Study: 30% of smartphone cost tied to patent royalty fees

May 30, 2014
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Study: 30% of smartphone cost tied to patent royalty fees

With all the patent litigation flying around, it’s reasonable to assume it will affect the price of a smartphone. If a case is lost or settled out of court, one or both sides typically have to pay a patent fee to the other company. That added cost is not blindly absorbed by the company, and a new document shows just how much we’re paying for patents when we buy a device.


According to two Apple lawyers and an Intel executive, over one-fourth of the cost of a smartphone is tied directly to patent royalty fees. Their report, aptly titled The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones, details how much we as consumers end up paying.

For a $400 smartphone, we’re paying about $120 in patent royalties. That’s about 30% of the total cost, directly tied up in patent fees. The data shows that in many cases, patent royalties meet or exceed the cost of the actual device hardware.

Even more troubling is “royalty stacking”, where multiple companies with interests try to steal away fees from a handset. To that end, a single smartphone could end up having, say, three royalties for LTE connectivity alone. That threatens to drive the price up to the point it’s no longer affordable.

Companies can sidestep these rules, as Samsung and Google recently did, offering up a truce and cross-licensing agreements. Save for agreements like those, FRAND is the only thing saving OEMs from being torn apart by patent trolls.

Source: Wilmer Hale

Via: Digital Trends


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