But exactly how much royalty is paid? Well in a book by patent litigators, Joe Mueller and Time Syrett, along with Intel’s VP and Associate General Counsel, Ann Armstrong, it has been found that patents amount for about 30% of a smartphone’s retail price. In their report, The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones (that’s a pretty lengthy title), the authors found that in a hypothetical smartphone that costs $400 in retail, about $120 of that cost is used towards making royalty payments to patent holders.
They based their findings on publicly disclosed information. For example they found that $60 could be paid out in royalties to patent holders that holds the patents for LTE connectivity in smartphones. However the actual component itself costs around $10-$13 to make, meaning that if it weren’t for the royalties, your smartphones could have been priced a lot cheaper than they are today.
However we can see more companies starting to play nice with one another these days, such as Apple and Google’s Motorola who have recently agreed to drop the lawsuits against one another and work on a deal which will satisfy everyone. So what do you guys make of this? Are you shocked that a bulk of your smartphone’s price goes towards paying patent royalties?