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Originally Posted by sclitheroe
That assumes that hardware costs and market size remain fixed - with hardware costs always decreasing, and the market expanding (at at an enormous pace right now), you can realize sustained, or even increased profits despite a margins decrease. Declining margins are pretty much the norm for the IT hardware business.
The other thing is that the patent licensing is a two way street - the cross-licensing involved by all parties helps to level the field. The parties with more patents obviously come out a bit ahead, since its not a perfect zero-sum game, but this stands to reason since more patents means more spent on R&D (or on acquisitions), so the costs are incurred elsewhere. I suppose we could argue that the cross-licensing model isn't working, and that's why companies are going to court, but with billion dollar settlements being handed out I'm not convinced that is a trend that will continue for long.
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You're missing the point, even if hardware costs decreased and market size expanded, the consumer is still paying more in litigation costs that he/she would otherwise not have had to pay without litigation or fair cross licensing deals that were previously considered norm. Even if the overall price of a smartphone decreases (which it has not with SGS BOM costs of $200 and SGSII BOM costs of $209 vs MSRP of $649 and $699 respectively... seems to indicate they just packed more in at the roughly the same price), the price would have dropped more had the legal fees not played a factor in the overall costs. That is harm to the consumer.
What makes you think the trend will stop? I'd also argue that billion dollar settlements will set the precedent of increasing consumer costs that otherwise not have be paid by the consumer with either increasing royalty fees in lopsided licensing deals or larger/more numerous settlements. This settlement has set the precedent that non-essential design patents are worth more than entire corporations and their patents. Lawyers and corporations will go to where the money is. Until there is real patent reform in the States, the trend is likely to continue. It has for the past two decades and with continued bipartisan bickering I doubt any meaningful reform will come in the next.