Firewire Licensing: Why all the fuss?
By Paul Shields

Recently, news hit the wire that Apple was planning on charging future licensees of Firewire a $1/port fee. While this seems like a small amount, the consumer electronics and computer manufacturing markets run on thin margins and the firewire licensing fees could create a roadblock to firewire's acceptance as manufacturers opt to leave it off their systems. The other initial concern was over whether Apple had the right to charge a licensing fee for something that was an accepted industry standard (in this case IEEE 1394).

In summary, all the noise is just a bunch of needless whining by a few very poorly managed firms and an overzealous media. Every component and feature on an electronic device or computer has an associated cost. The costs of including firewire are no different than the costs paid to Rockwell for modem technologies or Sony//Phillips for CD/DVD technologies. If the feature is in demand, consumers will pay the price necessary to acquire it. By electing to include Firewire and subsequently accepting the costs of licensing the technology, a manufacturer makes a statement that they want to offer a product with differentiating factors for which consumers will pay.

Apple's charging a licensing fee for an accepted standard is completely legal and accepted practice in the industry. All licensing boards (IEEE, ITU, ANSI, etc.) clearly state that if a standard includes proprietary, patented technologies then the owners of those patents have complete freedom over licensing fees and royalties. Think back about 12-18 months ago when the V.90 standards were still in development. Remember the media reports about the delays in final ratification. The delays were a direct result of licensing disputes. As reported in WebWeek in September of 1997, 3com wanted a flat $100,000 for their associated patents and Motorola was asking for $3 per modem for their technologies. Both pieces were critical to the proposed V.pcm standards. While manufacturers did not disclose the final licensing agreements, you can bet that every modem sold today carries some licensing fees paid back to an original patent holder. Apple's move is by no means unique or unusual.

While not unique, the move to a $1/port licensing model was shrewd. Apple has already signed the largest and most influential electronics firms in the industry. These include Sony, Matsushita, and TI. Each of these companies has flat licensing agreements with Apple and thus can include Firewire in as many devices as desired with no licensing costs. What makes this shrewd? Apple has set the stage for firewire to become ubiquitous in consumer devices thus necessitating its appearance on desktop computers. Those who did not sign on to the Firewire bandwagon early will now pay a small price for being late to market.

What about the efforts to develop an Apple free Firewire standard? It may happen, although it would be at least 2-3 years away and lack reliable backward compatibility. Then the question arises; who will own the patents on that technology? Companies do not fund research just for the sake of research; they do it to develop a competitive advantage. The inventors of the next generation of signaling technologies will definitely continue to look for ways to recover their associated development costs.

For additional assistance, feel free to post questions to the discussion board. If your needs are more extensive, please contact Paul Shields at pshields@applelinks.com.

Paul Shields is the contributing editor of The Business Mac on Applelinks. Outside of writing, Paul advises clients on building cross-platform networks and developing disaster recovery plans.

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February 09, 2010