Ann Armstrong (Vice President and Assistant General Counsel for Intel Corp.), and Joseph J. Mueller and Timothy D. Syrett (WilmerHale) recently released a working version of their article, The Smartphone Royalty Stack: Surveying Royalty Demands for the components Within Modern Smartphones. The article is not perfectly applicable to retailers because it is focused upon smartphones (hardware) as opposed to the software/internet technologies usually asserted against retailers. But it is instructive regarding the overall tax patent assertions and licensing programs placed on technology. Additionally, there are patent families included in the analysis that were also asserted against retailers, for example the Innovatio 8802.11x wifi portfolio.
The study looks at a $400 smartphone — roughly the average price of smartphones before the consumer discounts — and estimates the various license demands for the phone. Here is a summary of the results, which total $121-$124/$400 phone:
Potential Royalty Demands
|Cellular Baseband Chip (Standardized)||$54|
|Operating system software (Microsoft or Android)||$5-8|
That is approximately 30% of the phone’s price. 30% is a massive innovation tax. The tax on internet functionalities, for example the oft accused shopping cart functionality, could also easily be 30% of its price/value depending upon how you calculate the value.