and an excision order. There is now an interesting development that has come about in the Apple-Samsung dispute: in December 2012, “Samsung abandoned the 2.4% royalty demand for its wireless standard-essential patents (SEPs) it had been adamant about for well over a year.”
This issue arose in the Netherlands in 2011 when a Dutch court denied Samsung’s injunction request as its 2.4% royalty demand was considered to be outside the FRAND terms. In December, however, Samsung decided to withdrawal all of its European SEP-based injunction requests. The filing does not specify what the new demand is or weather that complies with the FRAND terms.
Samsung behaved similarly with Ericsson. It reduced its demands on Apple a week after it reduced its royalty demands with Ericsson. Samsung realized that its tactics were not working and had to shift gears. However, it still has to defend itself against Apple and Ericsson’s claims as well as the European Commission and countersuing. Apparently, the European Commission is still investigating Samsung to determine if it violated the European antitrust law in use of declared-essential patents against Apple.
Apple wants FRAND rates to be set in a district court and highlighted Samsungs track record of overdeclaring patents (where Samsung said certain patents were essential to standards when they were not) twice as much as the average industry rate. Apple has used Samsungs statements against them. Samsung and Nokia and others agreed licensing cost of a wireless standard should not exceed 5-7%, and Samsung would then get a fraction of this. There is still one SEP that remains on the table but apparently is quite trivial as far as functionality goes and accounts for less than 0.01% of the code in the accused device. In addition, this small amount is a relatively unimportant portion of the UMTS standard. All in all, there should be a standardized license so everyone pays the same amount, claims Dr. Nils Rydbeck, former Chief Technical Officer at Ericsson.
Just as Samsung, Google’s Motorola Mobility might agree to a 100-125 million annual royalty cap after Microsoft had dealt with years of 2.25% royalty for its Motorola patent use. SEP licensing is not something companies are able to hold over others heads any longer.
It's interesting that Samsung reduce the royalty from wireless standard-essential patents (SEPs). Not sure if others will follow the same action.
ReplyDeleteSamsung's move to reduce licensing fees sends a huge signal to all parties in the space. it could mean that they are changing strategy and to not be as aggressive anymore to prevent further disputes and focus its resources on some other areas.
ReplyDeleteI'm a little confused on this move by Samsung. If it really is about signaling a less-aggressive business strategy, then Samsung's move seems to be an opportunity for other companies to take more of the hotly contested mobile market.
ReplyDeleteOn a related note, I definitely see a need for some standardization in patent royalties. If companies are over-claiming on patents then this should be seen as an unfair advantage to dominate the market.
Simon I completely agree, it does seem to leave room for other companies to take advantage, although if others do follow suit ideally Samsung's move will not be a negative one. Hopefully it will begin a new precedent.
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