Apple is presently involved in legal conflicts in both the UK and the US concerning 4G patents critical for its mobile devices. The company has applied for the right to contest a UK decision that would enforce an extra charge of 12 cents per iPhone.
This matter is important not only for Apple but also for many companies, as it underscores the wider repercussions of patent licensing in the mobile sector.
### Understanding Key Terms
To produce mobile devices, businesses are required to secure licenses for various patents, termed Standards-Essential Patents (SEPs). These patents are vital since they are necessary for adherence to industry standards. The organizations that create these SEPs also take part in establishing the standards, creating an expectation that licensing conditions should be more advantageous than those for standard patents.
SEPs must be licensed under FRAND conditions—Fair, Reasonable, And Non-Discriminatory. Problems emerge when patent assertion entities, commonly known as patent trolls, acquire these SEPs and demand unreasonable licensing fees that do not comply with FRAND principles.
### The 12-Cent Dispute
Apple’s ongoing dispute with Optis Wireless Technology, a firm owned by a New York hedge fund, exemplifies this challenge. Even though Optis possesses a small number of 4G SEPs, it is pursuing significant licensing fees. In the US, a court originally awarded Optis $506 million in damages, later lowered to $300 million, prompting appeals from both parties. The judge mandated a new trial to re-evaluate the damages.
In a distinct UK case, the court ruled that the FRAND rate for Optis’s patents should be 2 cents per iPhone, which was subsequently increased to 14 cents by the Supreme Court. Apple’s concern transcends the 12-cent variance; it worries about the potential global precedent this ruling might establish. The price of the cellular modem in an iPhone is around $20, and if all SEPs needed for that modem were adjusted according to the UK decision, Apple could encounter licensing fees of approximately $40, in contrast to the existing $5-6.
Additionally, the UK Supreme Court suggested that it could establish rates applicable globally, not just in the UK. Apple has sought permission to appeal, with Optis anticipated to respond shortly, although a final resolution may not be reached until the following year.
### Broader Implications for Businesses
Apple contends that its struggle is not merely for its own interests but also for enterprises of all sizes. For example, a bicycle rental service that relies on 4G modems for tracking could be targeted by Optis, lacking the legal means to defend itself.
### Conclusion
While Apple’s intentions may be questioned, the prevalence of patent trolls represents a significant obstacle in the tech industry. The engagement of a major entity like Apple in addressing these issues is a positive advancement for the sector as a whole.
