| | | If there were any doubts about licensing phone manufacturers and not chip makers, it should have been settled by the Supreme Court case involving Intel, Samsung, and Quanta (known as the Quanta decision). Intel had a chip licensing agreement with Samsung, and Samsung paid royalties to Intel on chips made by Samsung and sold to others, including Quanta. Intel insisted that Quanta also should pay royalties, but the Supreme Court ruled that Quanta didn't have to, owing to patent exhaustion.
Qualcomm had at that time, and continues to have a contractual arrangement with its licensees (e.g., Apple's contract manufacturers), wherein only those licensed by Qualcomm can sell devices that use Qualcomm patents. Chip manufacturers are excluded from the licensing, but they are bound by contract to sell only to Qualcomm licensees. Hence, the licensees may buy chips that use QCOM patents from any source, whether it be MediaTek, Intel, Huawei, or Qualcomm's own chips designed and produced either by Taiwan Semi or Samsung, or others.
The Supreme Court decision exempted Qualcomm's licensing agreements from the exhaustion limitation because, as the court noted, it was a contractual arrangement agreed to by both sides. That exemption appears to justify the way Qualcomm licenses the use of its patents. By extension, if a licensee, such as Foxcon, sells devices that use Qualcomm patents to Apple, for eventual sale to the public, Apple pays no royalties whatsoever. Only its contract manufacturers pay royalties, and those in turn are limited to a capped wholesale price.
I do not understand why Apple, the FTC, or other regulators seem to think that this method of royalty payment is either unjust or too costly.
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