While there is a fierce rivalry between smartphone makers, companies typically have much better relationships with their suppliers. However, over the last two years, the relationship between Apple and Qualcomm has been anything but friendly. The two companies were involved in an intense lawsuit involving one of the world's largest smartphone retailers, Apple, against one of the largest designers of smartphone processors and modems, Qualcomm. The two have sued each other around the world for monopolistic practices, patent infringement and even theft.
At the heart of the conflict is a key question: how much is Qualcomm's technology worth? Apple claims that Qualcomm has charged excessive fees for using its modems and patents, while Qualcomm claims that Apple is using the legal system to try and get a good price for its technology. This is a critical issue for the entire industry ̵
In recent months, the battle has escalated. Qualcomm claimed that Apple had stolen "huge swaths" of his "confidential information and trade secrets" and that Apple had been ripped off with small but significant court results, leading to partial iPhone bans in Germany and China.
Now the time has come. On Monday, Apple and Qualcomm will go to federal court in San Diego, and Qualcomm will be forced to answer Apple's allegations that patent costs are disproportionate and unfair licensing conditions. If this is not the case, Qualcomm risks losing the billions of dollars currently available through patent licensing.
Apple's core is patents, especially patents that cover the design and functionality of a phone modem. You can not connect to a smartphone that is not connected to the Internet wirelessly. This means that you can not make a phone without contacting these patents. A large number of them belong to Qualcomm.
As Qualcomm sees it, these patents are a hard-won billion-dollar product for research and development, and it's reasonable to rely on billions in revenue now. When Qualcomm sells its modems, it not only sells hardware. It also sells a license that is tied to this hardware and is part of the alleged "no license, no chips" policy. However, according to Apple, Qualcomm is in a position to charge more for these patents than it should, as the company is also the dominant smartphone modem provider. If a manufacturer does not agree to the royalties, Qualcomm has the option of cutting them off from modems.
Since Apple filed these complaints in its first lawsuit against Qualcomm, the battle between the two companies has intensified into a global showdown. At first, Apple seemed to have the upper hand. Supervisors around the world, including the United States, South Korea, Taiwan, the EU, and China, have all tried with varying degrees of success to punish Qualcomm for similar practices to Apple's practices. Qualcomm paid $ 975 million to settle an investigation in China, $ 853 million for violations of antitrust law in South Korea and $ 93 million for antitrust litigation in Taiwan.
Lately, Qualcomm was chopping off at Apple. The company managed to persuade the judges to ban iPhones in China and Germany, forcing Apple to temporarily pull iPhone 7 and 8. In the US, a jury recently admitted that Apple violated three Qualcomm patents.
Since some of these results were dramatic, they were all side shows a major lawsuit. This lawsuit, which was brought to trial on Monday, has sparked all this. In January, Apple filed lawsuits in the United States, the United Kingdom, and China alleging that Qualcomm charges telephone manufacturers "disproportionate" access to their patents. Apple said Qualcomm was "illegal" as it forced companies to license patents in addition to purchasing hardware, and claimed that Qualcomm agreed to lower its fees "for additional anti-competitive benefits." Apple described it as "The Principle of Relentless Extortion."
Qualcomm's over-exploitation of its patents is a problem, Apple argues, because a modern smartphone can not be made without them, and they are essential to industry-wide standards ("Fair, appropriate and non-discriminatory"), Apple says that Qualcomm has agreed to these terms and conditions in the filings with the European Telecommunications Standards Institute (ETSI) but has not complied with these commitments.
The two companies have been arguing over these terms for years out of court since Apple first introduced Qualcomm modems in the iPhone 4 in 2011. With this phone, Apple said Qualcomm agreed Reimbursement of part of Apple's license fees, however s only if Apple has agreed to use only its modems. Apple claimed it had "no choice" to make its "exorbitant license fee" choice than to make that promise. "Qualcomm used inappropriate conditions to obtain even more inappropriate terms," Apple said in a lawsuit.
Qualcomm says that these events were reversed and that Apple was the first to claim patents. In return, Qualcomm said it would be asked that Apple use only its modems to ensure that enough modems are sold to make the arrangement worthwhile.
This agreement lasted until 2016, when Qualcomm finally said that Apple had withheld $ 1 billion in payments. This was the trigger that led to Apple suing Qualcomm in January 2017. According to Apple, Qualcomm did so because it had voiced the Korean Fair Trade Commission in South Korea over the licensing practices of Qualcomm.
In a preliminary ruling, a judge in this part of the dispute turned to Apple. Although the agreement between the two companies said that Apple could not prosecute Qualcomm in court or against regulators, the judge said that Apple's actions did not give Qualcomm the right to stop payments and that Apple owed up to $ 1 billion unpaid royalties.
Apple's remittance lawsuit began the same month that the US Federal Trade Commission announced its own lawsuit against Qualcomm's patent practice. This lawsuit, which was brought to trial in January, is currently awaiting a court ruling.
Apple has continued to press Qualcomm since the beginning of the legal battle. In 2017, Apple ordered suppliers such as Foxconn and Compal to withhold all royalty payments to Qualcomm as long as the dispute continues. Qualcomm responded with a lawsuit against the suppliers of Apple, which then decided to join Apple's fight against the chip maker. Qualcomm has faced Apple for directing its suppliers to stop paying. If it wins this case, it may get additional damage.
Qualcomm did not abandon Apple's aggression. In the past two years, she accused Apple of violating his patents and filed complaints in the US, Germany and China with some success. Judges in Germany and China both noted that Apple had violated some of the Qualcomm patents and responded by banning sales of certain iPhones – although Reuters states that the China ban was never seriously enforced. Apple has also played its own hand in patent litigation, claiming that Qualcomm has violated patents related to power consumption.
By chopping off patent wins, Qualcomm hopes to prove that its patent portfolio is more valuable than what it was charging. This would not disprove Apple's allegations – Qualcomm inappropriately forces it to agree on offensive licenses – but it could force the company to resign if litigation could ultimately increase costs.
In a recent San Diego study, Qualcomm has successfully argued that Apple violated three of its $ 1.41 per iPhone patents. That's only a small part of the $ 7.50 Apple pays for Qualcomm's patents on iPhone, but if the courts consider Qualcomm's other patents to be equally valuable, Qualcomm may be encouraged to raise its prices further and one to hand over a hefty bill to Apple.
Qualcomm also struck off with the allegation that Apple had stolen the company's confidential modem technology and given it to its fierce rival Intel. According to Qualcomm, Apple has "stolen huge amounts of Qualcomm's secret information and trade secrets," improving Intel chips. Qualcomm is currently suing Apple for these claims separately. Qualcomm has recently argued in a lawsuit before the FTC that Apple's ability to use only Intel chips proves that there is still healthy competition in the industry.
Apple claims that Monday's case amounts to ending Qualcomm's monopolistic and anti-competitive practices. Apple wants to be able to buy (or even purchase) modem chips from whomever, without paying big patent fees. The transition from 4G to 5G is a key moment for the mobile industry, and if current trends continue, Qualcomm could dominate the industry over the next 10 years.