For reference: Apple is willing to pay a maximum of $1 for patents that make their device a functioning phone. Two years ago, they offered Samsung to license some of their less important patents for $30 per phone and $40 per tablet.
For reference: Apple's patents were for multi-touch/bounce back scrolling which their research showed was worth $30/$40 to consumers. Samsung's patents are one of the many FRAND patents for core 3G/WiFi.
Samsung is just one of MANY FRAND patent holders for 3G/WiFi which are commodity technologies today. People just expect it to be on all mobile devices.
The bounce back scrolling uniquely differentiated iOS from other platforms. And there are plenty of ways to implement it without needed to duplicate the exact Apple way. In fact HTC, Samsung, Google, Motorola all have different implementations.
So yes from a product perspective Samsung's tiny contribution to the FRAND patent pool is worth 1/30 of what Apple's patents are worth.
People just expect it to be on all mobile devices.
This actually argues that the patents on such technologies are worth more - after all, a mobile device lacking mobile connectivity is worth virtually nothing, regardless of how nice it's scrolling implementation is.
That nicely encapsulates why it's so hard to determine a fair price for a standards-essential patent. In terms of the bounce-back scrolling thing, it's easy: if $30 is more than it's worth to consumers, then Samsung will implement a work-around instead; if not, then they'll license it. The price will tend to the value. For standards-essential patents, the apparent value is very high - but it may have only acquired that value by virtue of being included in the standard in the first place, so charging a price commensurate with its value would not be "fair".
It's not surprising that negotiations over such a price are difficult, particularly when the relationship between the companies involved is already acrimonious. Apple needs a license to these patents for its devices, but would rather pay as close to zero as possible for that; Motorola is required to license the patents for a fair royalty, but would like that license to be as lucrative as possible. Essentially we have a negotiation over price which neither party is permitted to abandon - what is most surprising is that this ever works!
The key to it working smoothly in the past is that all the manufacturers had standards-essential patents. So then if other manufacturers ask a lot for their patents, you ask a lot from them for yours and one way another you come to a cross-licensing agreement (because otherwise neither of you can sell any phones).
The problem with Apple is that they refuse to license their own patents for any reasonable amount, so the other manufacturers come in and ask them to pay the full ticket price for the standards essential patents, and Apple starts crying about how expensive it is when they refuse to offset the cost by cross-licensing their own patents like everybody else.
Apple basically came into the phone industry, built upon the innovations of all others of the past decades, added their innovative ideas, a highly-polished UI and then flat-out refused that others ever could use these improvements of theirs.
Apple shocked many of the incumbents who believed they had a stable oligopoly and could now be lazy. This is the positive effect Apple had, and they have earned handsome profits for it so they really have no need to exploit the patent system for the last penny. I hope they realize this gradually.
I was wondering the same thing a couple of days ago. The iPhone5 hasn't got the buzz previous releases had, and the iPad mini seems to be less and later than comparable android 7" tablets. Apple is also putting increasing energy into patent lawsuits, which is another sign of a company resting on it's laurels. And of course they've lost Jobs.
Having said that, although I think it likely that Apple has peaked, I wouldn't short it just yet. I had the same opinion about Microsoft ten years ago during the years bewtween XP and Vista. Linux was surging ahead, Windows was going nowhere, lawsuits started flying and Bill Gates stepped down. Actually, now I commit this to text, the comparison is spookily similar!
But my point is that it took about 8 years before there was any effect on their share price. My experience is that what seems obvious to us now takes years to filter through to market sentiment. So if you're going to short Apple, do it 10 years out (if that's possible).
Tim Cook may be no Steve Jobs but he's no Steve Ballmer either...
(Though on the other hand as cash cows go the iPhone and iPad are no Windows and Office).
That said I think the whole Jobs thing is overstated at this point. It's not as if they didn't misstep with Jobs at the helm, and it's not as if they've been turning out bad products since he went (not to mention that everything "post-Jobs" they've done so far was in the pipeline while he was still in charge and would have had his blessing).
Before Steve Jobs got sick and started the war with Android, it was always that Apple could innovate their way out of any problem. Somehow Apple decided to stop innovating their way out or problems and file patent lawsuits like any other top dog billions of dollar corporations. It is not the way to do things and will turn around to bite Apple in the long run.
