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mjk

07/11/03 2:52 PM

#129209 RE: phill #129190

phill, I think we're in agreement as well. I must be saying something wrong.

I don't think Samsung pays QCOM a royalty on the IC in the phone and on the phone itself. Samsung buys the IC from QCOM, puts it in a phone, and pays a royalty on the sale of the phone only.

The only difference is when the IC is not made by QCOM, then there are two cases, (1) either company A makes it and sells it to company B (moving to the front of the alphabet now <g>) to use in a phone, or (2) company C makes it and puts it in their own phone.

In the first case, if company A has no cross license agreement with QCOM (rather they just pay a royalty) and they design and sell an IC, they must pay QCOM. Then company B must also pay QCOM on the end sale of that product. So it is a form of double taxation, but that doesn't fall entirely on company B selling the phone. Company A is going to factor their royalty payment into their selling price of the IC. Company B then has the option to pay that price, or buy from QCOM, or buy from anyone else. TI has a cross-license agreement with QCOM that allows them to make and sell ICs and not pay QCOM a royalty, that only benefits them. It doesn't benefit NOK or anyone else for that matter unless TI decided to pass that savings on to NOK or anyone else through some agreement of their own.

In the second case, depending on what type of agreement company C has with QCOM that allows them to use QCOM patents in the design of their ICs, they may or may not have to pay QCOM some sort of royalty in addition to the sale of the end product. This is where there really aren't any examples to refer to. NOK and MOT are both using their own ICs in some of their phones, but they also have patents that QCOM cross-licenses, therefore they probably don't pay QCOM anything other then the royalty on the end product. For a company that has no patents QCOM uses, I don't know how that would be handled...I don't know of any cases like this, everyone else pretty much uses QCOM ICs.