Apple, Ericsson end legal battle with new patent licensing agreement

Swedish telecoms firm Ericsson announced a fresh patent licensing agreement with Apple on Monday, finally resolving a year-long legal fight between the two companies.

Ericsson didn't identify the exact terms of the deal, but the company's revenue from intellectual property in 2015 — including the new Apple deal — is expected to reach between 13 to 14 billion crowns, or $1.52 billion to $1.64 billion, Reuters reported. That's an increase from 9.9 billion crowns last year.

An investment bank, ABG Sundal Collier, estimated that Apple is being charged 0.5 percent of the revenue from iPhones and iPads. Since the company pulled in $32.2 billion in revenue from iPhones during the September quarter alone, that could translate into hundreds of millions of dollars per year.

Ericsson's chief intellectual property officer, Kasim Alfalahi, said that the licenses covered 2G, 3G, and LTE cellular connections.

"It means we can continue to work with Apple in areas such as 5G radio network and optimization of the network," he commented to Reuters.

Apple initially sued Ericsson in January, claiming excessive royalties on some of Ericsson's LTE technology. The situation quickly escalated, with Ericsson unleashing lawsuits and U.S. International Trade Commission complaints. By May, Ericsson had opened several European lawsuits as well.

12 Comments

tmay 6455 comments · 11 Years

About 8 years ago

Probably something like $3 a unit, so $750M - $1B a year for Ericsson as a guesstimate. Both parties should be happy with the deal.

studiomusic 654 comments · 17 Years

What stinks with these kinds of licensing deals is that you pay a percentage of the final price of the phone. If you make a cheap phone, you pay less than if you made an expensive phone.
Used car deals for electronics.

foggyhill 4767 comments · 10 Years

tmay said:

Probably something like $3 a unit, so $750M - $1B a year for Ericsson as a guesstimate. Both parties should be happy with the deal.

I doubt it's that much at all. That would be ridiculously high: $3-400M a years seems closer to the mark.
Still good free money for doing nothing really. good things these patents aren't exactly new so it isn't "eternal".

Yes, applying this to the margin of the phone is absurd and this has got to the stop in general.

In what other industry does that happen!! So, if you're brand you built for 100 years allowed you to make 99% margin, the widget maker makes money off that!! Crazy.

Considering these things should already been covered by buying from Qualcom, this is even more absurd.

There is no advantage really for staying with Qualcom if they can just take the licenses they need and develop their own and pay the same amount.

They'll even pay less probably the way this shakedown is occuring.

ericthehalfbee 4489 comments · 13 Years

How do we know the royalty is being applied to the retail price of the iPhone? It could be a fixed amount on the baseband chip that just HAPPENS to be 0.5% (or similar) of the retail price of an iPhone. It doesn't mean that's how they are calculating it.

Regardless, it's fair to say Apple won this round. It was Apple who first Ericsson sued over high royalty rates, and if they didn't get a good deal then they would just continue with the court case.

ericthehalfbee said:

How do we know the royalty is being applied to the retail price of the iPhone? It could be a fixed amount on the baseband chip that just HAPPENS to be 0.5% (or similar) of the retail price of an iPhone. It doesn't mean that's how they are calculating it.

Because all iPhones are not the same price. 6 different prices for 6s, 4 different prices for the 6, and 4 for the 5s.