2nd UPDATE: Court Document Unveils Royalty Rate Motorola Sought From Apple
February 06 2012 - 7:06PM
Dow Jones News
Motorola Mobility Holdings Inc. (MMI) asked Apple Inc. (AAPL) to
pay a potential royalty of 2.25% of sales for some mobile devices
last year, representing potentially billions of dollars in
licensing fees.
In a letter filed in a California court last month, a lawyer
said Motorola, which is being acquired by Google Inc. (GOOG), had
"demanded" the royalty for a license of its patents.
The letter, which was dated Oct. 17 of last year, gives a
glimpse into the ongoing patent struggles between mobile device
makers. Apple, in particular, has locked horns with industry
titans, including Samsung Electronics Co. Ltd. (005930.SE, SSNHY)
and HTC Corp (HTCXF, 2498.TW), over patents for mobile devices.
Each company has suggested much is at stake, but this document
gives the first sense of potentially how much. A royalty of 2.25%
on Apple's iPhone sales, for example, would amount to more than $1
billion in 2011, though the court letter doesn't specify which
devices would be affected nor whether it would be retroactive.
Apple and Motorola both declined to comment.
Royalty rates are a closely guarded secret among technology
makers, lawyers say, and it is unusual for companies to divulge
such information. Additionally, because such rates are so rarely
discussed in public, lawyers and industry insiders said it was hard
to tell whether the amount Motorola was asked for was
reasonable.
"People ask for these royalty rates based on fundamental
inventions," said Ron Epstein, chief executive of Epicenter IP
Group, which helps companies license patents. "There is no debate
that Motorola was the inventor of the mobile phone."
However, some lawyers said the rate Motorola asked for seemed
pricey, and may be designed to either force a settlement or disrupt
business. Apple briefly suspended sales of some mobile devices
through its German online store last week, after Motorola enforced
an injunction from a local court banning Apple from importing
devices that allegedly infringed on its patents. The injunction was
lifted within a day.
Florian Mueller, an intellectual property consultant who first
uncovered the court document, said Motorola's royalty rate appeared
high, and was likely offered only because it is required to offer
licenses for its industry-standard patents.
Motorola "wants Apple to refuse it so they can pursue
injunctions against Apple," he said.
Apple shares closed up 0.9% at $463.97 while Motorola shares
closed down 0.4% at $38.83.
-By Ian Sherr, Dow Jones Newswires; 415-439-6455;
ian.sherr@dowjones.com
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