Apple offered Samsung $30 per smartphone, $40 per tablet patent license

Apple offered Samsung $30 per smartphone, $40 tablet per tablet patent license

Late Apple CEO Steve Jobs may have wanted to go all thermonuclear on Android over their alleged infringement of Apple's patents, but that doesn't mean they didn't try a pocketbook-based approach behind the scenes. If the current trial between Apple and Samsung over this very matter is any indication, there's a lot that happened behind the scenes that we didn't know about until now. Case in point: the release of a late 2010 Apple slide deck detailing a proposed licensing deal with Samsung that, if accepted, would have put this whole ordeal behind us.

The basic details of the proposed licensing agreement are that Apple wanted for $30 per smartphone and $40 per tablet from Samsung. There are some discounts available, though, with Apple knocking 20% off if Samsung were to cross-license their not-as-formidable patent portfolio back to Apple, a 20% discount for devices that have features that aren't "Apple Proprietary", and a 40% discount for smartphones that run an OS that's already licensed patents from Apple (i.e. Microsoft, not Google). In total that could bring the royalty per device down to $6, assuming it was a smartphone that runs Microsoft software and has key differentiating features from Apple's devices  (the proposal cites Samsung's BlackJack smartphone, with its Windows Mobile OS and hardware keyboard as an example). Considering that Apple's primary beef with Samsung is over Android, however, the best discount the company could manage would be down to $24 per device. The tablet licensing fee would also be reduced to $30 per device over the course of two years.

Table outlining Apple's proposed licensing terms

How that compares to other licensing deals in the mobile space, like Microsoft's dealings with HTC, Samsung, LG, Acer, and others, we're note entirely sure. It's been reported that Microsoft's licensing agreements range between $5 and $15 dollars per device, but it's never been confirmed (Samsung's been rumored to be on the high end of that scale). In fact, this is one of the few times we've been able to get the nitty-gritty details of what exactly one company was trying to ask of another for patent licensing.

As other court documents have revealed, Samsung between June 2010 and June 2012 sold 21.25 million smartphones and $1.4 million tablets, generating just over $8.1 billion in revenue. Assuming the vast majority of those were Android devices and only qualified for the 20% discount per Apple's proposal, Samsung would have been looking at licensing fees of $554 million during that time.

Half a billion is a relative drop in the bucket for Apple, with their $8.8 billion in profit - not revenue, that was $35 billion - just this past quarter. But for Samsung, $554 million is a big chunk of change for their smartphone business, while Samsung did register a profit of $5.9 billion for the last quarter, it's worth noting that Samsung also makes a wide range of consumer devices, including high-priced televisions, refrigerators, washing machines, and cameras. They do share an overlap with Apple in the smartphones, tablets, and personal computers space, but only in smartphones is Samsung's marketshare competitive with Apple's. But Samsung also produces a wide variety of smartphones, limiting the economies of scale that Apple enjoys by producing only a handful of different smartphones, and making the same model (see: iPhone 3GS) for years.

With that all in mind, we still don't know what exactly sort of profit Samsung's enjoyed off their smartphone and tablet success, but we can be all but certain their profits haven't been nearly as strong as Apple's when the company as a whole can't generate as much profit across their wide range of products. An approximately $250 million-a-year hit to Samsung's mobile electronics business would have likely been devastating to the division's bottom line, hence the lack of an agreement on Apple's proposed licensing terms.

Amusingly, Apple expected that Samsung would respond favorably to the proposed licensing terms.

Source: AllThingsD

Derek Kessler

Managing Editor of Mobile Nations, Army musician, armchair pundit, and professional ranter.

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There are 21 comments. Add yours.

Premium1 says:

No wonder Samsung turned this down. Apple is worse than Microsoft with trying to strong arm manufacturers to license.

SockRolid says:

If Samsung chose to not directly copy Apple's designs, it would have been totally free. But no, they thought they could get away with it.

Ummm, not so fast.

Apple didn't patent all possible smartphone UI and hardware designs. Just the best ones. The ones that everyone wants to copy. Especially Samsung.