The iPod, the iPhone and the iPad in 11 years. That's a record of innovation that stands up to pretty much any company in the last dacade and a bit. The iPad itself came out less than three years ago and they've put out four versions of it plus the iPad mini taking it from a product that no-one had made work to a product that is now tearing a major chunk out of the laptop market.
Maybe it's just me but I think that's quite a rate of progress. The iPad is less than three years old and people are saying "what have they done lately?"
Put it in context, who is doing more? Who else has introduced just one product on that scale in the last five years? In the last ten?
People talk about the new innovative Microsoft but do the Surface, Windows Phone (both massively reactive plays) and Kinnect really stack up that well against what Apple are doing and have done in the same period (and I didn't mention the MacBook Air or Apple TV in there). Don't get me wrong, these are good products and it's great to see Microsoft upping their game (my background is as an MS developer and I always thought they got more criticism than they deserved so it's good to see them getting some credit).
Google have got Glasses which are interesting but still basically a prototype, ditto the car and Google TV which is going nowhere fast as far as I can tell. Android is a great OS but I'm not seeing the Android devices that your typical unbiased observer would sit next to an iPhone and think "that's just in a different class". Great phones (and now tablets) and there are certainly things that they can do that iOS can't but is it innovation on the scale of the original iPad or iPhone? It's always easier to make improvements when you're catching up as Android has been - now it's achieved parity I think we'll get to see what Android is really about. Other than that Plus is nice but hardly innovative, Hangouts likewise and from a business perspective Google remains at it's heart an advertising company.
I love what all these companies are doing - I love Google for Gmail, search and Reader, I love Apple hardware, I love that MS is raising it's game, I love that Samsung are making great phones that are pushing the form factor and keep Apple improving things which in turn will keep Samsung improving things (and I love my Samsung TV and the fact my iPhone is basically half Samsung components), I love what Amazon are doing with content and I love my Kindle.
What I don't understand is some of the lazy narratives that people want to put around these things, as if the lawsuits mean that Jonny Ive is no longer designing because he's training as a paralegal. The law suits were a dick move (almost entirely let's not forget driven by the Apple-isn't-the-same-without-him Steve Jobs - Tim Cook seems to have a far more pragmatic view on them) but I don't think they've changed a single thing Apple have been doing on the product side and I'd be really interested to see any evidence that says they have.
While being beholden to Wall Street is a double edged sword, you need to be a special sort of person to really work without being answerable to anyone in the way Jobs and Gates did.
I think Ballmer shows that for lesser mortals, some responsibility is a good thing.
The suggestion that Jobs was not answerable to Wall Street is false. Successful share price growth kept Wall Street from asking a lot of questions for a long time. Had there been less success, history might have repeated itself.
Even had he lived, Wall Street would have gotten the dividends they demanded. This in no way makes his success less impressive, but it is perhaps foolish to mythologize it.
Ballmer's position is very special for a blue chip tech company. It aligns his interests with those of the large index funds which are structured so as to require owning Microsoft stock over the long term.
To put Ballmer's holdings in perspective, $1.00 of share price change is about half a billion dollars in wealth. Or roughly equivalent to the headline grabbing stock options Cook at Apple will see mature in 2016.
The fifth revision of any product is going to lose some buzz. Remember when new iPods used to generate crazy coverage like the iPhone does today? Now even completely redesigned iPods (like the new Nano) get little mainstream attention. This is not Apple's fault - it is just inevitability, and the only way to fight it it to release completely new product categories (e.g. iPad).
The iPad Mini may be lesser in many ways to the Android 7inchers...but I think this is a smart business decision and in line with how Apple releases products. Apple knows that the first release of any new product will sell well...simply because it is the first of a new Apple product. By leaving out important features (retina, LTE, cameras), it ensures continual upgrade path that will last a few years. At least with the Mini, there is some supply chain justification for leaving out retina displays (which are probably in short demand after being chewed up by all the retina iPads, iPhones and now Macbooks). Leaving out the front camera on the original iPad (despite the obvious need for one) was just extreme cynicism.
