liren chen, vp engineering and legal counsel kirti … 4 - chen_liren and...1 liren chen, vp...
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Liren Chen, VP Engineering and Legal CounselKirti Gupta, Director of Economic Strategy
Competition Data and Antitrust – a Corporate Perspective
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Advancing technology through innovation and foresight
InventedDigitized wireless communications
ForesightDemand created for higher quality voice
InventedIncreased voice
quality
ForesightAdd data to the
network
InventedData added with 3G
technology
ForesightUsing phone as
computing device
InventedFirst 1GHz mobile
processor
Qualcomm Snapdragon is a product of Qualcomm Technologies, Inc.
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Advancing technology through invention and foresight
Foresight1000x increase in video
on mobile
InventedLTE Broadcast
ForesightEnhance experienceof video on mobile
InventedBrought 4K intomobile devices
ForesightBillions of connected
devices
InventedTechnologies that
enable IoE
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Diverse patent portfolioCovering all aspects of mobile devices
NFCAppsprocessor GPU Position
locationOS/user interface
Wireless charging Camera Security
WWANSensors Semiconductor Videocodecs
RF andantenna Display Audio
processingConnectivity
(Wi-Fi)
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Investment in technology standards years in advance
2011Rel-A 10
2006HSDPA Rel 5
2009HSPA + Rel 7
2010EV-DO Rev B
3GHigh Speed Data
4G
2000CDMA 2000 1X
2001WCDMA Rel992G+ 1988
Qualcomm R&D Conception of Cellular CDMA
1995CDMA IS-95A
1997EV-DO
2002EV-DO Rel0
2002OFDM
2009LTE Rel 8
5G 20065G technology
1998EV-DV
2000EV-DO Demo
R & D Commercial
2007HSUPA Rel6 & EV-DO Rev A
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Consistently growing innovation, large portfolio in China
Source: Qualcomm Incorporated data
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Fiscal yearCurrent worldwide Qualcomm patent portfolio
(pending and granted)
Compound annualgrowth rate32%
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Innovation in mobile technology driving trillions of dollars of impact
Source: “The Mobile Revolution: How Mobile Technologies Drive a Trillion Dollar Impact”, Boston Consulting Group (2015)
$1.8 trillioninvested in past 5 yearsR&D and infrastructure investments from 2009-2013
$3.3 trillion in revenue
Revenues of the global mobile value chain in 2014
Jobs in the global mobile value chain
Another $4 trillioninvestment comingAdditional R&D and infrastructure investments needed by 2020
$3.3T
11 million jobs
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IP frameworks and standard setting are two fundamental enablers of mobile’s growth
Source: “The Mobile Revolution: How Mobile Technologies Drive a Trillion Dollar Impact”, Boston Consulting Group (2015)
Consumer-oriented data practices
Strong IP frameworks and patent protection
Collaborative industry standard-setting processes
Adequatespectrum allocation
Free international trade and capital flows
Healthy network operator environment
Dynamic digital servicesecosystem
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Chinese consumers value their mobile device at ~40% of their income, well above US, Germany, Korea, and Brazil
2011
45%
2011
11%
2011
12%
2011
13%
2011
20%
2011
43%
Mobile valued at 20~40% of their incomeby consumers in emerging economies1
Mobile valued at ~11% of their incomeby consumers in developed economies2
1. For Brazil and China, 3G consumers as 4G only very recently rolled-off in both countries 2. Developed country our reference consumer is a 4G user 3. Based on the nominal GDP per capita (2013)Source: Conjoint analysis, BCG Consumer Impact Survey (USA: n=1003, Germany: n=1014, Korea: n=1002, Brazil: n=1000, China n=1070, India: n=2640)
$770 $2,270$2,270 $5,800$6,300 $3,150
Value in USD
$3,300
Value as% of income3
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Mobile contributed to more than $1.2 trillion to GDP in Mobile industry GDP contribution in 2013 in USD B (as % of country GDP)600
400
200
0
$477B(2.8%)
$43B(1.9%)
$307B(3.3%)
$61B(1.7%)
$140B(10.8%)
$41B(2.2%)
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IP and antitrust: Technology standards under scrutiny
Concerns raised by FTC, DOJ, and most recently NDRC, about potential “consumer harm” due to IPR related to standards
For example, see:• FTC (2011) report, “The evolving IP marketplace”• DOJ (2012) remarks “Six “small” proposals for Standard Setting Organizations (SSOs)
before launch”• Kuhn, Scott-Morton, Shelanski (2013), “SSOs can help solve the Essential Patents
licensing problem”
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IP and antitrust: technology standards under scrutiny
