Apple accuses Qualcomm of extortion, monopolistic practices, price-gouging and more in law...

Posted:
in General Discussion edited January 2017
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.
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.
Along with Qualcomm's most recent indiscretions, the lawsuit outlines questionable licensing strategy that goes beyond SEP licensing and component sales double-dipping.

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.

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Comments

  • Reply 1 of 21
    What the HECK?!?

    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.
    patchythepiratewatto_cobra
  • Reply 2 of 21
    SoliSoli Posts: 8,433member
    since when it is legal or even OK to put conditions on payments that you OWE someone?
    It's always been legal. Capitalism is a conditional system where all parties in a transition have their conditions met. What you may be referring to are extra conditions added post hoc. Effectively a form of extortion.
    hmm
  • Reply 3 of 21
    Soli said:
    since when it is legal or even OK to put conditions on payments that you OWE someone?
    It's always been legal. Capitalism is a conditional system where all parties in a transition have their conditions met. What you may be referring to are extra conditions added post hoc. Effectively a form of extortion.
    Which is what Apple is contending.. and will need to prove in court.
  • Reply 4 of 21
    welshdogwelshdog Posts: 1,638member
    Wonder if Apple has a backup supplier in mind?
  • Reply 5 of 21
    SoliSoli Posts: 8,433member
    welshdog said:
    Wonder if Apple has a backup supplier in mind?
    They've already been using Intel chips, but all reports I've seen show they are functionally inferior to what Qualcomm currently offers, which is why the Qualcomm chips in the current iPhone are firmware-limited to match the Intel chip's performance capabilities. Even then, Intel will likely still have to license quite a bit from Qualcomm, so on some level they will be in the mix for the foreseeable future.
    edited January 2017
  • Reply 6 of 21
    Rayz2016Rayz2016 Posts: 4,518member
    Soli said:
    welshdog said:
    Wonder if Apple has a backup supplier in mind?
    They've already been using Intel chips, but all reports I've seen show they are functionally inferior to what Qualcomm currently offers, which is why the Qualcomm chips in the current iPhone are firmware-limited to match the Intel chip's performance capabilities. Even then, Intel will likely still have to license quite a bit from Qualcomm, so one some level they will be in the mix for the foreseeable future.
    Damn. 
  • Reply 7 of 21
    hmmhmm Posts: 3,405member
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
  • Reply 8 of 21
    SoliSoli Posts: 8,433member
    hmm said:
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
    Couldn't it also be a criminal case if a governing body believes that Qualcomm actively engaged in fraudulent actions in order to illegally obtain more money from their customers?
  • Reply 9 of 21
    misamisa Posts: 827member
    Soli said:
    hmm said:
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
    Couldn't it also be a criminal case if a governing body believes that Qualcomm actively engaged in fraudulent actions in order to illegally obtain more money from their customers?
    For those who haven't/can't read what the situation is, it is literately "Qualcomm charged X, Y and Z to license patents that it had no right to do so"

    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.
  • Reply 10 of 21
    fracfrac Posts: 480member
    Too much 'across the pond' grammar for me, it seems to be worded back to front. 
    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. 
  • Reply 11 of 21
    gatorguygatorguy Posts: 19,699member
    misa said:
    Soli said:
    hmm said:
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
    Couldn't it also be a criminal case if a governing body believes that Qualcomm actively engaged in fraudulent actions in order to illegally obtain more money from their customers?
    For those who haven't/can't read what the situation is, it is literately "Qualcomm charged X, Y and Z to license patents that it had no right to do so"

    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.
    (For @frac ; too)
     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
    edited January 2017 rich gregorySolifrac
  • Reply 12 of 21
    gatorguygatorguy Posts: 19,699member
    This is new this morning, a response from Qualcomm on the Apple lawsuit:

    “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.

    Soli
  • Reply 13 of 21
    lkrupplkrupp Posts: 6,530member
    welshdog said:
    Wonder if Apple has a backup supplier in mind?
    The iPhone 7 uses Qualcomm and Intel modems. Remember “modem-gate” where tests showed the Qualcomm modem outperforming the Intel modem in the iPhone 7?So it would appear Apple already has a backup supplier.
  • Reply 14 of 21
    gatorguy said:
    This is new this morning, a response from Qualcomm on the Apple lawsuit:

    “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.

    One point of interest is the biographical information for Don Rosenberg found on Reuters:

    "He served as Senior Vice President, General Counsel and Corporate Secretary of Apple Inc. from December 2006 to October 2007."
  • Reply 15 of 21
    maestro64maestro64 Posts: 4,371member
    If Apple and Qualcomm can not get along Verizon customers are the ones that suffer since most all Qualcomm IP is in CDMA technology which Verizon relies on. This is typical thing that Verizon does they do a deal with a company like Qualcomm then all suppliers who want to do business with Verizon has to use these suppliers.

    For the most part it just means Verizon customers pay more. It is just more Verizon tax for its customers.
  • Reply 16 of 21
    fracfrac Posts: 480member
    gatorguy said:
    misa said:
    Soli said:
    hmm said:
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
    Couldn't it also be a criminal case if a governing body believes that Qualcomm actively engaged in fraudulent actions in order to illegally obtain more money from their customers?
    For those who haven't/can't read what the situation is, it is literately "Qualcomm charged X, Y and Z to license patents that it had no right to do so"

    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.
    (For @frac ; too)
     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
    Thanks. Some useful info there. 
  • Reply 17 of 21
    hmmhmm Posts: 3,405member
    Soli said:
    hmm said:
    What the HECK?!?

    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 doesn't work that way from a legal standpoint. Failure to pay down debts is not a criminal offense. It's a civil matter if it's between two private parties. There's probably a better term for it here.
    Couldn't it also be a criminal case if a governing body believes that Qualcomm actively engaged in fraudulent actions in order to illegally obtain more money from their customers?
    Fraud is something completely different, and there's no indication of it from the information presented thus far. Qualcomm actually paid these rebates previously, and neither of us knows the exact terms of the rebate. My earlier point was that "theft" is a mischaracterization, because non-payment is not a criminal offense. 
  • Reply 18 of 21
    Intel very likely has developed cutting edge technology that Apple desires access to. I suspect it is their 3D XPoint NVM memory based on phase change technology. 

    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. 
  • Reply 19 of 21
    gatorguygatorguy Posts: 19,699member
    Intel very likely has developed cutting edge technology that Apple desires access to. I suspect it is their 3D XPoint NVM memory based on phase change technology. . 

    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.
    China dinged Qualcomm before Korea did (not certain the Korean settlement is even final yet), and the EU is also in the mix with an investigation started back in 2015. The wheels there turn slow. 
    http://www.reuters.com/article/us-china-qualcomm-idUSKBN0LD2EL20150210
    http://europa.eu/rapid/press-release_IP-15-5383_en.htm
    edited January 2017 Solihmm
  • Reply 20 of 21
    SoliSoli Posts: 8,433member
    Is Qualcomm losing their footing as we move further away from CDMA, '2G,' and even '3G' technologies? How much IP do they have with '4G' and '5G' tech?
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