Google Wants Apple To Pay Royalty On The Difference Between iPhone-iPod Price

[quote] The most interesting revelation is that Motorola apparently took in its sealed trial brief a new position on what should be the FRAND royalty rate for its celullar standard-essential patents (SEPs). According to Apple, “Motorola’s first new theory is that 2.25% should be applied to the difference in price between an iPod Touch and the unsubsidized iPhone (without a carrier contract)”. The filing says that this would mean a royalty base between $400 and $450. As a result, Google’s Motorola Mobility would charge Apple between $9 and $10.13 per iPhone for its wireless SEPs.[/quote]This amount is less than what Motorola was initially requesting, which was 2.25% of the full $600 price of an iPhone. However, its still more than Apple is will to pay.Mueller stated:[quote]  Apple rejects the notion that it “receives $400 to $450 in value from cellular functionality” and claims it’s inconsistent with what one of Motorola’s own experts said in a related case.

Google’s (Motorola’s) “iPhone minus iPod” theory is clearly an attempt to create the appearance of compliance with the Entire Market Value Rule (EMVR), a patent damages theory according to which a patent holder is entitled to a reasonable royalty only with respect to the smallest saleable unit the relevant patents read on (unless the patentee can prove that the related functionality is the primary basis for customer demand). What Google is doing here reverses the concept of the smallest saleable unit: instead of applying 2.25% to the relevant chipsets (baseband and WiFi), which are the smallest saleable units implementing the wireless standards in question, it deducts the price of a separate saleable unit from the same vendor (Apple) that does not come with cellular functionality. Given that the iPod touch supports WiFi, Motorola presumably applies 2.25% to the iPod touch price for WiFi, and then, for cellular functionality, the same 2.25% rate additionally to the differential between the price of an unsubsidized iPhone and that of an iPod touch.

The difference in functionality between an iPod and an iPhone is huge. While cellular connectivity is certainly an enabling technology without which a smartphone wouldn’t work, most of that value is simply not created by cellular standards — which is why an iPhone costs a multiple of a basic feature phone.[/quote]

 

Source: FossPatent