(Reuters) - Qualcomm Inc (QCOM.O) has broadened its use of a lower-cost licensing model for the next generation of mobile data networks, a move that could help in contentious talks with two customers including iPhone maker Apple Inc (AAPL.O), the wireless tech company’s patent licensing chief said on Monday.
The patent business traditionally has supplied much of Qualcomm’s profit but has also spurred conflict with Apple, Samsung Electronics Ltd (005930.KS) and Huawei Technologies Co Ltd as well as regulators in China, South Korea and the United States.
New deals could lower the licensing rate that Qualcomm receives while making the business more dependable if regulators view the terms favourably and two major customers - Apple and a company widely believed to be Huawei - resolve their disputes and resume paying Qualcomm.
“It’s a good context for dealing with the two licensee issues we have now,” Alex Rogers, the head of Qualcomm’s licensing division, told Reuters in an interview, naming Apple but leaving Huawei unnamed as is the company’s policy when a dispute hasn’t become public through a court proceeding.
Rogers did not comment directly on the likelihood of resolving either customer dispute. Apple and Huawei did not immediately respond to requests for comment.
Qualcomm sells chips for mobile phones but has a second, much older business licensing technology for wireless networks. The licensing business has generated global controversy and resulted in billions of dollars in regulatory fines, some of which remain on appeal.
Handset makers can licence one of two sets of Qualcomm patents: The full suite that costs makers about 5 percent of the cost of a handset or a smaller set of so-called “standard essential patents” for 3.25 percent, which includes only the patents needed for gear to work on mobile data networks.
In the past, most of Qualcomm’s customers licensed both sets of patents to avoid lawsuits. But Qualcomm has been defusing tensions by making it easier for customers to licence just the smaller, lower-cost set of standard patents and by adding patents for the next generation 5G wireless network to the suite at no additional cost.
That essentially extends a 2015 settlement with China’s chief antitrust regulator. Qualcomm began to licence only its standard patents for 3G and 4G networks to Chinese handset makers for a rate of 3.25 percent. More than 100 device makers have signed on for such deals.
“We have not lowered the rate. What we’re doing is including more technology, more (intellectual property) in the offering without increasing the price,” Rogers added.
Qualcomm also announced last week that it would assess its patent fees against only the first $400 of a phone’s net selling price. Rogers said the previous price cap was $500, a figure that was well known among industry insiders but that Qualcomm did not make public.
“What we’re doing here is creating a foundation for stability going forward,” Rogers said, describing Qualcomm’s 5G licensing moves as “regulator friendly”.
The question now is whether more handset makers will opt for Qualcomm’s lower-cost standard patents rather than its pricier full portfolio.
“What we perceive here is there will be more of a mix than there was in the past of companies opting for (standard essential patents) only,” Rogers said. “How much more, depends on each individual company.”
While Qualcomm has made no public disclosures about the status of talks with the two major customers in licence disputes, the company’s approach to licensing patents for upcoming 5G networks will look different than its initial approaches for 3G and 4G networks of years past.
“Both of those issues (disputes) are essentially now being handled within the framework of the current programme we’re offering,” Rogers said.
Reporting by Stephen Nellis; Editing by Peter Henderson and Cynthia Osterman