Apple and Qualcomm are engaged in what will likely be a yearslong and epic battle. Following news that Qualcomm had been charging heightened royalties for use of its tech, as well as reports indicating Qualcomm required Apple to pay a percentage of the iPhone’s revenue in return for the use of Qualcomm patents, Apple has sued the company in three countries.
In the United States, Apple is suing Qualcomm for a hefty $1 billion — but it has also filed a lawsuit in China for $145 million, as well as in the United Kingdom. Now, Qualcomm is following with its own countersuit (but losing quite a bit of money).
Here’s everything you need to know about the lawsuit battle so far.
Qualcomm wants to ban iPhones in China
This ban has nothing to do with the Chinese government, but rather with Qualcomm’s claim that Apple has stolen patents. According to a Bloomberg report, the chipmaker has now filed paperwork to ban both the sale and the manufacturing of the popular smartphone in China.
It’s Qualcomm’s latest and most pointed barb at Apple yet. A company spokeswoman told Bloomberg, “Apple employs technologies invented by Qualcomm without paying for them,” noting that the iPhone’s power management and Force Touch features are just “a few examples of the many Qualcomm technologies that Apple uses to improve its devices and increase its profits.”
Apple has refuted these claims, with a spokesman noting, “In our many years of ongoing negotiations with Qualcomm, these patents have never been discussed. Like their other courtroom maneuvers, we believe this latest legal effort will fail.”
Indeed, it would be a surprise if a Chinese court acquiesced to Qualcomm’s request, as there is no historical precedent for such a move. But in this ugly legal battle, anything is possible.
Qualcomm asks U.S. trade regulators to ban iPhone imports
Qualcomm is seeking to ban certain iPhone models from sale in the U.S., according to a new lawsuit.
On July 7, the San Diego, California-based chip maker filed a complaint with the U.S. International Trade Commission and the U.S. District Court for the Southern District of California requesting a Cease and Desist Order to to ban new iPhones from coming into the country. It also asked regulators to bar further sales of iPhones that have already been imported.
Qualcomm alleges that Apple is violating six patents that have to do with extending its battery life. Crucially, unlike the other patents at dispute in the companies’ patent spat, it says that none are “essential to a standard,” and that Qualcomm isn’t required by law to license them.
“Qualcomm’s inventions are at the heart of every iPhone and extend well beyond modem technologies or cellular standards,” general counsel Don Rosenberg said in a statement. “Apple continues to use Qualcomm’s technology while refusing to pay for it.”
If a ban were to go into affect, it’s not clear which iPhone models would be affected. But rulings from the U.S. ITC and District Court are expected within weeks.
Apple claims that Qualcomm is operating an ‘illegal business model’
Apple upped the legal ante against Qualcomm in June 20 filings in federal court in San Diego. It said that there was “mounting evidence” that Qualcomm operated an “illegal business model,” and that it sought to extract patent royalties on every wireless device containing its chips.
Specifically, Apple alleged that at least some of the patents Qualcomm wants to get paid for are invalid, and that the chipmaker hasn’t fulfilled its obligation to charge fair and reasonable rates. The iPhone maker pointed to a U.S. Supreme Court ruling in May that limited the ability of patent owners to control the use of their products after they’re sold. Qualcomm, Apple said, is illegally double dipping by selling the chips it makes and also licensing its technology.
“[We] found continuing — and mounting — evidence of Qualcomm’s perpetuation of an illegal business model that burdens innovation,” lawyers for Apple said. “[It] amounts to a scheme of extortion that allows Qualcomm unfairly to maintain and entrench its existing monopoly […] This is precisely the kind of […] extra-reward system that the [court]” seeks to eliminate.
In a separate filing, Apple asked the court to dismiss several of Qualcomm’s counterclaims, including one that accused Apple of making false statements about the quality of chips made by its competitor, Intel. It also denied Qualcomm’s charges that it’s been pushing for regulatory investigations and interfering with Qualcomm’s contracts with other manufacturers.