Example 1: “Patent hold-up”• With no alternative to a technology standard, patent owners can potentially
“hold-up” the standard’s implementers, deriving supracompetitive rents and harming competition and consumers
For example:“Hold-up may have especially severe consequences for innovation and competition in the context of standardized technology.” (FTC (2011) report)
“Patent holders may seek to take advantage of that market power by engaging in one form of patent hold-up, such as excluding a competitor from a market or obtaining an unjustifiably higher price for its invention. Consumers could be harmed as well by (increased consumer prices).” (DOJ (2012) remarks to ITU-T)
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IP and antitrust: technology standards under scrutiny
Example 2: “Royalty Stacking”• Royalties paid by product manufacturers to many different patent owners can
add to prohibitively high as a percentage of the product’s value, diminishing their margins & commercialization incentives
For example:“Time and time again, we have seen this sort of royalty-stacking problem arise. One great example is 3G telecom in Europe. The standard-setting organization (SSO) put out a call for essential patents, asking which they must license to make the 3G wireless protocol work and the price at which the patent owners would license their rights. 3G telecom received affirmative responses totaling over 6000 essential patents and the cumulative royalty rate turned out to be 130%. This is not a formula for a successful product.” (Lemley (2002))
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Theory versus evidence: Lower costs and improved performance of mobile
0
100
200
300
0
2
4
6
8
2004 2006 2008 2010 2012 2014
$/megabyte
Consumer cost of data per megabyte relative to data consumption versus data speedMbps
Sources: Cisco Visual Networking Index, ITU, IE Market Research, Motorola, Deutsche Bank, Qualcomm
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Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper
Theory versus evidence: Lower consumer prices of products as patent owners increase
0
20
40
60
80
100
120
140
-
100
200
300
400
500
600
700
800
900
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Num
ber o
f ess
entia
l pat
ent h
olde
rs
Aver
age s
ellin
g pr
ice
($ 20
13)
Number of essential patent
holders
Averagesellingpriceof a
phone
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Theory versus evidence: High market entry, more consumer products as patent owners increase
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
20
40
60
80
100
120
140
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Milli
ons o
f pho
nes s
old
Num
ber o
f ess
entia
l pat
ent h
olde
rs
Number of essential patent
holders
Number ofphones sold
Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper
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Theory versus evidence: Higher market entry and lower concentration
-
5
10
15
20
25
30
35
40
45
50
-
5,000
10,000
15,000
20,000
25,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Num
ber o
f pho
ne m
anuf
actu
rers
Aver
age
sale
s per
pho
ne m
anuf
actu
rer (
in 2
013
$)
Numberof phone
manufacturersAverage sales per phone
manufacturer
2G Cell phones
introduced
3G Cell phones
introduced
Iphoneintroduced
4G Cell phones
introduced
Source: Gelatovic and Gupta (2015), “Royalty Stacking and Standard Essential Patents: Theory and Evidence from the Mobile Wireless Industry:, Hoover IP2 Working Paper
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Need for future research
Filling the gap between theory and evidence
• What explains the disconnect between these policy concerns about competitive harm and the reality of a healthy, thriving industry?
• While one can always argue that the “but for” world would be better in some way, competition concerns demand consideration of objective criteria
• What policies should China and other emerging innovation economies embrace for promoting IP and standards
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Qualcomm and Snapdragon are trademarks of Qualcomm Incorporated, registered in the United States and other countries. Other products or brand names may be trademarks or registered trademarks of their respective owners.
References in this presentation to Qualcomm may mean Qualcomm Incorporated, Qualcomm Technologies, Inc., and/or other subsidiaries or business units within the Qualcomm corporate structure, as applicable.
Qualcomm Incorporated includes Qualcomm’s licensing business, QTL, and the vast majority of its patent portfolio. Qualcomm Technologies, Inc., a wholly-owned subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm’s engineering, research and development functions, and substantially all of its product and services businesses, including its semiconductor business, QCT.
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