- The $120 figure, equivalent to a 30 percent aggregate royalty rate on a $400 phone, is wide of the mark. Nobody is paying anywhere near as much. Actual figures paid are, on average, less than one sixth that figure, at under $20 or below 5 percent of total handset costs.
- Her source is not cited. It is obvious to those who focus on smartphone licensing charges that she has plucked the figure from the much-criticized, here, and, here, “Smartphone Royalty Stack” paper by Intel and Wilmer Hale. Without her including any reference to help listeners and readers find the study or those who rebut it, folk might take the greatly-inflated figure at face value.
- The study is not recent and provides no fresh perspective. It was published two and a half years ago, in May 2014.
- It misrepresents the study’s findings. Commissioner Vestager has either ignorantly and unwittingly or sinisterly disregarded how the study cunningly characterizes this $120 figure. That figure does not represent what is actually paid in cash or recorded in financial or management accounts as licensing revenue or licensing expense. It is a notional cost that is not adjusted for what is netted-off in cross-licensing. The study is weasel worded: “setting aside off-sets such as ‘payments’ made in the form of cross-licenses and patent exhaustion arising from licensed sales by component suppliers, we estimate potential patent royalties in excess of $120 on a hypothetical $400 smartphone” (underling added for emphasis). This is flawed economics, as well as misleading and disingenuous.
- The study includes various additional systematic errors in its analysis including disregard for clear public evidence that much lower rates are being paid than those it includes in its calculations in most cases.
- Despite seeking and receiving external inputs, the European Commission continues to ignore logical and facts-based assessments of aggregate royalty rates that are in marked disagreement with the study by Intel and Wilmer Hale. The Commission’s DG GROW ran a consultation on patents and standards commencing 2014. My initial estimate of 5 percent aggregate mobile phone royalties was included in my submission to that consultation in February 2015 (pages 21-22). That finding has been reinforced in my subsequent publications and validated by other reputable experts.
|Aggregate Licensing Fee Estimates for Mobile Phones Including Smartphones|
in Two Totally Different Ballparks (Applicable Year 2014 or 2015)