The fact is Apple is a smart company that knows how to generate huge amounts of revenue and profits. It uses it's allure and cult-like appeal to sell lesser products at huge margins. Does this make it evil? I don't think so - it just shows it has played the game extraordinarily well.
True, but Apple does not have the corporate stronghold that Microsoft did/does although you could argue the App Store point. Also the upgrade cycle in the Apple profit center (iPhone) is only 2 years and is going to get hit hard by the lower ASPs that phones are seeing. I shorted at 674 (http://seekingalpha.com/article/839661-the-iphone-s-growth-r... - I'm dude111), and am going to continue to hold the position for now. I think the holiday quarter is going to be much weaker, in terms of profits, than anticipated.
Apple is killing it with sales of the iPad. 3 million in 3 days is pretty impressive. Combine that with the other refreshes and this Christmas should be another record breaker for Apple.
So not sure where you get this idea that Apple has peaked. If Apple has peaked then so has Google, Samsung, Microsoft etc.
Look at the stock market and the economy. See any patterns?
Look at the bank scandals and failing banks, foreclosed homes.
Corporations have made record profits at the expense of others, and then sued other companies in an attempt to destroy the competition and have more profits. Apple may or may not have peaked, but there is a big asskicking coming their way because of these frivolous patent lawsuits.
> Guess what happens when the $45 A-Pad Android Tablet comes to the USA and UK?
Absolutely nothing? The type of person that would buy the cheapest equipment available with no concerns other than price wouldn't have considered Apple to begin with. Why is the world driving around in overpriced cars when $3500 Tata Nanos are available?
As someone else replied, probably next to nothing.
Now get schools hooked up with some open source software that runs on Android and THEN try to get the local decision makers to buy that tablet over an iPad; which makes them look cool and hip; and then I will be impressed.
I live in Australia. We don't really have those problems here.
And your entire "price is the most important factor" has been disproven so many times by Apple et al that you just look stupid for bringing it up. Cheap tablets already exist and yet Apple still sold 3 million iPads in 3 days.
People will pay a premium to get the best, but apple isn't clearly the best anymore (except in terms of apps selection, and as app devs will go where the market is, apple may lose this advantage as well).
3 million devices in 3 days might be more impressive from someone else at this point. There are a lot of people that will line up to buy a new iPad even though they just bought the previous iPad a week ago.
Is it time to short AAPL? They've lost some value recently, and the growth proposition doesn't seem to be where it has been. I could see them stay where they are, even with an earnings miss or two, however they are very much a stock traded on public perception.
My perception is that Apple could lose every one of these lawsuits and still make crazy profits, but YMMV.
Looking at this particular case, it seems extremely arrogant for Apple to offer to pay nothing for the ~100M admittedly-infringing products they've already sold.
Where did this idea of Apple paying nothing for the patents come from? I've never heard anyone suggest that, and it seems completely unrelated to debacle's comment.
Apple proposed to pay Moto at most $1/unit "going forward", which has been interpreted (perhaps wrongly) to mean that they want to pay nothing for past infringement.
Their P/E ratio is just 13.26, while Microsoft's is 16.05 and Google is 21.38. While P/E is just one simplistic measure, it does seem to indicate that their stock price already assumes lower future earnings relative to other mature tech companies.
Or it indicates that they are a hardware company, which is to say their ability to grow (or sustain) their business depends on any number of factors, not the least being political stability and conditions in China. Factors over which they can exert very little control.
Not till the day where we see Android based tablets littering nearly every good TV show and movie. These lawsuits and such are meaningless to the coffee shop / college crowd. Apple is as much an image thing as BMW cars were for the previous generation.
Far too many think that their phone, tablet, or laptop, confers status. That is going to take a lot of work to overcome that attitude. The marketing and product placement that it took to create that is the real power of Apple
Apple loses its cool right now... quickly. Wait and see. The problem for Apple is that also the "uninformed crowd" slowly starts to realize that Apple rips them off.
That's at least what's happening here in Germany where also mainstream newspapers talk negative about Apple's politics when it comes to marketing and / or lawsuits.
This may just be a pricing factor. People that earn more money and more discretionary income are able to and want to purchase luxury, or higher-quality, goods. Those at lower income levels with less discretionary income will either not purchase the high priced goods, or will try to acquire a similar product at a lower price.
