Apple accuses Qualcomm of extortion, monopolistic practices, price-gouging and more in law...
Apple earlier today filed a patent royalty lawsuit against Qualcomm, alleging the firm failed to pay owed rebates in retaliation for Apple's part in a Korean antitrust investigation. The claims goes further, however, accusing the chipmaker of partaking in unsavory business practices, from price-gouging to extortion.
In its lawsuit, Apple alleges Qualcomm withheld nearly $1 billion in payments in retaliation for cooperating with law enforcement agencies. Specifically, Apple cites the Korea Fair Trade Commission's probe into Qualcomm's business practices that resulted in an $854 million fine in December, the largest in the agency's history.
According to Apple lawyers, Qualcomm used its "monopoly power" to flout FRAND (fair, reasonable and nondiscriminatory) patent commitments by charging hefty royalty rates on standard-essential patents relating to cellular communications standards. In addition, Qualcomm refuses to sell chipsets to manufacturers until they first license the SEPs, often at "extortion-level" rates.
Since 2011, Qualcomm has conditioned billions of dollars in rebates on "exclusivity or de facto exclusivity from Apple," the lawsuit reads.
With the KFTC investigation, however, Qualcomm added yet another condition to payment.
At the heart of the issue are secret manufacturer licensing agreements. Apple has been forced to pay fees for patents obscured by a legal shroud since 2007, when the first iPhone was released. When Apple selected the Infeneon (now Intel) baseband chip, Qualcomm required a licensing fee. The situation worsened when in 2011 Apple introduced an iPhone capable of connecting to CDMA networks, a technology dominated by Qualcomm chipsets.
Instead of licensing directly to Apple, however, Qualcomm entered into a number of secret agreements with smaller contract manufacturers. Without bargaining power, these CMs pay "exorbitant" royalties on non-FRAND terms and pass the cost along to Apple. The process is hidden from Apple, meaning the company in many cases does not know what patents it is paying for its CMs to license.
Apple as recently as last year attempted to negotiate direct licensing arrangements as certain agreements were set to expire at the end of 2016. Amid accusations of patent infringement, and in the face of heavy resistance by way of Qualcomm's increasingly litigious business strategy, those talks were largely unsuccessful.
Apple is seeking unspecified damages in its suit against Qualcomm including the $1 billion in unpaid payments, as well as a disgorgement of non-FRAND royalties paid by Apple CMs. The lawsuit also looks to leave Apple unencumbered of certain cellular patents-in-suit, or alternatively assign a reasonable FRAND royalty rate.
In its lawsuit, Apple alleges Qualcomm withheld nearly $1 billion in payments in retaliation for cooperating with law enforcement agencies. Specifically, Apple cites the Korea Fair Trade Commission's probe into Qualcomm's business practices that resulted in an $854 million fine in December, the largest in the agency's history.
According to Apple lawyers, Qualcomm used its "monopoly power" to flout FRAND (fair, reasonable and nondiscriminatory) patent commitments by charging hefty royalty rates on standard-essential patents relating to cellular communications standards. In addition, Qualcomm refuses to sell chipsets to manufacturers until they first license the SEPs, often at "extortion-level" rates.
Since 2011, Qualcomm has conditioned billions of dollars in rebates on "exclusivity or de facto exclusivity from Apple," the lawsuit reads.
With the KFTC investigation, however, Qualcomm added yet another condition to payment.
Along with Qualcomm's most recent indiscretions, the lawsuit outlines questionable licensing strategy that goes beyond SEP licensing and component sales double-dipping.Qualcomm has withheld the required contractual payments from Apple even though the agreement clearly permits Apple to respond to the KFTC's lawful investigation and requests for information. If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm's release of those payments to Apple. Apple refused.
At the heart of the issue are secret manufacturer licensing agreements. Apple has been forced to pay fees for patents obscured by a legal shroud since 2007, when the first iPhone was released. When Apple selected the Infeneon (now Intel) baseband chip, Qualcomm required a licensing fee. The situation worsened when in 2011 Apple introduced an iPhone capable of connecting to CDMA networks, a technology dominated by Qualcomm chipsets.
