I don't understand why unbundled patents would be a problem for QUALCOMM.
Huge unthinkable pandora's box of a problem.
Basically, as long as the pricing is "one price buys all patents", Qualcomm avoids having to point out the handful of patents that are more or less valuable than others, defend against the "I don't use that" defense, and avoid painting big targets on a few patents. And it can extract the same revenue stream from all of its licensees. One price for all is very easy to administer, therefore the most capital efficient business model. If you can maintain it.
And that's exactly what Nokia is threatening with this action.
Let's pretend for a moment that Nokia is correct and that Qualcomm is obliged to propose a price to Nokia for each of the undertakings (each separate patent license) that it granted.
Let's also pretend that while Qualcomm is compelled to put a price on the table for each of these undertakings, Nokia is not compelled to accept this value.
Now, several things must be true.
Firstly, Qualcomm must propose a price which makes sense in aggregate (when all of the individual licenses are added together, it must pass a test of reasonableness). Secondly, it must make sense individually (some patents are more valuable than others).
Certainly, the aggregate price for all of the patents can not be greater than whatever price Qualcomm has offered to Nokia (and asserted to be FRAND) for all of its patents. Calling two different prices for the same set of patents offered to the same party "reasonable" is absurd. It can not be greater than whatever price Qualcomm has offered to any other party for all of its patents either. Calling two different prices for the same set of patents offered to two different parties "non discriminatory" is absurd.
With this in mind, and as a hint of the evil about to unfold, we note that Nokia is in a fairly unique position of already having a fully-paid-up perpetual license to *some of* Qualcomm's patents.
Obviously there is a "fair, reasonable and non-discriminatory" value for this set of patents, let's call it "Value A". It may be zero, but it is a value. Presumably there is another "fair, reasonable and non-discriminatory" value for all of Qualcomm's other patents. This is "Value B". And presumably there are some of these other patets which are not Essential IPR for ETSI. This is "Value C".
The same logic of construction above must apply, so that whatever Qualcomm is charging to a third party for All of its patents, if fair and reasonable and non-discriminatory, must be equal to Value A plus Value B plus Value C.
In other words, the maximum fair, reasonable and non discriminatory price that Qualcomm can ascribe to "Value B" is equal to whatever they are charging others for all patents, minus Value A, minus Value B. In other words, they must offer the ETSI patents at a discount to all patents, and the magnitude of this discount is whatever the value of the fully-paid-up licenses are. To everyone else.
THIS MEANS Qualcomm is forced to put a "Fair, Reasonable and Non Discriminatory" price on the patents that Nokia is not compelled to license, and those on which Nokia is compelled to license, and, then by inference this places a value on the patents that are not Essential IPR.
The combined value can not be greater than the value it is charging third parties for all patents without being either unreasonable, unfair or discriminatory.
And if my guess is correct, Qualcomm has put a *huge* value on those patents that are fully paid up... Somebody, somewhere is paying for these, they aren't licensing them for free. At least that's what is likely to show up in any discovery that Nokia might initiate if it ever challenges the fairness of Qualcomm's pricing!
In other words, once Qualcomm is forced to start slicing up the value of its portfolio, and proving that each of the prices quoted for each of the slices is fair in relationship to the prices they charge for the other slices, they start down a very slippery slope.
Which gets worse.
Nokia asserts that they are not compelled to pay for *all* of the essential IPR that Qualcomm has declared, just that which they are *actually* using, and which are *actually* valid.
If, they aren't using it, they are not going to pay Qualcomm a license fee. If the patent isn't valid, they are not compelled to pay Qualcomm a license fee.
So this forces Qualcomm to carve the "Value B" bucket up into two sub-buckets - those patents which it thinks Nokia is using, and those patents which it thinks Nokia is not using. The value of these two buckets must add to Value B calculated above, and individual sub-buckets must be valued as well (Nokia's patent-by-patent license theory). Furthermore, if Qualcomm puts a high price on a handful of patents, that paints a bullseye of invalidation and avoidance defenses on these patents, wihch, if successful, further subtracts from the "fair value" Qualcomm can eventually extract from the whole.
Nokia now gets to weed the list and come up with the patents (and associated fees) that it believes it uses. Arguments go on, but sooner or later a license fee is arrived at. Less than whatever Qualcomm is getting from third parties.
And it doesn't end with Nokia.
This process sets individual benchmark "FRAND" price for some majority of Qualcomm's patents, either explicitly (Qualcomm having quoted a value to Nokia), or implicitly (by subtractive reference to other agreements which Qualcomm has asserted are FRAND). While confidential, it would be forced available under discovery rules in any conflict with any other licensee. And having quoted that patent X is worth $Y to one party, Qualcomm can't very well turn around and claim that it's worth more to some other party! That would be discriminatory!!!
Why does this matter?
Because, if Nokia's French Logic is correct, then Qualcomm is not only obliged to grant some licenses to some of its patents on FRAND terms to Nokia, but also to every other member of ETSI, all of whom, presumably will end up with different "I use that" lists, all of which become discoverable precedent for the next license... and so on.
If this comes to pass, then Qualcomm can kiss its "one price for all patents" model goodbye, and, in the process, shrink the amount of licensing revenue they can extract from various players, since nobody is going to pay the "One price" rate, and everybody is going to claim a discount.
As I said, unthinkable.
Qualcomm can't start down this slope. Qualcomm can not afford a positive outcome for Nokia in the Delaware action. I really want to see Qualcomm's response. As it stands, I expect a settlement prior to trial, and I would expect that while it might be more than $20M/Quarter Nokia has put on the table (minus whatever Nokia demands Qualcomm puts on the table for access to Nokia's IPR), it would be not be favorable to Qualcomm. |
