Thread by @sharatibken

I'm back at court in San Jose for @FTC vs @Qualcomm. Today is all Qualcomm's defense, with its CTO, execs from its licensing business and an Apple chip exec testifying #FTCQCOM

First up in @FTC vs @Qualcomm is James Thompson, Qualcomm's CTO. #ftcqcom

Thompson oversees all engineering at @Qualcomm. He's been at the company for 27 years and worked on CDMA when he first joined #ftcqcom

Talking about the early days of CDMA: "At the time, cellular system was analog. Capacity was limited. Cellular was very expensive at the time. What CMDA promised is a much higher voice capacity" as well as higher reliability, etc, @Qualcomm's Thompson says #ftcqcom

"Even tho CDMA was a voice system, our focus in the company was data," @Qualcomm's CTO Thompson says #ftcqcom

"Voice was considered the killer app at the time," @Qualcomm CTO Thompson says. "Data was something that people didn’t really embrace, especially in the 90s." #ftcqcom

Thompson is talking about importance of having a multi-mode modem. To be able to roam globally, can't just support CDMA, but also need GSM and WCDMA #ftcqcom

What makes @Qualcomm successful in LTE, attorney asks. Thompson says it's 2 things: "We try and succeed to be the first to come out with the latest feature set." And "just as important, we provide this multimode product." #ftcqcom

"To do this multimode, all-world product, we have teams all over the world that actually do testing," @Qualcomm's Thompson says. "We have teams around the world to test in those networks to prove that it works. It makes it easy for our customer to go to any customer they want."

When @Qualcomm was getting into 4G LTE, it thought it was behind, Thompson says. It saw demos by @Samsung and @LG in Korea and thought it was really late with 4G. #ftcqcom

"It was like a call to arms in the company where we marshaled the resources we could around the company to try to catch up," @Qualcomm's Thompson says. "There was a lot of evidence we were behind. We pulled out all the stops and eventually came out with a product." #ftcqcom

When @Qualcomm finally launched an LTE chip, "to our surprise, we were the only ones," Thompson says. "When we came out with that product, we were the only ones with a commercial product." #ftcqcom

When @Qualcomm and Thompson realized the co was going to be about data, it started investing in multimedia work b/c that's what would create and consume the data. #FTCQCOM

.@Qualcomm has about 500 people working on cameras, 600 working on graphics, CTO Thompson says #ftcqcom

Along with making high-end chips, @Qualcomm also designs processors for entry level devices. They cost about 1/10th of the cost of a high-end chip, CTO Thompson says. #Ftcqcom

Thompson talks about relationship @Qualcomm builds with smaller mobile companies. It helps them figure out how to navigate the market. Says @Samsung was like that before became huge. Now @oppo, Vivo, @oneplus and others are challenging @Huawei, @Apple and @Samsung #ftcqcom

"Basically the small companies love us," @Qualcomm CTO Thompson says. "And the large companies, we’re competition and a supplier. They like us and don’t like us." (it's those big companies that have helped the @FTC and testified against Qualcomm in this trial) #ftcqcom

In 2011, @Qualcomm was worried about @Apple, @Samsung, @Nvidia, @TXInstruments and @Intel building apps processors with integrated modems, Thompson says. Rivals Marvell, @Broadcom and ST Ericsson already had such chips #ftcqcom

Man, this is taking me way back to my early days covering tech and chips. I almost forgot there were so many companies trying to supply to mobile devices

Thompson is going over the modems @Qualcomm has launched over the last several years. Notes MSM8960 was very important because it was first time it could integrate full multimode LTE with its app processor. "It allowed LTE globally to scale up." #ftcqcom

Thompson talks about the industry's move to 64-bit chips. @Qualcomm was really ready for it so it rushed to change its chip. Because of that, the chip didn't do well. #ftcqcom

Because that chip was so bad, @Samsung ditched @Qualcomm and used its own Exynos chips. Other customers bought older chips, @Thompson says. #ftcqcom

Compared to the MSM8974 (Qualcomm's most popular modem ever), the MSM8994 failed. It only had a tenth the lifetime sales, @Qualcomm CTO Thompson says #ftcqcom

"The modem, it was the best modem on the planet. But that was not enough to save that part," @Qualcomm's Thompson says #ftcqcom

"We win or lose every single year," @Qualcomm's Thompson says. "It’s not about a single technology. It’s about a wide range of technologies. ... If you have a spectacular failure on 1 of those technologies, it doesn’t matter, you’re going to lose." #ftcqcom

From 2011 to 2016, @Qualcomm spent $5B a year on R&D, about 20% of its total revenue, Thompson says #ftcqcom

Says @Apple is the only customer that buys modem without the apps processor (Apple makes its own apps processor), @Qualcomm's Thompson says. He says if didn't have to make that for Apple, it wouldn't come out with modems as often #ftcqcom

