Wednesday, August 24, 2005 12:22:40 PM
Some comments-
1. “Rumors are circulating that Nokia Corp. is planning a major public offensive against Qualcomm Inc. over royalty rates for W-CDMA mobile phones “ <<<<<<
First report I’ve seen of that recently. I recall a year or two back several “analysts” expressed concern, and I imagine some still do.
2. “The issue is largely wrapped in secrecy because no wireless company will discuss its licensing agreements and royalty rates. “ <<<<
I take exception to the above in Qualcomm’s case. The Q often discusses its licensing agreements in general terms, but do to NDA cannot discuss specific licenses. As for the Q’s royalty rates, again in general terms they are anything but “wrapped in secrecy”. In fact, they are totally transparent with QTL as separate business unit and their financial reporting breaking out licensing and royalty income. The Q also provides handset sales and handset ASP figures to enable anyone to calculate the average royalty rates on a quarterly basis.
However, I don’t believe that NOK or anyone else separately breaks out their licensing / royalty financials.
3. “On the GSM side, the issue is a little less clear. More than a dozen companies hold essential patents on the technology, and industry observers guess royalty rates range anywhere from 2 percent to 10 percent”.<<<<
That’s interesting. Seems to me independent studies of GSM royalty rates for new entrants without cross licensing IPR to trade reflected royalty rates in excess of 19%, “somewhat” higher than the Q’s ~5% (and what some believe as excessive”. Wonder why that wasn’t mentioned in the article?
4. “prevalence of cross-licensing agreements. For example, if Nokia wants to sell a CDMA phone it would need a license from Qualcomm to do so. But Qualcomm itself wants to sell chips for GSM phones. Thus, the two companies would hole up until they hammered out a cross-licensing agreement-basically a trading arrangement that means neither company would have to pay the other the full licensing fee.” <<<<<<<<
I believe that it is commonly accepted that due to the Q’s essential IPR strength, that the Q nets ~ 5% after cross-license consideration from most all licensees. Again, I wonder why that was not specifically mentioned?
5. “Thus, startups and other new entrants generally have to pay full licensing fees if they have no intellectual property rights with which to barter. This gives large players like Nokia and Qualcomm an added edge,...” <<<<<
I’ve gotta take exception to that, Lumping the Q in with the GSM cartel’s practices. The Q licenses on Fair and Reasonable terms. From what I’ve seen, the Koreans without much if any tradeable IPR may have rates slightly above the average in the mid-5% range. Again, nothing close to the ~19%+ rates extracted by the GSM MEN (men in black – MOT/NOK/ERICY).
6. “Two years ago, Nokia proposed a 5-percent cap on W-CDMA royalty rates. The proposal fell flat, and Nokia said it is no longer pursuing the scheme.” <<<<<<<<
Interesting, NOK proposes and then backs-off. Could it be it knew it had an indefensible position given its GSM track record ( anything but fair and reasonable)?
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