High-pass patent licensing order will collapse like a domino

Absrtact: The final result of the 14-month Qualcomm Antitrust investigation was announced February 10, Qualcomm received a 6.088 billion-yuan ticket. "First financial daily," the information obtained from the multi-source sources show that Qualcomm old business model faced with unprecedented challenges, through

The final result of the 14-month high pass antitrust investigation was announced February 10 that Qualcomm received a 6.088 billion-yuan ticket. "First financial daily," the information obtained from the multi-source sources show that Qualcomm's old business model is facing unprecedented challenges, the communications industry "patent change" will be the final outcome of the fall and quietly come.

The anti-monopoly investigation is long overdue, this reporter from the people in the know, this is the main reason is Qualcomm is not willing to give up the original based on the basis of high patent charges, "free reverse license" and other old business model, as for the amount of fines, it does not care.

Compared with the former, the latter will have a more far-reaching impact on Chinese handset makers. From the current point of view, the abolition of "free reverse license" is a foregone conclusion. Over the years, the industry has been criticized by the Qualcomm Patent Licensing order, will be like a domino collapse, the real industry changes have just begun.

Protecting the interests of consumers in the Chinese market

According to our correspondent to obtain information, in the NDRC's punishment decision, Qualcomm to calculate the patent rate of the model must change, the abolition of "free reverse license" model has not been disputed.

The so-called "free reverse license" refers to Qualcomm companies in order to avoid patent licensing downstream manufacturers into too many patent lawsuits, such as a mobile phone manufacturers with Qualcomm chips, they have to have their own patents for the free reverse license to Qualcomm, Qualcomm chip to sell to other handset manufacturer B, b no longer pay royalties to the original handset manufacturer, a can not go to court to sue B infringement.

A free reverse license is a way for Qualcomm to maintain its downstream eco-chain and avoid downstream handset makers from recurring lawsuits. In the 3G era, its big Brother's status makes this game rule has certain rationality. But with the upgrade from 3G to 4G, Samsung, Huawei, ZTE also accumulated a large number of standard necessary patents (SEPs), whether it should be debatable.

Due to the downstream of different manufacturers, the interests of complex, the National Development and Reform Commission in dealing with this matter is also unusually cautious, a number of people close to the situation said that throughout the decision-making process, the NDRC has regularly heard from the law, industry and the Group of Experts on the recommendations, as well as the upstream and downstream

From the current point of view, after the "first financial daily" reporters in many ways, the cancellation of "free reverse license" has become a foregone conclusion. This is also the telecommunications industry in the entire industry chain due to the patent for the potential change of the department. Qualcomm with the NDRC's investigation, the initiative to propose a package of corrective measures, including "do not require our licensee to the patent for free reverse license."

An understanding of the progress of the Development and Reform Commission think-tank said to this reporter, "Anti-Monopoly law" to the current stage, including the United States and other countries have reached the consensus that law enforcement is to protect the fair competition in the market. Protect the overall interests of consumers throughout the market through fair competition. As a law enforcement agency, the NDRC needs to consider not the industrial interests, nor the interests of the enterprises, but also to protect the fairness of the Chinese market and protect the consumers ' interests in the Chinese market.

"From my current observation of the case, I think it is reasonable to remove the free reverse license," he said. "he said.

Qualcomm's thigh is a bad hug.

What is the change of the "free reverse license"? This depends on the downstream handset manufacturers different patent research and development claims.

Specifically, for those who want to invest a lot of money in research and development, a patent-accumulating mobile phone company does not want to sign a patent reverse license contract for free, but for those handset companies that are less likely to accumulate patents and rely entirely on the purchase of Qualcomm chips, they want to continue to use Qualcomm's "umbrella" to block other companies from suing them.

Dr. Xu, who is engaged in antitrust law studies at Heidelberg University Law School in Germany, says that the interests of domestic handset manufacturers are differentiated, and ZTE wants to abolish the free reverse licensing model of Qualcomm, and to collect royalties from vendors who have no need to accumulate patents without communication standards such as millet.

