Motorola Mobility Seeks 2.25% of iPhone Sales for Patent License

Motorola Mobility (MMI) is asking for 2.25 percent of Apple’s iPhone sales in order to license MMI’s patents. The figure was uncovered by patent watcher Florian Mueller, who found the figure in documents filed in the U.S. and Germany.

Apple vs. MMI

This figure is one of the tidbits that observers of the back and forth patent battle between Apple, Motorola, Samsung, and other mobile device makers have been wanting to know. This is in part, as The Wall Street Journal pointed out, because technology companies try quite hard to keep licensing rates for patent licensing under wraps.

Another reason is that the patents involved are subject to so-called “fair and reasonable, non-discriminatory” licensing terms, something that Motorola Mobility (in this instance) agreed to in order to have their patents included into wireless standards.

Apple vs. MMI Letter

A Court Document Found by Florian Mueller and Published by FOSS Patents
(Click the image for a larger version)

The problem is that the new data point of 2.25 percent of iPhone sales doesn’t really tell those of us on the outside of these industry deals whether or not Motorola’s demands are outside of “fair and reasonable.” On the surface, it seems like an extortionate demand, but if that rate would then cover Apple for licensing all of Motorola Mobility’s patents, it could well be quite fair and reasonable. If it is the same percentage every other company has paid, it would also be, by definition, fair and reasonable.

Further complicating the issue is the fact that Apple has been arguing in the U.S. that a license agreement the Cupertino, CA company has with Qualcomm covers Apple on the particular patent at the center of this specific patent fight. Apple has told U.S. courts that it is covered in an extension of Qualcomm’s own licensing agreement with MMI, while MMI has argued, more or less, nuh-uh.

According to Mr. Mueller, “[Apple] claims that MMI’s standards-essential patents implemented by Qualcomm’s baseband chip are exhausted, meaning Apple can’t be sued because its supplier, Qualcomm, has a license. On the other hand, Apple apparently wants to use the commercial terms of that agreement as one of various indications for the unFRANDness of MMI’s 2.25 percent royalty demand.”

To that effect, Apple has apparently been filing subpoenas against a variety of mobile handset makers looking for documentation that would shed light on MMI’s licensing agreements with those companies. If Apple can prove that MMI is trying to hold it to different terms than MMI holds other companies to, it might be able to get the courts to agree that MMI is violating its FRAND agreements. If not, it could be forced to pay whatever MMI is asking for.

If Motorola Mobility were to win the amount it has demanded, it could be entitled to more than $1 billion in licensing fees based on Apple’s 2011 iPhone sales alone. Going forward, the fee would likely be worth billions more.