vg: Whether IDCC will receive any additional royalty income depends on the Apple and Pegatron license terms. Here is an old Ron Marchma post on the subject.
Saturday, July 12, 2008 12:41:28 PM
Re: loophole73 post# 226542 Post #226550 of 296741
Loop re "carveout" provision in licenses you asked:
"Can anyone tell me what a carveout is and which contract is being carved, IFX or Appl?"
The first time I heard this term was in a Q&A conversation that I had with Janet in August 2006 as follows:
"6. IDCC has licensed ODMs like Arima who manufacture for some of IDCC’s licensed OEMs, including Sharp, LG, and SE. Who pays the royalty on these handsets, the licensed ODM or the licensed OEM? What if the ODM sold to a licensed OEM of IDCC, who had a paid-up or fixed royalty contract, then who is responsible for the royalty?
The licenses with ODMs can be very different and can contain numerous variations as to royalty obligations. One type of ODM license could require for the ODM to pay IDCC royalty on all handsets that they make, even if it is subsequently sold to a licensed OEM. In this case the licensed ODM would pay all the royalty and not the licensed OEM. I then asked that wouldn’t IDCC prefer the royalty at the OEM level, since the subsequent selling price by the OEM is greater than the selling price by the ODM. She said that this factor is considered in setting the royalty rate of an ODM, who is required to pay royalties on all handsets they manufacture.
However ODM licenses can also be structured to contain “carve-out” provisions, whereby the royalty will be shared by both the ODM and the licensed OEM. These carve out provisions can vary greatly as to the royalty obligation of the ODM and the royalty obligation of the licensed OEM. In some cases most of the royalty can be paid by the OEM and a small part passed through to the OEM, or the ODM could pay a small part of the royalty with the majority being paid by the licensed OEM. Different royalty rates would apply to the ODM under the different scenarios.
I tried to get clarification on the question about an ODM, who has some type of carve-out provision to share royalty, selling to a paid-up or fixed royalty licensee of IDCC. I don’t think she had really thought about this, and seemed not to be to sure of her answer. Her tentative response was that she thought that the ODM would still be liable to pay only its part/share of the royalty, even though the licensed OEM would not have to pay anything additional for its respective part."