Instead of licensing directly to Apple, however, Qualcomm entered into a number of secret agreements with smaller contract manufacturers. Without bargaining power, these CMs pay "exorbitant" royalties on non-FRAND terms and pass the cost along to Apple. The process is hidden from Apple, meaning the company in many cases does not know what patents it is paying for its CMs to license.
Apple as recently as last year attempted to negotiate direct licensing arrangements as certain agreements were set to expire at the end of 2016. Amid accusations of patent infringement, and in the face of heavy resistance by way of Qualcomm's increasingly litigious business strategy, those talks were largely unsuccessful.
Apple is seeking unspecified damages in its suit against Qualcomm including the $1 billion in unpaid payments, as well as a disgorgement of non-FRAND royalties paid by Apple CMs. The lawsuit also looks to leave Apple unencumbered of certain cellular patents-in-suit, or alternatively assign a reasonable FRAND royalty rate.
Apple v. Qualcomm Lawsuit by Mikey Campbell on Scribd
Comments
since when it is legal or even OK to put conditions on payments that you OWE someone?
You owe it, you pay it. If not, it's THEFT.
Apple should simply be awarded Qualcomm just because they are so stupid as to pull this number.
You'd think this was all taking place in a communist country.
It's similar to licencing problems with software where some component has a per-user or per-seat (eg MS Office) but you are still charged for it, even if you don't use those seats yourself. Ever see what a Microsoft Licence looks like from 1996? It's literately just a license paper on a piece of cardboard and wrapped in plastic. It has nothing on it saying what software product it is for. It's literately "a software license", and should you ever get audited you need to have enough of these for every computer in your organization. The example I'm deriving this from is a high school who just dumped all the things in a storage room, and the storage room was looted randomly by a few students, not knowing what the value of these were.
What I'm getting at Apple paid X/Y/Z company for a product that a cost incorporated into it was the cost of licencing patents that Apple already had a license to.
Who exactly owes what to whom? How is Qualcomm withholding payments to Apple for licensing? Why do they owe Apple these sums?
Not denying Apple here, I'm just having difficulty with the sense of this piece.
Bloomberg has an excellent video here explaining why Apple has sued Qualcomm. In only 3 minutes and 35 seconds it will be clearer to you.
http://finance.yahoo.com/video/apple-sues-qualcomm-over-patent-235642110.html
“While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless. 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. Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits,” said Don Rosenberg, executive vice president and general counsel, Qualcomm Incorporated.
"He served as Senior Vice President, General Counsel and Corporate Secretary of Apple Inc. from December 2006 to October 2007."
For the most part it just means Verizon customers pay more. It is just more Verizon tax for its customers.
Apple is willing to go to a less capable modem from Intel at least in the short term. Once Intel gains all of Apple's modem business, they won't be underperforming Qualcomm for long.
Intel may even be able to offer an integrated modem as part of the SOC for Apple's fabrication needs. Intel has gotten out of the mobile CPU business and seem dedicated to winning all of Apple's CPU needs.
Qualcomm itself is in trouble. For those who think it is just Apple expressing sour grapes, think again. The South Korean government initiated the first lawsuit. In a nation where Android handsets are utterly dominant with the largest Android handset manufacturer based there, being Samsung.
Why would the the Korean government initiate such a lawsuit to benefit Apple specifically? Samsung and LG will also be beneficiaries from being freed from Qualcomm's predatory licensing model.
Qualcomm is in trouble. Besides the Huawei Mate 9 will not have a Snapdragon CPU. And Samsung can easily go back to their own Exynos line.
Qualcomm may have hoped to establish the same type of model that Intel did with Android the Windows equivalent. It won't happen. And with the loss, goes Google's desire to establish Android as the dominant OS platform. Samsung still has plans to displace Android with Tizen and those plans are now far more likely to come to pass.
http://www.reuters.com/article/us-china-qualcomm-idUSKBN0LD2EL20150210
http://europa.eu/rapid/press-release_IP-15-5383_en.htm