In other words, the rich are less price sensitive than the poor. Thus, I don't see how one can make a connection between education and Apple ownership without correcting for income.
Or it could be that older, better educated and wealthier people are willing to pay a little extra to get something that works. Because you know as you get older you realise that time is more important than money.
My point was that blanket statements like Apple users are uninformed is stupid.
I'm not actively trading, but my "system" would have suggested to consider shorting them on 9/20 and again on 10/23.
I think you're right about public perception. For that reason, I think heavily about any signals with a technical base.
I've had some sense of a perception shift since summer when the price was in this area previously. Though, I haven't taken a real position on AAPL since it was going sideways around $380 almost a year ago.
So where does this leave FTC who have been looking to accuse Google of the same thing? Do they need to start looking for other "crimes" to accuse Google of anti-trust now?
Relax. There are PLENTY of legal problems for Google.
You have the FRAND investigation in US, EU, SK. The countless lawsuits over Google News. The recent finding in Australia of defamation against Google because of their search results. How that plays out in the future will be interesting. The privacy violations over DNT and major concerns/lawsuits over the cross-product privacy policy in EU, Canada and elsewhere.
Then I expect there to be a wave of lawsuits over Google's intelligent search results e.g. flights, tickets, offers, shopping which are very similar to Microsoft's "embrace and extend" approach.
Seems like everyone misses the "do no evil" Google.
> Then I expect there to be a wave of lawsuits over Google's intelligent search results e.g. flights, tickets, offers, shopping which are very similar to Microsoft's "embrace and extend" approach.
See, you left off the end of that strategy: "embrace, extend, extinguish". Maybe if Google wanted to "extinguish" intelligent search results you might even begin to have an argument, but as long as they're just looking to provide a better service, you're just trying to draw connections to a strategy that people in this community [rightfully] react to emotionally and negatively.
So, this wasn't a trial about Apple using patents against Motorola. It was Apple filing suit against Motorola's use of patents against it.
Basically, when a standard is created the standard will likely use patented technology. Think about H.264. It isn't free. However, it is open (anyone is allowed to create hardware and software using the standard, so long as they pay the fee). Also, that fee is the same for everyone. These terms are FRAND (fair, reasonable, and non-discriminatory). It's essential for standards to ensure competition.
Then there are things that aren't standards. I'm not saying that you should agree with patents or anything like that, but they do exist and this distinction is made. If you hate patents (and I'm not saying you shouldn't), then they're all bad and we should get rid of them all. Disclaimer aside, let's say that you patented having 3 buttons on a phone (home, back, menu) ala some Android phones. There are many other ways to implement that functionality. Maybe that's the best combination of buttons and users love it. However, even in the Android world, we see phones with on-screen keys and no buttons, ones with 4 buttons, etc. You could even do something cool like a touch area with swipe left for back, touch for home, and swipe right for menu. Nothing there would kill your ability to create a device worthy of people spending money on. Taking a real-world example, let's look at Apple's bounce-back function for over-scrolling. Android 4 now does a highlight on over-scroll rather than the bounce-back. While a user might say, "the bounce-back looks better", it doesn't prevent a party from creating a device worthy of users' money.
Now, if you can't send signals using the technology that cell sites use, that does prevent one from making a device worthy of users' money. Those patents are standards essential. Now, when groups set standards, they will work around the patents of any company that doesn't want to license their patents under FRAND terms. However, companies want standards to use their technology because while they might not be able to extort money, they're guaranteed that everyone will use it. There's a big distinction between things you have to license and things you can implement differently with a little creativity and, as such, we treat them differently.
In the Apple/Motorola case here, Motorola (along with others like Nokia, Ericsson, Siemens, others) helped develop the wireless standards. They have to license their patents under FRAND terms. However, many of them want Apple to pay more per device than competitors. Part of this is that Apple has sucked up most of the profit in the industry and they want it back. Before Apple, Nokia was doing pretty well. Now? Motorola had been sliding for a bit, but Apple certainly helped that along by creating much better devices than pre-Android Motorolas.
