Nice Try: Motorola Demanded a License to Every One of Apple's Patents
Motorola Mobility's request that Apple pay it patent royalties of 2.25 percent on sales of some iPhones and iPads in return for a license to its standards-essential patents, while aggressive, was not the most onerous demand …
Context & Ripple Effects
Motorola Mobility's 2.25-percent royalty ask did not appear out of nowhere: Apple had already cast Motorola's licensing push as troll-style shakedown back in December 2011, then in February formally sued Motorola in the U.S. over its Qualcomm patent license — this disclosure of the actual number being demanded turns that running legal fight into a concrete negotiation dispute. The pickup was broad for a licensing story, with Reuters, Bloomberg, The Register and SlashGear all carrying it the same day.
Timing sharpens the stakes: the demand covers sales of some iPhones and iPads just as Apple's third-generation Retina iPad has sold out its preorders ahead of its March 16 launch, meaning the 2.25 percent rate would be levied against a product cycle at peak volume.
First-order effects
- Apple faces a royalty bill tied to end-product price rather than component cost — at 2.25 percent of the selling price of premium iPhones and iPads, the demand prices Motorola's standards-essential patents off Apple's own brand margin.
- Motorola gains a public negotiating position and potential leverage to seek sales bans on devices that implement the relevant wireless standards if Apple refuses to pay.
Second-order effects
- If the percentage-of-device-price formula sticks, every other holder of standards-essential patents in smartphones gains a benchmark for demanding royalties scaled to full handset or tablet value, raising the cost base for the whole Android-and-beyond ecosystem.
- Apple's counter-strategy shifts from paying to litigating the fairness of the rate itself, forcing courts to define what FRAND terms actually require — an outcome both sides' future licensing talks depend on.
Third-order effects
- Standards-essential patents become the decisive battleground of the smartphone patent wars, displacing feature-patent suits, because control of the standard lets a licensor threaten product bans rather than mere damages.
- Royalty demands pegged to whole-device value invite antitrust scrutiny of whether such rates honor FRAND commitments, pushing regulators toward policing licensing conduct as a competition issue.
The trend: Smartphone patent disputes are migrating from who-infringed-what feature claims to fights over standards-essential royalty rates, with FRAND fairness becoming the question regulators and courts will have to answer.