Data for: An estimate of the Average Cumulative Royalty Yield in the World Mobile Phone Industry

Published: 6 March 2018| Version 1 | DOI: 10.17632/z4nyyf867h.1
Alexander Galetovic, Stephen Haber, Lew Zaretzki


A New Dataset on Mobile Phone Patent License Royalties---August 2017 update Mobile phones integrate a wide array of technologies, from computing to consumer electronics to communications, and from semiconductors to hardware, software and services. This makes them a relevant target for a large and broad array of patents and licensors. In addition, mobile phones rely on technological standards to make them interoperable. A standard-compliant phone uses hundreds, if not thousands of standard essential patents (SEPs), which are owned by many different patent holders. While some have claimed that dispersed ownership of SEPs leads to high cumulative royalty rates, the estimates that underpin these claims are based on the simple addition of published handset royalty rates. This dataset estimates the Average Cumulative Patent Royalty Yield paid in the mobile phone value chain— the sum total of patent royalty payments earned by licensors, divided by the total value of mobile phones shipped. The core of our method, then, is to “follow the money.” In following the money, we make no distinctions as to where a licensor is earning revenues in the mobile phone value chain, nor do we make distinctions among the different patented technologies in a mobile phone. We capture, for example, revenues earned from licenses taken by semiconductor and base band chip producers, as well as the OEMs and EMSs that assemble phones. We also capture revenues earned from licenses on patents that enable video, imaging, audio, and other functions, as well as the SEPs that enable mobility. We capture, as well, the revenues of a major software company that earns revenue from its patents that read on the most popular mobile phone operating system. Our purpose is to provide as comprehensive and transparent a data source as is practically possible for use by other researchers, industry practitioners, and government officials. We do not take a position on whether the estimates of the royalty yield we present in this study are “too high,” “too low,” or “just right.” That is an important debate, but it can only be joined on the basis of evidence. All methods of analysis are dependent upon an underlying theory, and underlying theories are created in order to answer particular questions of interest. Calculating the cumulative royalties paid (or earned) in the mobile phone value chain is not an exception to this general rule. The basic question researchers are asking is how do royalties paid by firms in the mobile phone value chain affect production and decisions at the margin? That is, if royalty rates were X percent higher, by how much would output fall and prices increase? If they were X’ lower, by how much would output rise and prices fall? Microeconomic theory provides a guide to the relevant facts necessary to answer this question; it tells us that we need to approximate running royalties.