Patents and Licensing

[leehljp]

Patent and Licensing Questions:

The Fein Multimaster patent kept away other manufacturers for the life of the patent run. I am not sure about the SawStop, but from what I have read from others, its licensing fee is so high that it will prevent low end saws from obtaining a license.

Question: To what extent can someone control a patent and not license it, - as opposed to being made to license it at a decent regulated price?


The reason that I am asking is that Apple refused to pay an exorbitant license fee to Nokia that others were paying cheaper, and as a result, Apple was sued by Nokia. In court Apple was then made to pay a lower license fee equivalent to the other companies that licensed it, which is what Apple wanted to begin with.


Now, Apple's specific graphical interface operation that it has on the iPhone and iPad - has received the patents, but it looks like Apple will refuse to license it and are suing . . . specifically Samson (at the moment) for their use of it.


SO, Question again: When can a patent be controlled to the extent that it is not licensed and remains a monopoly for its patent lifetime (ala Fein); and when is the patent forcibly licensed, ala Nokia?


Some of these patents and licensing conflicts don't make sense to me.

[gsmittle]

Some of these patents and licensing conflicts don't make sense to me.

Doesn't make sense to me either; that's what keeps the lawyers employed.

Just off the top of my head, I would think that the Nokia issue was that they were "overcharging" Apple for the same terms that other companies were getting. Perhaps the perception was that Nokia didn't want to license to Apple, so set the fee so high that Apple wouldn't pay. If Apple didn't pay, then no harm done. If Apple did pay, then Nokia gets a ton of money. (I'm sure at least some of the professionals here have "overpriced" a job they really didn't want. I know I have. )

I would bet the big issue was that Nokia, unlike Fein, actually licensed to other companies. Since Fein didn't license to anybody, they couldn't be compelled to license. Since Nokia did, they could be compelled to play fair. (Leaving aside the issue of free trade, charging what the market will bear, etc.)

Again, this is all speculation. I'm not a lawyer, nor do I play one on TV.

g.

[jackellis]

The level of the fees might have something to do with price discrimination, which is a pretty slippery subject. In fact, price discrimination occurs all the time - on airlines, at sports events, in stores, etc. It amounts to charging different parties different prices for the same good or service.

[sparkeyjames]

A patent holder does NOT have to license his patent to anyone if he/she/corporation so chooses. However as apple sued and was granted a lower rate because that is what everyone else was paying is a matter for a court.
Normally patent license rates are private and the contracts for said are also
private so a company that holds a patent is free to charge what ever it wants to.

[LinuxRandal]

Doesn't make sense to me either; that's what keeps the lawyers employed.

Just off the top of my head, I would think that the Nokia issue was that they were "overcharging" Apple for the same terms that other companies were getting. Perhaps the perception was that Nokia didn't want to license to Apple, so set the fee so high that Apple wouldn't pay. If Apple didn't pay, then no harm done. If Apple did pay, then Nokia gets a ton of money. (I'm sure at least some of the professionals here have "overpriced" a job they really didn't want. I know I have. )

I would bet the big issue was that Nokia, unlike Fein, actually licensed to other companies. Since Fein didn't license to anybody, they couldn't be compelled to license. Since Nokia did, they could be compelled to play fair. (Leaving aside the issue of free trade, charging what the market will bear, etc.)



g.

I would agree with the above. A patent is good for 20 years, once licensed, you will have other issues.
Also software by itself has issues. Software patents get fought all the time since they are about math, and math isn't patentable. (the recent Microsoft supreme court case is a good example, in the way it was set up, if they lost, they paid a big fine, but get to keep collecting on their software patents. If they won, they didn't have the big fine, and already had been paid on their patents, just couldn't collect any more.)
Another issue is software is 1/2 of the equation. Hardware is another and both are required, so there are already other competitors. This brings in the monopoly issue.

But for a clear explanation ask a lawyer, for an unclear one, talk to two lawyers. (good line I read on Groklaw)

Groklaw, patentlyO are both good resources on this.

[leehljp]

Thanks for the replies. It has been clarified somewhat, but it did not make sense why monopolies could exist on patents on one hand and required fair licensing on the other.

I am glad I am not a patent lawyer!

[LCHIEN]

"Back in late 2009 Apple countersued Nokia after Nokia filed suit against Apple for using 10 wireless technologies they patented without compensation. Many companies patent technologies from Nokia since Nokia was one of the leaders in wireless innovation and was around before many of the existing companies in the wireless market. It looks like Nokia’s claims were legitimate and unlike other companies Apple was just trying to avoid paying Nokia what they were due as Nokia announced they entered into patent license agreement with Apple."

