Study: Royalty Charges Almost On Par With Component Costs For Smartphones

Bismillah (993337) writes "An interesting study by WilmerHale lawyers and Intel's assistant general counsel Ann Armstrong looked into how much royalty payments and demands actually amount to per device, and found the cost so high it threatens industry profitability and competitiveness. 'As the bank robber Willie Sutton is reported to have said, he robbed banks 'because that's where the money is' - so too of smartphones for patent holders,' the authors wrote."

It is for a $400 device.

[Ecuador]

Since most smartphone royalties are charged as a % of the price of the device, they have to do the calculation given a hypothetical device with a specific price. They chose $400, seems that seems to be near the average price of a high-end smartphone.
I know it is /., but if you have such a basic question about the article perhaps you could take a quick look...

In general I can understand basic technology royalties like LTE etc. I mean, somebody spent a lot of money developing a technology essential for a device type, so you'd have to pay to enter the market of that device which would not exist otherwise. Ok, with so many companies involved the royalties may get a bit high. But in addition to that, there are companies allowed to patent obvious things (that most of the time they did not even "invent" first) like swiping the screen, or even generic designs like rounded corners that essentially had near ZERO cost in R&D and yet either demand high royalties or try to block competitors...

Re:The people that invent things must be compensat

[wbr1]

Interesting fact. In america , recipes are not subject to copyright or patent. General mills, and other cereal makers, as well as other food companies rely on jealously guarded trade secrets. This does not stop generic copy cat foods (is store brand sodas and generic cereals) from being made. In fact they proliferate. Some are indistinguishable or better than the original. Some are junk.

This is the market in operation. Stopping patents will not slow or stop innovation, it will spur some as companies need to invent to differentiate from the rest. Then when they are copied, it continues. In this sense, necessity is the mother of new invention. The necessity of being unique and valuable Ina sea of clones.

License fees are a hidden tax

[Required Snark]

I worked for a company that was trying to develop technology for MPEG. It was a pure intellectual property play.

MPEG is (theoretically) a non-profit, open to all international standards body. The separate entity MPEG-LA is the MPEG License Authority. It's the business end. The technical committees are front organizations for the license authority, which generates a lot of cash.

The entire setup is a sham. The big players send so many representatives to the technical committees that they dominate by sheer numbers. Sometimes meetings extend for hours late into the night. The faction that wants to get their proposal excepted keeps their people in the meeting, and then when they count a majority they hold a vote and get what they want.

It's not about technology or quality or making things faster/better/cheaper. It's about decades long revenue streams protected by international standards and laws like the DCMA. Even though it looks like technology is driving to lower costs, the reality is that patent royalties are effective a huge tax on users.

The return is completely disproportionate to the initial investment. How much do you think it cost to come up with the standard for the HDMI cable? How much do you think is being made worldwide if even $1.00 US is going for license fees?

No capitalism here. Nothing to see. Move along.

I can copy the declaration in seconds

[raymorris]

> if it was simple enough to copy quickly, then your > invention wasn't so revolutionary anyway.

I canmake a copy of the declaration of independence in about two seconds . The document was obviously revolutionary. :)

More seriously, though, it is not too uncommon to try a thousand different things before finding what works. Once you know what works, reproducing it is trivial. For example, the lightbulb. Thousands of different materials and approaches were attempted. Once you find the right design and materials, making another copy is trivial. The payoff for spending all that time and money trying different things in the HOPE of finding something that works is you get to temporarily profit by being the only seller for a while. Without that, it would be silly to spend years trying different designs and materials (or paying your employees to do so) - you'd be better off letting the guy down the street do all of the hard work, then just rip off his design.

Dyson literally built over a THOUSAND prototypes trying to come up with a better vacuum. It was probable that he was wasting his time and money - that he'd never perfect an effective, affordable, reliable design. The reward for taking that risk and putting in the work is a temporary patent, so he can sell his invention rather than having the pre-existing vacuum companies sell his design thorough their network of established retailers without him getting any reward for his work.

Of course two key components of the system are that it is supposed to be a TEMPORARY protection for a NEW INVENTION. The appropriate definition of "temporary" has changed in our fast-paced world. Also half a dozen patent trolls have been trying to assert patents on a lot ofthings that aren't new inventions, and trying to assert them against people who have not actually infringed the appropriately narrow scope that the patent should cover. So we do need to deal with these patent trolls. Fortunately, there are very few of them and a whole lot of us.