Qual­comm says Ap­ple us­ing its power to pay less for a patent li­cence

Qual­comm is de­mand­ing dam­ages and with­held pay­ments from Ap­ple writes John Ribeiro

PC Advisor - - NEWS ANALYSIS -

Qual­comm is seek­ing dam­ages from Ap­ple, al­leg­ing that the iPhone maker in­ter­fered with long-term agree­ments be­tween the chip com­pany and li­censees that man­u­fac­ture the iPhone and iPad, and en­cour­aged ac­tions by reg­u­la­tors against the com­pany by giv­ing gov­ern­ment agen­cies “false and mis­lead­ing in­for­ma­tion”.

Ap­ple did not use cer­tain high­per­for­mance fea­tures of the Qual­comm chipsets for the iPhone 7, claims the chip­maker. When iPhones with the Qual­comm pro­ces­sor still out­per­formed iPhones that used a chipset from key ri­val In­tel, Ap­ple is said to have pub­licly claimed that there was “no dis­cernible dif­fer­ence” be­tween iPhones us­ing In­tel chipsets and those us­ing Qual­comm pro­ces­sors, when it knew the op­po­site to be true, ac­cord­ing to a re­cent fil­ing by Qual­comm.

Ap­ple warned that if Qual­comm were to make or spon­sor public com­par­isons of the In­tel and Qual­comm-based iPhones, Ap­ple would use the mar­ket­ing re­sources at its dis­posal to “re­tal­i­ate” against Qual­comm and its stand­ing as an Ap­ple chipset sup­plier would be jeop­ar­dised.

The fil­ing in the US Dis­trict Court for the South­ern Dis­trict of Cal­i­for­nia is in re­sponse to a law­suit Ap­ple filed against the com­pany in Jan­uary, ac­cus­ing the chip sup­plier of charg­ing “ex­or­bi­tant” li­cens­ing fees for its cel­lu­lar tech­nol­ogy.

Ap­ple is seek­ing nearly $1 bil­lion in com­pen­sa­tion for pay­ing ex­ces­sive roy­al­ties to Qual­comm. The com­pany said in its fil­ing in Jan­uary that Qual­comm’s li­cens­ing model is based on the fi­nal sell­ing price of a de­vice, so that the roy­alty paid for its stan­dard­essen­tial patents by mak­ers of high-value phones will be higher than that paid by mak­ers of ba­sic mo­bile phones.

The small­est saleable unit for a cel­lu­lar SEP li­cense should be no greater than the base­band pro­ces­sor chipset, Ap­ple ar­gued. It also wants Qual­comm to ne­go­ti­ate sin­glepatent li­censes rather than of­fer a li­cense to its patents as a sin­gle port­fo­lio.

Both com­pa­nies have a lot at stake. Ap­ple would like to find ways to lower the cost of its iPhones, par­tic­u­larly in newer, price­sen­si­tive mar­kets, while Qual­comm makes a sig­nif­i­cant por­tion of its rev­enue from li­cens­ing its in­tel­lec­tual prop­erty.

In its re­sponse, Qual­comm por­trays Ap­ple as us­ing its con­sid­er­able power to try to get lower roy­alty rates from the chip com­pany. Af­ter fil­ing the law­suit in the court in Cal­i­for­nia, Ap­ple also sued Qual­comm in China, the UK and Ja­pan as part of “its ag­gres­sive strat­egy of con­struct­ing com­mer­cial dis­putes and then claim­ing it has been vic­timised,” ac­cord­ing to the fil­ing.

When asked for com­ment, a spokesman for Ap­ple re­ferred back to the com­pany’s state­ment in Jan­uary in which it claimed that Qual­comm had in­sisted on charg­ing roy­al­ties for tech­nolo­gies they have noth­ing to do with.

“The more Ap­ple in­no­vates with unique fea­tures such as TouchID, ad­vanced dis­plays, and cam­eras, to name just a few, the more money Qual­comm col­lects for no rea­son and the more ex­pen­sive it be­comes for Ap­ple to fund th­ese in­no­va­tions,” the iPhone maker said in that state­ment, when fil­ing the suit against Qual­comm in the Cal­i­for­nia court.

Ap­ple said that Qual­comm has taken “in­creas­ingly rad­i­cal steps”, in­clud­ing most re­cently by with­hold­ing nearly $1 bil­lion in pay­ments from Ap­ple as re­tal­i­a­tion for its

“truth­ful re­sponses” to law en­force­ment agen­cies in­ves­ti­gat­ing the chip com­pany.

Qual­comm holds that “late­comer” Ap­ple con­trib­uted vir­tu­ally noth­ing to the devel­op­ment of core cel­lu­lar tech­nol­ogy and has de­pended heav­ily on Qual­comm tech­nol­ogy to be­come the dom­i­nant player in the cell­phone mar­ket. “Now, Ap­ple wants to pay far less than fair value for a li­cense to Qual­comm’ s patents,” it added.

The chip­maker al­leged that Ap­ple in­ter­fered, and con­tin­ues to in­ter­fere, with the chip maker’s long-stand­ing con­tracts with the man­u­fac­tur­ers of Ap­ple’s cel­lu­lar de­vices, lead­ing them to with­hold cer­tain roy­al­ties owed to Qual­comm, ac­cord­ing to the redacted fil­ing. The con­tracts with man­u­fac­tur­ers such as Com­pal, Wistron, Pe­ga­tron and Fox­conn were signed even be­fore Ap­ple started us­ing Qual­comm chipsets in its prod­ucts. Rather than en­ter into a con­tract di­rectly with Qual­comm, Ap­ple chose to rely on the con­tracts Qual­comm had with the man­u­fac­tur­ers.

The chip­maker also claims that Ap­ple has with­held money owed to it un­der an­other con­tract re­lat­ing to a high-speed fea­ture of its chipset.

In ne­go­ti­a­tions be­tween the two com­pa­nies for a patent agree­ment, Ap­ple is said to have of­fered to pay Qual­comm roy­al­ties per phone that would be “a small frac­tion of the roy­alty” paid by other smart­phone ven­dors.

Qual­comm also ac­cuses Ap­ple of giv­ing false in­for­ma­tion to reg­u­la­tors. The chip com­pany was fined in De­cem­ber by South Korea’s an­titrust reg­u­la­tor for vi­o­lat­ing an­titrust laws. By Jan­uary, the US Fed­eral Trade Com­mis­sion ac­cused it in a law­suit of strong-arm­ing phone mak­ers into ac­cept­ing un­fair li­cens­ing terms while giv­ing Ap­ple a break in ex­change for ex­clu­siv­ity.

The chip com­pany now charges that Ap­ple mis­led the Korea Fair Trade Com­mis­sion on 17 Au­gust 2016 by tes­ti­fy­ing, for ex­am­ple, that “Ap­ple has yet to add a [sec­ond chipset] sup­plier be­cause of Qual­comm’s ex­clu­sion­ary con­duct”. Ap­ple had al­ready at the time added In­tel as a sec­ond base­band chip sup­plier and pur­chased In­tel chips to in­clude in the iPhone 7, which was only a few weeks away from its Septem­ber re­lease, ac­cord­ing to the fil­ing.

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