Samsung must be ruing this decision now, but, before the huge Apple vs. Samsung trial took place in New York this summer, Cupertino had been in touch with the Galaxy makers to suggest a cross-licensing deal. Apple’s devices do make use of Samsung’s UMTS connection technology, and since it’s standards essential, Cupertino offered what it thought was a fair amount of $0.33 per unit sold. Much lower than the 2.4% unit cost that Sammy was after.
A letter from Apple read:
“Apple is willing to license its declared-essential UMTS patents to Samsung on license terms that rely on the price of baseband chips as the FRAND royalty base, and a rate that reflects Apple’s share of the total declared UMTS-essential patents (and all patents required for standards for which UMTS is backward-compatible, such as GSM)–provided that Samsung reciprocally agrees to this same, common royalty base, and same methodological approach to royalty rate, in licensing its declared-essential patents to Apple.”
To break it down in simple terms, FRAND is essentially the rate that’s Fair Reasonable And Non-Discriminatory. What that means is that it has to be the same rate that’s charged to every manufacturer who uses the same patent. From the looks of things, Samsung tried to charge Apple way more than this reasonable rate. Apple responded with a much lower figure, Samsung declined. All that results in the court case going ahead, and Sammy now owing $1 billion. Talk about a plan backfiring.