Apple sues Qualcomm for not paying patent fees of $ 1 billion

The American chip maker Qualcomm has once again become a figure in the patent scandal. This time, the company acts as a defendant against Apple, which sued the chip maker for violating patent laws and requested payment of the $ 1 billion due to it, reports Bloomberg .

Based on the nature of Apple’s claim, the chip maker has stopped paying royalties for using Apple’s patented technology. This was done by Qualcomm to “punish” a Cupertino-based company for cooperating with the Korea Fair Trade Commission.

The essence of the conflict

At the end of December 2016, the media reported that the Korean regulator fined Qualcomm a record $ 853 million (1.03 trillion won at the exchange rate) in its practice for violating antitrust laws. According to the Korean authorities, Qualcomm abused its position in the market and forced smartphone manufacturers to enter into patent agreements and pay royalties for technologies that they did not even directly belong to. Qualcomm's total profit for licensing and selling its chips for 2016 was $ 6.5 billion. In addition, in February 2015, the Chinese antimonopoly committee already fined the chip manufacturer for $ 975 million.
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“Revenge” Qualcomm began because the verdict of the Fair Trade Commission was based, among other things, on information that was received from a company from Cupertino.

Qualcomm’s methods are even less surprising if Apple’s lawyer’s claim for extortion from the chip maker is true. In short: Qualcomm demanded that Apple change its testimony for the Korean Fair Trade Commission, otherwise they threatened not to pay patent fees.

Apple Requirements

Blackmail and an attempt to cash in on someone else's intellectual property from Qualcomm led Apple to take drastic measures.

The requirement to pay companies worth $ 1 billion is absolutely legitimate and in this situation, based on the available information, Qualcomm is to blame. Anxiety and bitterness in the ranks of the leadership of the chip manufacturer was caused by the "accompanying" claims of Apple in their statement of claim. So, Apple is demanding that the court oblige Qualcomm to abandon the dubious licensing scheme for chips and then benefit. By the way, Apple itself was involved in these schemes, but sees itself as the injured party. As a result, the company requires Qualcomm, in addition to paying the fees “withheld” by the chip maker, also to recalculate previous payments, which can result in much larger losses: this is about billions of dollars over many years of work.

“It’s clear that Apple’s claims are unfounded ... Apple deliberately distorted the meaning of our agreements and negotiations, as well as the scale and significance of our technologies ...”, quotes the general adviser of Qualcomm, Don Rosenberg, Bloomberg.

But for such a tough position on the part of Apple, there are other, more prosaic reasons than protecting their own intellectual property and reputation.

Mobile market slows down

For the first time since 2001, growth in sales of mobile devices (phones and smartphones) has slowed. One can argue about the fundamental reasons for such a phenomenon on the market for a long time, using as an argument both the growth in the number of budget devices and the absence of serious innovations.

According to NASDAQ statistics, Apple Inc (AAPL) net profit for 2016 declined to $ 45.68 billion from $ 53.39 billion in 2015. Previously, the numbers were even lower and amounted to $ 39.51 billion and $ 37.04 billion in 2014 and 2013, respectively.

The way out for a company whose business is based on the sale of high-margin premium-class smartphones - reducing production costs and components without loss of quality. That is, Apple expects to increase its own profits through the reduction of Qualcomm license fees for the use of its developments.

Recall, before the release of the iPhone 7 and iPhone 7 Plus, Apple used Qualcomm chips as LTE modems. In the latest version of its smartphone company from Cupertino began to use the development of Intel. According to unconfirmed estimates, for each LTE module Qualcomm received $ 15 of contributions from Apple.

Litigation as a source of income

Qualcomm is not the first company against which Apple filed a lawsuit. The company from Cupertino was actively suing Korean electronics manufacturer Samsung Electronics. In 2012, a court found Samsung guilty of patent infringement and ordered the manufacturer to pay Apple compensation. In 2015, Apple won the case against Samsung again. The patent war between manufacturers lasts for many years and led to the fact that in December 2015, the Korean company paid Apple $ 548.2 million for copying the design of the iPhone. Then Apple representatives called it a “partial victory” in the patent war with Samsung.

In 2010-11, Apple sued HTC. Then it was a violation of ten patents. The court only partially (one point) met the requirements of the American manufacturer and banned the sale of HTC devices on the US market with a “stolen” data tapping function. HTC received the verdict positively, since it was not difficult to develop a similar solution and legally returning to the US market.

Total

Litigation between major manufacturers can drag on for years, and now delaying the process on Qualcomm’s hand. If the court decision forces the company to reconsider its policy in terms of licensing fees and pressure on mobile device manufacturers, Qualcomm could lose its status as a segment leader. An important role is played by the fact that there already is a challenger in his place - the technology giant Intel, which in the past few years has been actively developing mobile solutions and has already partially entered this market through cooperation with Apple. In addition, unlike Qualcomm, which is focused on the mobile market, Intel has a “safety cushion” in the form of dominance in the server and PC segment, which gives it the right to make mistakes. Satisfying all Apple requirements could have disastrous consequences for Qualcomm.