Qualcomm and the real story behind Mobile World Congress
Analysis The story behind the story is always more interesting, somehow, than the story itself; and the story behind last week's Mobile World congress wasn't just the obvious stuff about backhaul capacity. Instead, people were mumbling furtively about piracy - intellectual piracy, that is. You know, like intellectual property, but acquired by devious means.
I asked Scott McGregor, CEO of Broadcom, what he thought of 2008 in the intellectual piracy arena. He said: "Patent enforcement has gone too far. It's time to see an adjustment in roll-forward royalties, where people have a business model predicated on charging royalties several times on the same component."
There will be some who will be startled by that. For Broadcom, widely perceived to be a major collector of intellectual property rights, to start criticising patent law, "is like a Mormon complaining about his wife's infidelity," commented one astonished delegate in Barcelona.
Jim Morrison, founder of start-up phone maker iMate, was the first to put his name to a comment on this subject in Barcelona. "This year is going to see meltdown in patent law in America," he said frankly.
His opinion is widely shared - that there are people who are laying claim to patents on the basis that "they thought of it one day in the bath". And this, he says trenchantly, is nonsense. "How can you have IP in something you've never built, just thought of? If you build something and design it, and prove it works, you can have IP. Build me something, show how it makes a difference!"
This isn't just a tough Scot entrepreneur expressing bolshie opinions - it's an industry player observing straws in the wind, and he's not alone in this. The problem is that royalties are being charged multiple times, and it's not perceived as either fair or sustainable.
A consultant who works with the Chinese mobile industry a lot (and who therefore absolutely is NOT going to let me publish his name) described a conversation with an unnamed company (which he led me to believe could well have been Huawei). He was asked to source some component which includes intellectual property which may (or may not) have belonged to Qualcomm. He was unable to help.
"Ah, well, we'll have to do something about that," said the Chinese corporate exec. "We are paying 25 per cent of the price of every product in royalties to Western businesses. It has to come down to at least ten per cent." Which is, of course, improbable, as my consultant friend observed to him. "We'll have to do something about it," repeated the angry entrepreneur.
"Are you suggesting you will stop paying royalties?"
"That is not my decision," said the exec. In other words, he knows someone who will make that decision.
America's IP owners are well aware of the friction. Even the most rapacious intellectual pirates are calling for reform of a system which is destroying any goodwill there ever may have been for patent holders.
McGregor again: "The problem is multiple charges for royalties. For example, if I sell you a device on which I hold a patent, you have to pay me royalties. But what if you sell that device onto someone else, who incorporates that component as part of something they sell on to a fourth party? Am I justified in chasing that someone else for royalties on something for which you've already paid, and then for their customer in turn?"
Obviously, not (he implied). "But that's the business model on which Qualcomm is founded. We own IP, but our business is founded on making great chips."
Morrison didn't need to name Qualcomm for his criticism to be obvious in its direction: "They're trying to make it cheaper for you to buy a licence than go through a court case; rather than pay a million in legal fees, buy a licence for a hundred thousand dollars," he summarised.
The threat of unilateral action from China isn't explicit - not yet. But America's legal fraternity appears to be aware that it exists. And to try to maintain that structure is (they think) killing the goose. No golden eggs from a royalty stream from around the world if people just go and invent their own technology specifically to avoid it; and even less income if the system simply collapses.
Morrison thinks it can. "The situation is that we will see Chinese companies push their own 3G technology into the infrastructure at a cost Western companies can't match. They can afford to do this."
Not everybody I spoke to thinks they can. "Maybe, for developing countries," was a dubious consensus, but there was no acceptance of the idea that America might be overrun by Chinese mobile technology.
Of course, in the end, the Chinese will rebuild the IP structure themselves - once they have their share of the new world created by intellectual piracy, it will become intellectual property again. As McGregor remembers from his time at Philips, that company got its start by ignoring patent law - right up to the point where it had enough IP of its own to start agitating for European-wide laws.
But for now, it looks like China has the American legal system scared enough to actually annoy Qualcomm. Whether it's scared enough to annoy Broadcom as well remains to be seen; but the threat is real, and is going to be taken seriously this year. ®
The end of IP laws?
I don't think so.
The IP laws currently in force in the US and a number of other western countries are for all intensive purposes, CRAP.
But I don't think people want to see the end of the IP laws, just a massive re-think and restructure. Patents laws for example do need to be reformed. Things like Patent squatting needs to be addressed. Same with the Copyright fair use laws.
A simple suggestion that may or may not be a good thing is that patents should only be granted to organizations that will develop them. None of this business models built on patent licensing alone.
You don't get to hold a patent if all you intend on doing is licensing it out and not developing it. And just to scare poeple, Patents that are not developed into working products with in say 4 years get released to public domain.
The whole point of the patenting laws is to let inventors gain remuneration for their ideas while promoting progress.
Business have forgotten the second part.... Thats why we have IP piracy and why the IP laws are falling apart.
I don't want to see the end of patent laws... I want to see then do what they were supposed to do, promote progress.
America's Piracy Coalition & China
Intellectual property is the one thing standing between developed countries current standard of living and a precipitous drop to the level of developing countries.
Without intellectual property most products and services are commodities and their profit margins become razor thin.
Those of you who are basing patent rights are asking to have your wages dropped to less than ten percent of their current rate. Give China what they want and you can expect to eventually work for less than the prevailing Chinese or India's rates. That is if you have work at all.
A few hundred patent pirating transnational’s formed an organization commonly known as the Coalition for Patent fairness & PIRACY. These companies have much in common with China, in that they are not producing significant inventions and they all have an entitlement mentality.
Like the Chinese they steal other's intellectual property. They count on abuse of the process of law to bankrupt the patent owner.
When they get caught with their sticky fingers in another's patent cookie jar and the courts slap their paddies they try to demonize those who own rights to the patent properties.
Whole industries collaborate to steal the intellectual property of a leading edge inventor. The auto industry did this with Bob Kearns, the laser industry did this with Gordon Gould, and the cellular industry is doing this with Qualcomm.
Before law as we know it we had sovergins deciding who was right and trial by combat. Our system of law has plenty of problems but it is better than the altneratives. Be careful what you wish for.
Ronald J. Riley,
Speaking only on my own behalf.
President - www.PIAUSA.org - RJR at PIAUSA.org
Executive Director - www.InventorEd.org - RJR at InvEd.org
Senior Fellow - www.patentPolicy.org
President - Alliance for American Innovation
Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
Direct (202) 318-1595 - 9 am to 9 pm EST.
lawyers - kill them all
No kidding. For instance, why do motorcycle helmets mostly have shit visor fastenings? Because someone patented the good ones, and there's only so many ways you can attach a helmet visor. Same for those fucking prehistoric D-rings, because someone patented using a buckle.
However, it will take a very big company repeatedly bloodied about the head in a very public manner to get even the hint of reform going.
I still remember the X11 "backing store" patent - you want to remember what was under a window by saving the pixels off somewhere else? Sorry mate! That's patented!
Grrrrr. I so hope the Chinese take the rest of the planet to the cleaners on this.