While Microsoft goes after competitors to get patent licensing agreements, Apple is notorious for not licensing its technology to anyone but instead looking to shut them out the market. As it turns out, Samsung was an exception.
You see Apple and Samsung have a multi-billion dollar buyer-supplier relationship. Every year Apple purchases billions of dollars worth of components for its devices from Samsung, such as flash memory, screens, etc. Even though Apple is reportedly trying to lower its dependence on Samsung in light of these patent wars, Apple spent $5.7 billion purchasing components from Samsung in 2010. Because of this relationship, in 2010 Apple was willing to license its patents to Samsung for per device royalties.
Borks Teksler, Apple director of patent licensing strategy, testified in the ongoing Apple vs Samsung trial that when Samsung released its original Galaxy S device in March 2010, Apple executives were “shocked” that a “trusted partner” would built a “copycat product”. Steve Jobs and Tim Cook then held a meeting with Samsung at which Apple presented its patent licensing proposal to Samsung.
The licensing proposal involved Samsung paying Apple per device royalties and was as follows:
- US$30 per Android, Symbian, and Bada device
- US$40 per touchscreen tablet
- This would decrease to US$30 per device over two years
- 20% discount if Samsung agreed to license its patents to Apple
- 40% discount if the device in question is using an Apple-licensed operating system (e.g. Windows Mobile)
- 20% discount if the device in question is using an Apple-licensed microprocessor
- 20% discount if the device in question uses no “proprietary” features (e.g. a touchscreen)
As CNN points out, at a price point of $600, the $30-40 per device royalty comes out to roughly 5% per device. In return, Samsung reportedly asked Apple to pay 2.4% royalty per iDevice.
Samsung obviously turned out Apple’s offer but if Samsung had agreed to the deal, it would have paid US$250 million to Apple in 2010 without the 20% cross-licensing discount or $288 million with the cross-licensing discount. This number obviously would be much larger today seeing as Samsung now dominates the market but it would likely be less than the $2.88 billion Apple is asking for in damages, a number that can be increased by the jury if Samsung is found willfully guilty for violating Apple’s intellectual property.