Apple may slow iPhone data speeds due to dispute
The next iPhone may miss out on the faster gigabit LTE speeds coming soon to many carriers in the United States, according to a report from Bloomberg. Despite the legal battles, Apple is still using Qualcomm’s modems in its hardware. However, the company has also partnered with Intel in an effort to lessen its dependence on the chipmaker.
Right now, Qualcomm’s modems are the only ones on the market capable of supporting data transfers up to gigabit speed. But sources tell Bloomberg that Apple doesn’t want to create a discrepancy between similar products, so it will intentionally disable that feature in Qualcomm-powered iPhones to achieve parity with the ones sporting Intel modems.
If this approach sounds familiar, it is more or less what Qualcomm suggested in its countersuit against Apple. The iPhone 7 also featured both Qualcomm and Intel modems — a first for the brand — and Qualcomm believes Apple deliberately capped the performance of its chipsets so they wouldn’t be superior to Intel’s.
Gigabit LTE hasn’t arrived on American carriers yet, but they’re all experimenting with the technology. Many of the newest flagship phones on the market, like Samsung’s Galaxy S8, feature Qualcomm’s X16 modem, enabling them to take advantage of the upgraded infrastructure when it finally rolls out as it is expected to later this year.
Qualcomm reportedly seeking iPhone import ban
Qualcomm is back on the offensive after Apple decided to suspend royalty payments to the chip manufacturer. Bloomberg reports the company will soon make a request to the International Trade Commission to prevent the importation of iPhones into the U.S.
The American market comprises 40 percent of Apple’s total sales, Bloomberg notes, and the iPhone is responsible for 60 percent of its global revenue.
However, on a Tuesday conference call, Apple CEO Tim Cook appeared confident that an injunction against Apple on the basis of iPhone imports wouldn’t stand because, as he put it, Qualcomm never issued fair terms to the iPhone maker that are required for patent licensing.
“Qualcomm has not made such an offer to Apple,” Cook said. “I don’t believe anyone’s going to decide to enjoin the iPhone based on that. There’s plenty of case law around that subject. But we shall see.”
Qualcomm cuts profit forecasts
As a result of Apple’s decision to stop paying all royalties as both companies wait to hear the outcomes of their respective lawsuits, Qualcomm has slashed its profit forecasts. On April 28, Reuters reported that Qualcomm would not receive any royalties from Apple’s contract manufacturers for sales that took place in the first quarter of 2017.
“Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court,” an Apple spokesman said in an email on Friday.
Consequently, Qualcomm has adjusted its revenue estimates, and now is citing a revenue of $4.8 billion to $5.6 billion for its third fiscal quarter, a decrease from its originally anticipated $5.3 billion to $6.1 billion.
“(Apple’s) contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant,” Qualcomm said.
Qualcomm files countersuit against Apple
Qualcomm has followed Apple’s lawsuits with one of its own. You can read the full lawsuit here, but it is centered around five complaints against Apple. For example, Qualcomm suggests Apple deliberately didn’t take advantage of the full potential of Qualcomm’s chips in the iPhone 7 in an attempt to prevent them from outperforming Intel’s modems. The iPhone 7 marks the first time in several years that Qualcomm chips are not found in all iPhone variants.
According to Qualcomm, Apple “chose not to utilize certain high-performance features of the Qualcomm chipsets for the iPhone 7 (preventing consumers from enjoying the full extent of Qualcomm’s innovation).” On top of that, when iPhones with Qualcomm chips outperformed devices with Intel’s chips, Apple claimed there was “no discernible difference” between the two.
Another big part of Qualcomm’s suit revolves around Apple’s role in various regulatory suits, and that, according to Qualcomm, Apple has been “misrepresenting facts and making false statements.”
Apple files a third lawsuit against Qualcomm
Apple has filed yet another lawsuit against Qualcomm. The two companies were already at war in both the U.S. and in China and now they will be going head to head in the U.K. According to reports, the U.K. lawsuit was actually filed in January, but it’s only now being noticed after being refiled.
