David Rosenthal: evaluation

Transcript context

…Yes, yes. Similarly, they had a clever tactic in their IP strategy. At Qualcomm, where I think they have something like 17,000 patents now, there's a decision every time there's a novel piece of technology about whether they should patent it or keep it a trade secret. There's enough things patented so that you can't achieve any of these things, these magical things we've been referring to all episode, these layers of magic without paying Qualcomm. But they don't patent everything because they want to keep an advantage for consulting revenue, implementation fees, or signing big deals where they say, not only do you get access to our patents—which may expire at some point—but if you work directly with us, you get access to the trade secrets and you can pay us to generate services revenue for you to work with our engineers. I was thinking about this for playbook as we're going to, there's this really interesting dynamic to this industry that lends itself well to the IP and patent monetization scheme that Qualcomm has adapted which is that the successive generations of wireless network Gs happened just fast enough that it's within the patent lifetime. So that all that core CDMA, all those patents are expired now, but it doesn't matter because we're so many generations beyond that those patents are now worthless. You get all the useful life during the protection period of the patent. It's not like a generic drug where Advil, Tylenol, or whatever is still useful. Right. That's a great point. It's also interesting if you miss the window. If Qualcomm had missed the window in the early '90s of evangelizing the technology for 2G, they may not survive long enough to catch the next window 10 years later for 3G. This is one of the few industries where there's this super quantized time window that exists when you can actually get in. Another one that I thought was pretty interesting, because I mentioned I think the business actually makes sense together, the licensing business offers Qualcomm predictable high margin revenue that they can basically use to fund R&D. Because they know they're going to keep getting that and because it's a big revenue stream, it lets them take bets on new R&D. When they do more R&D, that fuels the flywheel where they both get new products and they get more IP that they can continue putting into the licensing flywheel. There is a credible argument of why you want to keep them together.…

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