Apple: Samsung wants to charge 2.4 percent of chip price for every patent

It’s litigation day as Apple and Samsung battle it out in courts the world over. In a two-day hearing which began this morning in Australia a judge asked for more time to study Apple’s claims, resulting in a brief Galaxy Tab 10.1 launch delay until the end of the month. Meanwhile, the first round of hearings is underway in The Hague over Samsung’s accusations that Apple’s iPad and iPhone infringe on Samsung’s wireless patents. The Korean company is seeking a ban on those products in The Netherlands.

Apple is represented by Rutger Kleemans (Freshfields) while Samsung’s legal counsels are headed by Bas Berghuis (Simmons & Simmons). Per information sourced from Webwerld editor Andreas Udo de Haes on Twitter and this Nu.nl report, Apple says Samsung is seeking a 2.4 percent charge of chip price for every patent. Even though this is not 2.4 percent of iPhone’s retail price, these royalties could quickly swell given the hundreds of millions of iOS devices sold to this date.

The Wall Street Journal estimated that would add “a 9.6 percent fee to what Apple now pays for the transceiver chips in the iPhone and in 3G iPads”. Based on 80 million iPhones and about ten million 3G iPads projected this year, this would result in a hundred million dollar royalty claim. Judge will consider these issues and rule whether Samsung’s cases will be allowed to continue on October 14 at 2pm.

Also, per the Journal:

Of course, Samsung is paid a lot of money each time Apple sells an iPhone or iPad. According to the iSuppli breakdown, of the approximately $180 that Apple spends on components for a 16GB iPhone 4, Samsung gets about $50 for supplying memory chips and the application processor. But that’s a revenue figure. Samsung’s operating profit on that $50 is, judging by the reported operating margins of its chip business this year, probably in the 15% range, or around $7.50 per iPhone. So a royalty fee of $1.15 per unit would be a healthy gain at no added cost for Samsung.

Needless to say, Apple is calling Samsung’s demands “simply excessive”. Patent expert Florian Mueller who closely follows intellectual property lawsuits noted on Twitter that “there are hundreds of patents, sometimes thousands” in a standard like 3G. “Imagine if every patent costs 2.4% of chip price”, he noted. No matter how you look at it, sounds to us like Apple might have awoken the beast. Apple says because the two parties are still negotiating a licensing agreement of sorts, granting an injunction would be premature.

The Mac maker’s legal sharks stress Apple is buying its components from Intel and Infineon, hence no need for royalties to Samsung. Infineon was acquired for $1.4 billion by Intel in January of this year and we now know why then Apple CEO was reportedly “very happy” with that purchase. This is also important because prior to January 2011 Apple was buying baseband chipsets from Infeneon, which at the time did not have a license from Samsung.

Interestingly, Apple’s lawyers explicitly stated that iOS devices sold in Europe do not use Qualcomm silicon found in CDMA versions of iPad and iPhone. Apple also said Samsung changed the license to Qualcomm to exclude Apple. In a nutshell, Apple’s argument is that Samsung’s technology and patents are already incorporated in Intel’s chipsets.

Samsung obviously disagrees and argues Apple has more than ten component suppliers and is obscuring them purposefully in order to make determining which components infringe on Samsung’s patents that much harder. Apple launched the iPhone in Holland back in 2008 without securing the necessary licenses, the lawyers for Samsung said. Apple denied Samsung’s claims and said Samsung, its parts supplier, wouldn’t demand a license until 2010 because Apple was an important customer. According to this Guardian article, the Apple account is worth four percent of Samsung’s total business…

Apple on its parts maintains Samsung’s 3G technologies should be subject to fair, reasonable and non-discriminatory licensing conditions (referred to in legal terminology as FRAND). Samsung’s lawyers argue the company never barred any party from licensing its essential patents on FRAND terms. Quite the contrary, they offered Apple the choice between the whole package of patents and individual patents, each on FRAND terms, to which Apple replied they were neither friendly nor reasonable. Verizon Wireless unexpectedly sided with Samsung in the United States, asking the court not to issue Apple’s requested injunction against Samsung products because it “is not in the public interest”. The news sent Apple shares down 1.5 percent.

Cross-posted on 9to5Google.com.