Apple is engaged in legal battles in both the UK and the US over 4G patents used in its mobile devices. The company has applied for permission to appeal a UK verdict which would cost it an additional 13 cents per iPhone.
While this might sound crazy, the company says that very much more is at stake, not just for its own business, but for companies of every size …
Three quick pieces of jargon
In order to make any mobile device, you need licenses to use a whole bunch of patents. These patents are known as standards-essential (in other words, you can’t make a mobile device without them). Given that the companies who develop Standards-Essential Patents (SEPs) are also involved in setting the standards which require them, and that consumers ultimately pay the costs, there is an understanding that the terms should be lower than what might be demanded for more general patents.
The result is that SEPs must be licensed on what are called FRAND terms: Fair, Reasonable, And Non-Discriminatory.
The problems start when patent assertion entities, otherwise known as patent trolls, buy these SEPs and start demanding licensing fees which are very much not FRAND.
That 13-cent battle
Apple has been involved in a very long-running battle against one of these, Optis Wireless Technology, which is owned by a New York-based hedge fund. Optis owns just a handful of the total number of 4G SEPs, but the company is demanding large sums of money for licences.
In the US, a court initially awarded Optus $506 million in damages. That was subsequently reduced to $300 million, which both companies appealed. The judge in that case decided that a new damages trial should be held to decide the matter from scratch.
A separate UK case back in 2022 decided the FRAND rate for the patents owned by Optis should be 2 cents per iPhone. An appeal to the Supreme Court saw that amount increased to 15 cents.
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