Instead, @Qualcomm would release new modems every 2-3 years, Thompson says. "If we didn’t have the @Apple business, the customers we have for those -- data card people, cars -- they don’t demand you upgrade it every year." #ftcqcom

It costs @Qualcomm $250M a year to design modems for @Apple, Thompson says #ftcqcom

In cross, @FTC presents an email between Thompson and @Qualcomm CEO @stevemollenkopf. In it, Thompson says if Apple's chipping away at Qualcomm's licensing biz, it should fight back when it's strong. Says without Qualcomm, Apple would struggle in parts of NA, China, etc #ftcqcom

.@Qualcomm CTO Thompson acknowledges that the company won't sell chips to companies who've never had a license. "If a company has a license, we sell. If they never had a license and are not in any kind of negotiation, my understanding is we don't" #ftcqcom

Now up is Fabian Gonell, @Qualcomm SVP in the company's licensing business. #Ftcqcom

We're getting a peak into how @Qualcomm's licensing business works and what it charges. It charges an upfront fee and then a royalty to handset makers. It licenses its standard essential patents for one fee or all of its patents for another #ftcqcom

When @Qualcomm first started licensing patents, CDMA patent license royalty rate was 5%. #ftcqcom

When LTE came out, @Qualcomm licensed its essential patent portfolio for 3.25% royalty. Full portfolio was 4%. Later the LTE essentials increased to 3.5%, Gonell says #ftcqcom

A decision by China set a different rate, as well. 3.25% for LTE multimode standard essential patents instead of 5% for 65% of the device, @Qualcomm's Gonell says. For single mode LTE, it was 2.275%. Used to be 3.5% of 65% of device's selling price. #ftcqcom

Since then, that's been @Qualcomm's standard rate worldwide. More on that: cnet.co/2r2HDyS #ftcqcom

There's also a cap on the royalty amount that can be paid for a handset. An essentials-only multimode patent license cap is $13 per device. For the full patent portfolio in a multimode device, it's $20, Gonell said #ftcqcom

So for a $1,000 phone, the cap would be $13. That equates to about 1.3 percent, @Qualcomm's Gonell said #ftcqcom

Gonell says @Qualcomm has been willing to have an arbitration court set its licensing terms with @Apple, but Apple won't agree to that. #ftcqcom

"We don’t want the fact that we have a chip business to prejudice a fair value that’s been established for our IP," @Qualcomm's Gonell says #ftcqcom

Note - Gonell earlier talked about how some vendors -- like @Samsung and Sony Mobile have different licensing terms. Said both were tough to negotiate with. #ftcqcom

For @Samsung's deal with @Qualcomm "Everything was unusual," Gonell said. It was an incredibly customized agreement. Almost everything was an issue. Samsung is very sophisticated. They’re very hard negotiators." #ftcqcom

What @Samsung ended up doing was paying @Qualcomm upfront licensing fee "an order of magnitude larger" than average, Gonell said. It then transferred patents to $QCOM and cross-licensed its other portfolio. Royalty rate based on risk sharing based on how well Samsung phones did

The negotiation with @Samsung took two years to come to a deal, @Qualcomm's Gonell said. #ftcqcom

Gonell says 1 of reasons for the way @Qualcomm does its licensing is "actually being fair to licensees and their subjective belief of are you being fair, are you treating them fair." That caused someone in the viewing area to audibly scoff. (I assume he does NOT agree)

Some of the companies who've stopped paying @Qualcomm during licensing disputes are: @Apple (2 years), Vivo (over a year), @Oppo (over a year), @Huawei, Gonell says. @BlackBerry was underpaying he says. But Qualcomm kept shipping all of them chips. #FTCQCOM

Gonell has been making a distinction on dealing with companies who had a license but are renegotiating it and companies who never had a license. Says won't cut off supply for people who've had a license #ftcqcom

Why not license to chip makers? Because the license wouldn't cover all of @Qualcomms standard essential phone patents. "If you do licensing at the modem chip level, you'll also have to do some licensing at the device level," Gonell says. More efficient to do one license, he says

Judge Koh is confused by Gonell's testimony. She's asking if there are licenses at the chip level #ftcqcom

There's an objecting by the @FTC who says Gonell hasn't been set as an expert on licensing. Koh apologizes and said she's just confused things more. Tells @Qualcomm to continue with its prior questioning. #ftcqcom

.@Qualcomm used to have a chip patent agreement with @MediaTek but not anymore. And @Samsung approached it at one time, asking for one because it read in Korean media that LG had one. It did not, Gonell said #ftcqcom

.@Qualcomm explained to @Samsung that it didn't license at chip level, but Samsung said its management now wanted it to get a non-exhaustive agreement. So they negotiated but didn't reach a deal #ftcqcom

We're back in court, and it's time for the @FTC to cross examine @Qualcomm SVP Fabian Gonell #ftcqcom

Now up is @Apple exec Matthias Sauer. @Qualcomm @FTC #ftcqcom

Sauer used to work as an engineer at Infineon, working on baseband chips. He joined @Intel with its acquisition of the business. And then joined @Apple's chip team in 2011 #ftcqcom