Basically, there are patents that you're required to use and since you're required to use them (you can't build a phone without them), they have to be licensed under fair, reasonable, and non-discriminatory terms. The FTC looks like they will recommend that the government file suit against Google/Motorola over what the FTC sees as Motorola abusing these standards essential patents against Apple and Microsoft (http://www.bloomberg.com/news/2012-11-01/ftc-staff-said-to-f...).
So, this isn't a suit about Apple pushing UI patents against Motorola that got tossed here. This was Apple trying to get Motorola to license their technology under FRAND terms.
It seems that the disagreement is over the percentage model that Motorola wants. Motorola wants 2.25% of the full retail price of the device. So, if you make a dumbphone for $35, you pay 79cents. If you make a 16GB iPhone 5, you pay $14.63. Somewhat ridiculously, if you make a 64GB iPhone 5, you'd pay $19.13. Apple seems to be arguing that FRAND means that you can't discriminate like that. Motorola, still losing money, wants a large portion of those profits while still being able to profit off of cheaper devices. One can make the argument that the percentage model is non-discriminatory, but it doesn't fly well by me. Non-discriminatory isn't with respect to the price of the device or the money you're making off of it.
"However, many of them want Apple to pay more per device than competitors. Part of this is that Apple has sucked up most of the profit in the industry and they want it back."
Yeah, PART of it is this. Part.
The other part is it that Apple has amassed a war chest of UI patents which it is mobilizing against all of the makers of smart phones. The wireless standard holders are essentially saying "cross-license your stuff OR you pay through the nose for our stuff". And indeed, why should Motorola or Nokia be reasonably with their "intellectual property" if Apple clearly isn't going to be similarly reasonable? Nokia began the patent war, indeed but on the specific basis that Apple wasn't cross licensing its outside-the-standard-but-stilled-needed-for-a-smart-phone-stuff.
It only sounds greedy when you don't give the big picture.
Your argument falls flat on it's face because these patents have been licensed since day one, so how can they possibly be a response to anything? This is simply the big boys club protecting itself.
FRAND doesn't mean that the fee is the same for everyone. FRAND royalty deals are negotiated on a case-by-case basis - such deals will often include a cross-license for some of the other party's patents, and this will tend to reduce the royalty paid.
The crux of the issue is whether or not Motorola was discriminating against apple. If everyone else that licenses Motorola's patents pays 2.5% why should apple pay less? What gives them that right to special treatment?
Doesn't the non-discriminatory part just mean you have to license these patents to everyone who is willing to pay the fair and reasonable price? I don't see why that term would have any connection to individual products, and setting a different price for each product is reasonable accounting for the volume you expect to be sold of the product and the importance of the patented functionality to the product.
Frankly, it's a cell phone, so you could argue that the technology being licensed here is the core of the product.
While i agree with you on almost everything... Why didn't Apple accept to be bound by the courts (supposed to be fair and reasonable) rate?
Something smells here about this, and it's coming from Apple.
Apple and Microsoft both are trying to make FRAND patents become cheap, so they can just tax Android to hell with their utility patents.
First of all, I think it might be good if the FTC sue Motorola to explicitly nail down how FRAND patents can be used.
Secondly, I'm happy to see Motorola (Google) going after Apple and Microsoft with these patents. They are the two greatest perpetrators of unreasonable software patent abuse and they also both helped shape the system as it currently exists.
To be clear: If Motorola were going after other companies, I would have a problem with that type of behavior. Apple and Microsoft, however, deserve every kind of patent abuse they are getting (and then some).
> To be clear: If Motorola were going after other companies, I would have a problem with that type of behavior. Apple and Microsoft, however, deserve every kind of patent abuse they are getting (and then some).
This isn't patent abuse at all. The patents in question involve sophisticated, complex technologies (Wi-Fi and video compression). It's not the type of thing you accidentally stumble upon--these were technologies created by a consortium, including Motorola, at substantial cost. Licensing the underlying patents, and litigating if those patents are infringed, is how the members of the consortium recoup those costs. The situation presents the classical case of applicability for patents--you want the technology to be openly disseminated, so it can be used as a standard, but don't want people to be able to use it without paying.