"This agreement will result in settlement of all patent litigation between the two companies. Apple will may a one time payment with future royalties to Nokia for the terms of the confidential agreement. Nokia has invested EUR 43 billion in R&D and has over 10,000 patents. This outcome should have a positive impact on Nokia’s financials later in 2011."
from a Ziff-Davis blog

You really don't and won't know all the facts as the settlement is confidential. Nokia may have asked for higher royalties from Apple than apple was willing to pay, or maybe Apple did not initially make any royalty payments at all preferring to take their chances in court - patents can be notoriously tricky and at the whim of the jury or judge it could be held that there is or there is not any infringement.

If the patent holder has a weak patent then frequently they may be willing to settle out of court for a much lower royalty. Perhaps Apple was not using the same parts of the patent that others were using or had some technicality they thought MIGHT get them by. Ten patents were cited (Nokia has a portfolio of 10,000 patents) as infringed, maybe other royalty licensees were using less than ten.

Often the royalty amounts are not known in high tech patents. also in the case of cross-licensing one may have a deeper portfolio than the other. So one may pay more royalties than others.

the resulting negotiations depend on the following items:
1. Strength or weakness of the patent position
2. technicalities which may allow the alleged infringer to claim he does not violate said patent
3. depth of the pockets of the two parties.
4. depth of the patent portfolios of the two parties.
5. skill of the lawyers retained

When Nokia has 10,000 patents and apple may have a similar amount and both parties have countersued one or more times, then there is often an horse trading - where one party licenses all the patents to the other or even cross licensing where they share patents. The one with the more critcal and or numerous relevant patents may get a one time payment and some royalties as well from the other. As the above text says, the settlement is confidential and you will not know.

I recall working for a company where our competition patented a device with a "linear groove" in the shaft allowing gas to escape. We made a patent improvement which we claimed a spiral groove and were able to get around their patent. I don't remember if we claimed the spiral had some effect like cooling the gases better, but I'll bet we did allowing us to file an improvement patent.

If we had claimed a spiral groove with no claim for improvement it might have been rejected as a obvious similarity but claiming it made an improvement makes it different. The competition's mistake was in making too narrow a claim for a linear groove (why not just a groove?) Anyway that just goes to prove what companies might try to get away with - patents are really very rarely clear cut as you might think.

[woodturner]

When can a patent be controlled to the extent that it is not licensed and remains a monopoly for its patent lifetime (ala Fein); and when is the patent forcibly licensed, ala Nokia?

The point of a patent is to enable use of the patented idea. This can happen in two ways - the patent owner can produce a product incorporating the patent (e.g. Fein), or the patent owner can license the patent to others. If the patent is licensed, the royalties must be "reasonable" - as interpreted by a court.

The more common practice is that companies cross-license patents rather than pay royalties. Large companies build portfolios of patents so that they can cross-license when others claim infringement.

[LCHIEN]

i don 't think there is any requirement to license a patent "reasonably". For one thing, reasonable is hard to determine.

There are reasons why a licensor would not set the price too high...
1. total royalties would probably be more for more units sold cheaper than for a limited amount at high prices- this depends on demand flexibility and alternatives (this has been debated here extensively for Gass and his attempts to legislate specific rules that essentially require his device thus limiting alternatives.)
2. at some price people will not buy it ( e.g. there are other ways to cut wood than a table saw or maybe they don't even need to use wood)
3. at some price point alternatives will be created competitively - economics is funny that way.

Reasons why a licensor would set the price way high:
1. Is a producer and competitor with a similar product and want to capture larger or complete market share
2. Feels that the demand flexibility is low and people will buy the product at any price... this can be aided by government regulations requiring this specific technology with no alternatives easily available.

[Russianwolf]

Loring, what you posted is par for the course with Apple.

Do a bit of research and you'll find that Apple came to an agreement with the Beatles record label to never use their logo for a music service as it too similar to theirs. Then they came out with I-tunes and the Record label sued and lost.


Then they went into talks with Cisco over the use of the I-phone name (Cisco had purchased a company that was already producing an IP phone that used that name) Before an agreement was finalized they unveiled the I-phone under the name and Cisco had to fight for a licensing fee.

Apple seems to have the attitude that they will do whatever they want and fight it out in court later where they can throw enough money at it to get their way. This is why I will not buy their products.

[leehljp]

I didn't intend for this to become a bashing post. But shucks, I do that too. Just about every computer and internet related company has its down side and some much more than others. Some copy more than others. That is what competition is about.

I was trying to find out the difference in licensing vs staying a (legal) monopoly.