An email from Sauer said STEricsson "can neither execute nor manage their way out of a paper bag." That caused @Apple to decide to not work with it on baseband processors for the iPhone in March 2012. Or the iPad. #ftcqcom

In 2014, the @Apple engineering team made a unanimous decision to work with @Intel instead of @Broadcom as a second source for iPhone modems, @Qualcomm asks Sauer. He confirms that was true #ftcqcom

.@Intel's XMM7160 modem didn't have the carrier aggregation and features @Apple required for its 2014 iPhones and iPads, Sauer testifies. It didn't support a lot of bands like TDD-LTE. #ftcqcom

For a chip to get into an iPhone, it has to be set in June, the year BEFORE the iPhone goes on sale. So for September 2014 iPhones, it needed the chip ready in June 2013, Sauer sets (tho really, needed commercial sample chip in Sept 2013)

.@Apple's Tony Blevins testified last week that Apple wanted to build an @Intel communication chip into its iPad Mini 2, released in fall 2013, but @Qualcomm's hardball business methods crushed the plan cnet.co/2FmazdR #ftcqcom

.@Qualcomm's attorneys are trying to show that the reason @Apple didn't use @Intel chips wasn't because it forced Intel out of the market but because the technology didn't meet Apple's requirements #ftcqcom

When @Apple in 2014 looked at using @Intel chips in 2016 products, it determined using a second supplier had a "strong possibility of success" and the risks were "manageable," Sauer testifies. #ftcqcom

Matthias Sauer from @Apple is now done testifying in the @FTC @Qualcomm #ftcqcom case

.@Qualcomm has decided not to call exec Michael Hartogs. @FTC has been notified. But Judge Lucy Koh isn't happy with it. "It's a little unusual, but go ahead," she says, after saying it seems silly to do all the prep and not call him. Qualcomm says running out of time #ftcqcom

Judge Koh isn't happy with @Qualcomm changing the order of witnesses. Giving disclosures of 22 witnesses per day but not calling all of them. Koh, @FTC etc running around to deal with those, and she's not happy with it. Asks QCOM to have more precise list every day #ftcqcom

Now up is Liren Chen, an SVP of engineering and legal counsel working in @Qualcomm's licensing business #ftcqcom

Chen says @Qualcomm tries to sign licensing agreements that last for 5-10 years. #ftcqcom

"We obtain a lot of patents every day. On average, we get 35 granted patents in portfolio every day worldwide," @Qualcomm's Chen says. #ftcqcom

Research starts 5-10 years before tech is incorporated in a standard, @Qualcomm's Chen testifies #ftcqcom

.@Qualcomm is now playing a 2.5-minute video of John Grubb, senior director of IP transactions at @BlackBerry. Says he doesn't know of any instances of Qualcomm cutting off or threatening to cut off chip supply #ftcqcom

Grubbs also says understands @Qualcomm contributed the most to the CDMA standard #ftcqcom

Asks where concerns came from about @Qualcomm cutting off supply. "I don't know that anybody told me about them," @BlackBerry's Grubbs says "I don't know whether I heard this from someone else or if this was my concern." #ftcqcom

Next @Qualcomm witness is a video deposition of Ira Blumberg from @lenovo, who also testified earlier for the @FTC #ftcqcom

.@Lenovo's Blumberg testifies that @Qualcomm never threatened to not supply chips. #ftcqcom

Attorney reads email between @Lenovo execs saying that @Qualcomm said it would keep supplying chips, even if the companies don't reach a new licensing agreement. #ftcqcom

And now @Lenovo exec is done. Next videos all involve sealed testimony. One is @Motorola exec, one is @Huawei exec and last is @Broadcom former CEO Scott McGregor. About 17 mins total of video #ftcqcom

Koh asked @Qualcomm to switch the order to have video deposition of @Ericsson exec Martin Zander first. Then she'll clear the courtroom to have the other three video depositions, which are sealed

.@Ericsson's Martin Zander is testifying about partnership with @Apple. Apple was going to purchase modems from Ericsson in Oct 2011 #ftcqcom

Said @Apple appreciated the @Ericsson tech and the roadmap, but it had concerns about the timing of the 7450 modem versus Apple's launch date #ftcqcom

Assessment showed @Ericsson was up to 10 months behind with key features, and it was only 39% sure of reaching @Apple's timeline (versus almost 100% launch accuracy with its rivals) #ftcqcom

"On paper they had the resourcs, they had the capabilities to do it," Martin Zander says of ST-Ericsson's ability to make a modem for @Apple's iPhone. "They failed on execution." #ftcqcom @ericsson @Qualcomm

ST-Ericsson had more than 44 R&D sites around the world, more than a dozen for a single project, which hurt it, Martin Zander says.

We are now getting kicked out for sealed testimony. That's it for this week! #ftcqcom