As much as people kvetch about standards patents, they're an example of the patent system working well. You have an industry consortium (of specialists in a specific area) which develops complicated technology then standardizes it for everyone to use. Companies who want to be compatible with the standard then license the patents underlying the technology. The patents are just the legal glue that facilitate that transaction. Patent litigation is the mechanism by which the terms of that transaction are enforced--just like litigation is always the mechanism by which the terms of transactions are enforced.
I agree with this - A similar example of patents working in a reasonable manner is the pharmaceutical industry, where the time and money investment of developing a new drug is astronomical, and it can be reasonably argued that this justifies the 20-year monopoly that a patent entails.
The above cannot be said for design patents. Because there are essentially no barriers to entry in getting a design patent, yet they last the same 20 years as the development of a new drug, it's easy to see this getting stupid and destructive for the tech industry.
Just prior to their acquisition by Google, Motorola was planning on suing other Android manufacturers to collect patent royalties [1][2]. Some of the commentary I've read speculated that the Motorola purchase was done partly to avoid civil war among the Android licensees.
Interestingly enough, Sanjay Jha left the company right after the merger was finalized (with a healthy golden parachute to boot!).
Correct me if I'm wrong, but I think everyone who licensed with moto initially was given a 2.25% rate, but they cross-licensed patents to bring that down. Apple doesn't want to cross-license hence they're whining about how they think FRAND(non-discriminatory) terms aren't being followed, when in reality Apple's getting the same negotiation everyone else gets, but Apple doesn't want to play ball and cross-license patents like everyone else.
"It seems that the disagreement is over the percentage model that Motorola wants. Motorola wants 2.25% of the full retail price of the device. So, if you make a dumbphone for $35, you pay 79cents. If you make a 16GB iPhone 5, you pay $14.63. Somewhat ridiculously, if you make a 64GB iPhone 5, you'd pay $19.13."
There is a simple solution: Sell iPhones w/ little memory and sell the memory separately. Of course, then other people can also sell that memory, probably at a cheaper price. If you want to charge a premium on memory, then you should let Motorola charge a premium, too.
Aren't these FRAND patent fees handled through the actual baseband chipset manufacturer? From a logistics point of view, it seems like it would much simpler for Qualcomm to charge each of the licensees a fee for using the licensed tech present in their chip. Otherwise, it's all x FRAND committee members going out and looking for fees from all y manufacturers that use the patents in question.
Software patents that are not that easy to side step as mdasen present it to be. the software patent is a patent over an idea, and as ideas goes, 3 button on a phone can mean anything from 3 physical buttons, 2 buttons + touch area, 3 areas on a touch screen marked by a button icon, to 3 vocal commands as "conceptual button".
Maybe bounce-back function for over-scrolling is easier to bypass, maybe its not. Reading the actually patent gives no clues however, as it easy could cover the highlight on over-scroll implementation that android has.
Can we just agree to always link to the FOSS Patents blog for all these stories in the future? Florian Mueller is always the very first one to report on these and does a much better job at analysis. Here on HN, we should actively replace upvoted articles with the primary source when it is clearly the better source of information.
I actually agree on the point about linking to primary sources, but having said that Florian Mueller is a proven shill and his analysis should never be trusted at face value by anyone, particularly when he's analyzing anything to do with Google.
I never claimed he was unbiased just like no one would claim that Gruber is unbiased. But having posts from source like CNET that just water down the original source make it to the front page adds absolutely nothing of value.
Imagine if every John Gruber article worthy of making it to the front-page only ever made it to the front page after being laundered by a site like CNET? I think everyone can agree that we would be worse off without the original voices.
One of the biggest losses of not having original voices, even from the most biased of biased bloggers, is that it also dilutes the counter-arguments of those on HN that provide the balance to biased articles. For example, a direct link to Florian Meuller's article may elicit a response from a contributor like yourself where you point out where Florian's analysis may be wrong and shouldn't be trusted. Without Florian's post to rebut, it's more likely that people like yourself would remain silent on the issue.
I also chuckled, but he has a point: we shouldn't let CNet "launder" Mueller's analysis onto HN. Also, it's frustrating to me that I haven't seen any coverage of this issue that's both detailed and "unbiased".
for every one of these lawsuits i wish there were 10 more. we seriously need to get the patent courts so backed up that it should take 17 years to get your case in front of a judge and the same amount of time to secure a patent on an idea.