While we don’t yet know specifics about the new lawsuit, it does have something to do with patents and designs, according to a report from Bloomberg. It’s likely that it’s similar to the lawsuits Apple has filed in the U.S. and China.
Qualcomm is ready for a fight
Qualcomm had some fighting words against Apple during a call on its quarterly earnings report. The chipset manufacturer’s CEO, Steve Mollenkopf, said Apple just wants to grab as much money as possible from the lawsuits.
“Apple’s complaint contains a lot of assertions, but in the end, this is a commercial dispute over the price of intellectual property,” Mollenkopf said, according to CNET. “They want to pay less for the fair value that Qualcomm has established in the marketplace for our technology, even though Apple has generated billions in profits from using that technology.”
He said Qualcomm’s patents have “tangibly and meaningfully increased over time,” but the company has never raised its royalty rates. Derek Aberle, president of Qualcomm, chimed in.
“If you peel apart all of the arguments Apple’s making, we believe firmly they’re all without merit,” Aberle said. “At the end of the day, they essentially want to pay less for the technology they’re using. It’s pretty simple.”
But the CEO said Qualcomm will keep supplying chips to the Cupertino company, even while the legal battle rages on.
Apple files patent lawsuit against Qualcomm in China for $145 million
Just a few days after Apple filed a lawsuit against Qualcomm in the U.S. for $1 billion, Apple announces it will also take Qualcomm to court in China — this time for “only” $145 million.
The motive behind the lawsuit is similar to the motive behind the U.S. lawsuit — Apple is basically accusing Qualcomm of not delivering on patent-related promises. Qualcomm isn’t being silent about the suit.
“These filings by Apple’s Chinese subsidiary are just part of Apple’s efforts to find ways to pay less for Qualcomm’s technology,” said Don Rosenberg, Qualcomm general counsel, in an interview with TechCrunch. “Apple was offered terms consistent with terms accepted by more than 100 other Chinese companies, and refused to even consider them. These terms were consistent with our NDRC Rectification plan.”
The U.S. lawsuit
Apple has followed in the Federal Trade Commission’s footsteps by suing Qualcomm for $1 billion for “royalties that they had nothing to do with,” according to a report from CNBC.
The Cupertino, California, company claims in the U.S. suit that Qualcomm demanded onerous terms for the use of its patented technology and even sought to punish Apple for cooperating in a South Korean regulatory probe that dove into Qualcomm’s licensing practices — practices that are now under the microscope once again.
Apple’s documents also mentioned that Qualcomm required Apple pay a percentage of the selling price of the iPhone in return for the use of Qualcomm patents, and demanded that Apple use Qualcomm chips exclusively between 2011 and 2016. While Apple did get so-called “quarterly rebates” under the agreement, Qualcomm began withholding those rebates when Apple agreed to work with the Korean Fair Trade Commission. According to the suit, Qualcomm even told Apple that Apple had forfeited almost $1 billion in rebates by working with regulators.
“We are extremely disappointed in the way Qualcomm is conducting its business with us and, unfortunately, after years of disagreement over what constitutes a fair and reasonable royalty, we have no choice left but to turn to the courts,” Apple said in a statement.
Qualcomm responded to Apple’s lawsuit by calling its claims “baseless.”
“While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless,” according to Rosenberg. “Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed. and shared with all mobile device makers through our licensing program.”
Rosenberg said Apple has been “encouraging regulatory attacks” on Qualcomm with meritless claims and by withholding information. The chipset manufacturer is referring to the Korean Fair Trade Commission, which placed a hefty $853 million fine on Qualcomm in December for its alleged anticompetitive practices. As with the FTC lawsuit, Qualcomm said it would fight the fine.
It’s possible this could be a long and brutal legal battle, like the one between Apple and Samsung. We’ll keep this article updated with more information as we find out more.
Update: Qualcomm wants China to ban the sale of iPhones.