The idea that royalties should meet some "norm" or "cost of developing the intellectual property" is false. Royalties should be what the market will bear to maximize the property owner's profits over the long run. That might be 1% for one thing and 580% for another which everyone on Earth needs and which costs almost nothing to supply to them but is of very high value to them. Or it might be a fixed price per unit, say $0.01 per unit or $850 per unit, depending on the value of the technology. Or, it might vary from time to time and place to place and person to person. Or, anything. Guessing what royalties should be is guessing the future for a period of 20 years, which nobody can do. But the party to do it is the owner of the intellectual property, not the whining fleets of 747s, or courts, or government departments.
The idea that royalties "should" be "normal" or related to the cost of development in "fair return to the inventors" is nuts, but very common.
""An attractive IPR structure is another advantage of WiMAX compared to 3G technologies. Royalties paid by manufacturers on WCDMA phones are an average of 10% to 15% of the Average Selling Price (ASP) of a handset, compared to a telecommunication industry norm of 2% to 5% [1][2]. A less onerous IPR model will lead to a substantial reduction in equipment prices and fair treatment of vendors without essential IPR, which in turn will increase competition in the market and the attractiveness of WiMAX to network operators. The WiMAX Forum is currently exploring, and will endorse, solutions to provide a fair and reasonable rate and framework that will benefit both IPR holders and other vendors.""
Sometimes we can see how much undercharging was done, such as in the European spectrum auctions when QCOM left $100bn on the table. If too much is charged, the technology will be ignored, few will buy, it will have a dismal future. When companies fall all over themselves to adopt the technology and even bid $100bn extra for the privilege of being the supplier of the technology, we can see how cheap it was.
Not only did $100bn get left on the table, but GPRS/GSM/EDGE have enjoyed years of success they should not have had because they used QCOM technology to upgrade the obsolete GSM TDMA technology to at least handle some data efficiently on good devices. If all the 2006 sales had been CDMA instead of mainly GSM, QCOM would have enjoyed about 10 times the profit they actually got.
QCOM has missed out on something like $200 bn of revenue as a result just of those two items. Yet QCOM is considered greedy! They have given away probably the biggest amount of money in human history and nobody has noticed [well, not many people]. Not that they gave away the GSM/GPRS/EDGE rip-off, which was simply hijacked.
The $100bn in Europe was for just a small part of the world. The same value applies around the world and in USA, China, India, Japan, Korea etc, the equivalent value was given away [assuming the $100bn value of spectrum was correct] making a total undercharge of about $300 bn [China and India not being so valuable as the countries have low GDP per capita].
Depending on the value of the GSM hijacking of IP, there was something like $500 bn that QCOM will have missed out on by 2008 or thereabouts. That's real money. With the vast replacement cycle underway causing even larger profits.
Mqurice |