"The appeal is not entirely unreasonable, but will let a large number of domestic mobile phones such as millet increase costs, millet and other hope that Qualcomm can reduce royalties; Lenovo, which has acquired some of Motorola's patents and has a certain patent reserve, has both demands, so it first openly supports the NDRC's investigation. "Xu said.

This also means, for millet and so on Qualcomm rely on more manufacturers must also self-reliance, and only a very short "window period" to adjust, otherwise there will be trouble.

In addition, Xu said, Taiwan chip companies and some of the mainland chip companies are also different attitudes, the former and Qualcomm grab share, the latter more welcome Qualcomm's investment and technical support.

From a larger perspective, the trend of the "Qualcomm case" will also affect the expectations of Ericsson and Nokia to claim royalties from Chinese manufacturers in mainland China or overseas, such as the prosecution of millet in India's Ericsson, and the incentive to raise royalties if Nokia no longer manufactures handsets.

Back to Qualcomm, several people familiar with the progress of the talks said Qualcomm was able to ask the licensee to grant it a "free reverse license" because Qualcomm had a large number of standard-necessary patents and the licensee had no choice. This could lead to a pattern in which some of the leading companies in China and South Korea themselves have developed patents that must be licensed to Qualcomm for free.

"From this point of view, this will reduce the power of innovation and research and development of enterprises, their investment in research and development can not be the corresponding return, damage the entire industrial chain." Conduction down, to the entire consumer group and the wireless communication technology industry's technological progress, is a very big obstacle. said the person.

Sun, executive director of the Asia-Pacific Institute of Law, said the cancellation of "free reverse license" will help to return to the normal market licensing mechanism, so that companies in a particular product or technical market has a certain control of the manufacturer can no longer take this "hitchhiking" way to extend its control, or even the formation of alternative improper level and vertical integration.

Sun said that the most important national interest in conducting "antitrust" investigations like Qualcomm was to ensure a fair and reasonable market environment.

The industry reshuffle has long been beneficial to consumers

For the people walking in the forefront of the industry, has long been keenly aware of the trend of industrial change. The market order brought by Qualcomm is changing, and the increase of patent litigation is the trend. August 31, 2014, the 12 National People's Congress Standing Committee at the tenth meeting voted to adopt the NPC Standing Committee on the establishment of intellectual property courts in Beijing, Shanghai, Guangzhou decision. In the future, the number of such areas involved will continue to grow substantially.

From the industry's observation, in the past year, although Qualcomm still occupies the largest brand of Android device Chip market share, high-end market is still eye-catching, but the overall market share has fallen, is not a single big. The catch-up of MediaTek and the rapid development of other brands such as Intel make the mobile device chip market more competitive.

This is also the reason for Qualcomm's downward trend in its earnings forecasts for the year 2015: In addition to the China Development and Reform Commission's antitrust investigation, the loss of large customer orders and the intensification of competition in the Chinese market. In addition, the results also repeatedly stressed that before the NDRC closed the case, some Chinese handset manufacturers license fees are not collected.

To be sure, the cancellation of the free reverse license will bring the industry reshuffle acceleration.

A former large manufacturer of mobile phone department in charge of the reporter said, many struggling in the mobile phone of the Red Sea three or four line brand manufacturers, their human and material resources can not support the fight against these costly patents, for these manufacturers, the cancellation of free reverse license may mean that the shuffle in the game. "Some manufacturers add up to only more than 10 people, and the cost is too high, which could mean being driven out of the market." ”

Other professionals from the consumer point of view that in such a pattern, consumers may be more difficult to buy low-cost smartphones in the short term, but after long-term competition, perhaps the overall cost reduction, will again benefit consumers.

Changliqiang, the patent agent in charge of patent agency work in the field of communications, said to our correspondent the future can be foreseen is that the major mobile phone manufacturers will increase research and development and patent application, but because the general need for patent acquisition cycle of 2-3 years, the short term smartphone access threshold began to increase, the cost rose; The market will automatically revise this result, several big companies after game, increase technology investment, under the pressure of sales, the cost will fall again, in favor of consumers.

"If a company reaches a certain size and needs to go overseas, it needs to reserve a large number of patents for preventive litigation, or to pay a considerable amount of licensing fees." "Changliqiang said.