151: Chapter 151 Charging Qualcomm a Transmission Tax

The Qualcomm lawyer immediately retorted!

"But the patents you preemptively registered have nothing to do with MediaTek."

Shen Fei nodded; this indeed had nothing to do with it.

"Those patents were developed by us," Shen Fei picked up his teacup and glanced at Paul Jacobs. "Mr. Jacobs, Qualcomm has been working in communication technology for 30 years.

Transsion has indeed been doing it for a shorter time, but some things don't belong to whoever has been doing them the longest.

Relying on seniority doesn't work in the business world; it's more suitable for children playing house."

He wrote on the whiteboard next to him: The Patent Review Committee is not stupid.

"Starting in 2008, Transsion began researching multi-carrier aggregation technology.

Some technologies were indeed referenced from Qualcomm's solutions, but they have all been extensively improved.

For example, with this one, our engineers found that Qualcomm's standard wasn't good enough in certain scenarios, especially in environments like Africa where the network is unstable.

We spent several months developing a new solution that is better suited for Africa."

"As a result, we successfully applied for the patent."

He turned around: "Rather than saying these patents were preemptively registered by us, it would be more accurate to say they were independently developed by us."

The Qualcomm lawyer wanted to say something else, but Paul Jacobs stopped him.

Today was not about arguing!

He looked at Shen Fei, his gaze becoming serious.

"Mr. Shen, you just said they were developed by yourselves, but as far as I know, you don't have a relevant R&D department?"

Shen Fei raised a finger and pointed to his own forehead: "Mr. Jacobs, have you ever heard of an old Chinese saying: 'Make a fortune in silence'...

Without a breakthrough, we naturally prioritize confidentiality.

It's just that last year, your country's engineers were indeed very useful, allowing us to achieve a technological explosion, and the next explosion will come very soon."

Jacob's expression changed.

"You poached our engineers, used our technical roadmap, and you still say it's not infringement."

Shen Fei smiled and then waved his hand.

"Mr. Jacobs, reverse engineering is an industry practice. MediaTek is doing reverse R&D, Samsung is doing reverse R&D, we just do it more thoroughly.

And besides, we don't just dismantle; we also improve."

"As for the engineers, they were 'abandoned' by you, and they joined Transsion voluntarily. We didn't use any means..."

...

Mentioning this topic, Paul Jacobs didn't know what to say.

In the end, he chose to avoid the topic.

After all, this is something happening throughout the entire United States, not just at Qualcomm.

In an economic crisis, being able to save your own skin is what matters most.

"Mr. Shen, do you know why Qualcomm came here?"

Shen Fei looked at him: "It's not about the patents. That was just an opening act, a small show of force from your company to intimidate me.

Time is tight, let's get down to business, shall we?"

Jacob nodded.

"Right, it's not just because of the patents."

He looked at Huang Tianya sitting on the side: "It's mainly because of Huaxin Investment."

The office was quiet for a long while; Shen Fei did not deny it.

After all, it was a fact.

"Huaxin Investment bought Qualcomm shares. The last time it was 4.9%, and at that time, I wanted to come and talk with Mr. Shen, but because of the MSM8255, this meeting was postponed.

Last month we investigated again, and the shares had changed slightly, reaching an astonishing 7.5%.

Even for an investment bank, this is a very large shareholding.

Although it is scattered under the names of more than a dozen investment companies, which took us quite a bit of time, the result is too shocking. If we don't know your side's intentions, our work cannot proceed normally."

The reality was far more terrifying than what Paul Jacobs said. Some of these shares came from the secondary market, and some came from shareholder mergers...

The cards were laid out on the table!

"Mr. Shen, what exactly do you want to do?"

Shen Fei picked up Qualcomm's investigation file, finally shook his head, and then he smiled:

"Mr. Jacobs, what do you think I want to do?"

Jacob said: "You want to control Qualcomm? Just like acquiring NVIDIA, packing up all the relevant patents and leaving, draining the United States of its fortune."

Shen Fei shook his head: "It's only 7.5%, it's not that serious yet."

Shen Fei paused for a moment and revealed his true purpose: "But it can do one thing."

"What thing?" Paul Jacobs asked, a bit impatiently.

"Make you sit down and talk to me, talk to me voluntarily."

Paul Jacobs calmed himself down; the other party indeed had this purpose.

Although Transsion has many 4G patents, in the 3G era, Qualcomm is still the hegemon that cannot be bypassed, so he can occupy the dominant position.

That afternoon, the two sides talked for four hours. Qualcomm did not gain the upper hand, and at times, they were even led by the nose by Transsion.

The final agreement reached was: Transsion acknowledges Qualcomm's basic patents and pays reasonable licensing fees.

Qualcomm acknowledges Transsion's patents...

Cross-licensing.

Transsion cannot increase its shareholding in Qualcomm further. As compensation, Qualcomm can cancel the Qualcomm Tax collected from Huaxin.

The Qualcomm Tax is a common industry term; in essence, it is the Qualcomm 3G standard-essential patent licensing fee.

The rogue aspect of this patent collection model is that it doesn't sign a patent license, nor does it just sell chips; it charges 5% of the wholesale price of the entire machine.

Including the full set of CDMA/WCDMA, this cut is indeed very high.

Based on Apple's selling price, it's about $25 per unit, equivalent to over 100 Chinese Yuan.

Even if you use MediaTek chips, you still have to pay it.

If you don't pay this Qualcomm Tax, there are no chips available to use.

Now, with Motorola's patents and Transsion's own related 4G and 3G patents, after the final calculation, Huang Tianya walked over and whispered a few words in Shen Fei's ear.

After listening, Shen Fei smiled.

"Mr. Jacobs, according to the current agreement, every Transsion phone needs to pay Qualcomm an $18 patent fee, but..."

"Qualcomm needs to pay Huaxin $21.5 for every chip.

That is to say, Qualcomm needs to pay Transsion $3.5 for every chip."

Jacob's expression changed. He looked at his lawyers, and the legal team immediately did the math.

This problem was a bit complicated; about an hour later, their expressions changed too.

"This is impossible."

Huang Tianya pushed over more detailed documents.

"This is the global licensing situation for Huaxin patents; Nokia, Ericsson, and MediaTek are all using them."

He looked at Jacob: "The chips your company sells also use these technologies."

Jacob hurriedly picked up these documents and flipped through them page by page.

It was finally proven that what Huang Tianya said was true.

Qualcomm needed to pay Huaxin Investment an additional $3.5, accounting for about 15% of the chip cost.

It's not fatal, but it hurts.

After all, they have always been the ones collecting patent fees from other companies; how could other companies collect from Qualcomm...

Besides that, it's this dull knife... For every 100 million chips Qualcomm sells, they have to give Transsion $350 million.

And they can also get shareholder dividends, plus the reverse charging; it's eating the fish twice, and the bulk of the profits all went into their hands!

So, he has become the laborer.