Urban22 says:

Didn't you read the article? Apple also wants royalties for their Windows Phone devices too so please tell me in what way WP is like iOS?

Oh plus this more than just design aesthetics going down to how the kernel works. If Apple wins this then its the end of Android and practically any other device that challenges the iPhone as this goes past just Android.

Premium1 says:

Not end of android since apple is going after Samsung for how Samsung made android not how android is. It will just force them to change it up.

Urban22 says:

No there are documents that talk about the Android Architecture too if you looked at the presentation Apple made in 2010 plus like I said its not just aesthetics as they wanted royalties from Samsung's Windows Phone devices which look like nothing else on the market. So Apple is basically trying to completely stop the competition.

Here is a link to the presentation and what I was talking about is on page 11- 16
http://www.scribd.com/doc/102595858/Apple-s-August-2010-presentation-to-...

BBPandy says:

It wasn't just Android & Windows phones Apple was after. The proposed license would have extended to all of Samsung’s devices running the Android, Symbian, Bada and Windows Mobile operating systems. The Symbian claim is the most amusing because it came out 10 years BEFORE the iPhone (1997)

http://forums.crackberry.com/showthread.php?p=7562264#post7562264

Urban22 says:

Their Licences are ridiculous and at this point Apple is just delusional. I mean at least with earlier versions of touchwiz you could argue but WP and Symbian too? nah sorry they are clearly delusional if that's the direction they are going in.

ilovechildlabor says:

wow iOS stole all its ideas from previous phones... But guess what apple is just an ass and takes them to court saying they made the first thing. We need to get real judges that would put apples CEOs on their knees and make then suck the cheap Chinese labourers.

Urban22 says:

The thing is I think is that it doesn't matter who done what 1st as like many other things in this world there are more than way of doing things and I think the issue at heart here is that Apple just doesn't want others to get to the same end result even though they used a different method for completing the task.

Vanti says:

apple only has one Ceo.....

Urban22 says:

Why are you telling me this, did I suggest otherwise in any of my previous comments?

sciwizam says:

"An approximately $250 million-a-year hit to Samsung's mobile electronics business would have likely been devastating to the division's bottom line"

The mobile division has been the main driver of profits for the last several quarters, almost 60%-70% of the $5.9 Billion profit last quarter, not sure how it would be devastating...

S.meezy#CB says:

in all seriousness, why would they have to pay apple 6$ for each blackjack...? what are the infringing patents at play with this?

BBPandy says:

well it may LOOK like a BlackBerry but it's got slightly rounded corners :P

http://www.blogcdn.com/www.engadget.com/media/2007/10/samsung-bj2.jpg

SockRolid says:

Wow. $30 - $40 is a lot. But it could have saved Samsung a lot of grief. We'll know in a few weeks.

plunder says:

I am so sick of this issue.

It is natural for Apple to want to OWN the mobile space; and natural for Samsung to want a huge slice of it for themselves. The unnatural bit is this legal contest to see who paid the best law firm, or found the most compliant legal environment to play out their attack. Everything I have read and heard about Apples greedy conduct makes me dislike them even more; I honestly did not think that was possible.

johncblandii says:

I keep hearing Rene say "Apple doesn't want to license, they want to make Android worse." [rough translation]

Rene wasn't the only one that got that wrong.

plunder says:

That offer was like saying "You cant afford to play in our yard dude, F*** off"."
Calling that a genuine offer in light of Apple's reply to Samsung's price for essential 3G patents make the situation crystal clear. Apple still have not paid a penny for them. Apple are crooks.

nswaby says:

I think we will see this play out in the courts for a while yet! Nice article

Dark_Blu says:

Samsung would've been crazy to pay Apple a license fee for the Blackjack (A WINDOW PHONE THAT WAS OUT BEFORE THE iPHONE) or any other non- Apple like tech. This whole case is nonsense and needs to be tossed out. But it won't. We've got to make some lawyers rich. BLAH.

Naza1966 says:

Why is it that all you damn sheeps think that apple never ever in their lives never copy anything from anyone?!?!?!?!? That they are the 1st to come out with everything come on now you need to open your sheep eyes and see that apple is not what you think they are