Qualcomm to continue supplying Apple with chips despite $1B lawsuit, considering legal reb...

Posted:
in General Discussion edited January 2017
Qualcomm is expected to continue supplying modems and other components to Apple despite facing a $1 billion lawsuit over patent royalties and a related U.S. Federal Trade Commission action involving the Cupertino tech giant, according to a report on Monday,




Citing sources familiar with Qualcomm's plans, Re/code reports that while Qualcomm is mulling a countersuit against Apple, it is not looking to end or suspend business relations with the iPhone maker. That means the chipmaker will continue to supply Apple with a steady stream of mobile modems even as legal proceedings progress behind the scenes.

Both decisions are perhaps expected. Qualcomm needs to fight Apple's claims, or at least seek to have them dismissed, but at the same time the company cannot afford to lose one of its biggest clients.

Apple filed suit against Qualcomm on Friday alleging the firm takes part in extortion, monopolistic practices, price gouging and other unsavory business tactics.

In particular, Qualcomm uses its "monopoly power" to flout FRAND (fair, reasonable and nondiscriminatory) patent commitments by charging clients exorbitant royalty rates on standard-essential patents. Further, the chipmaker will only sell chipsets to customers who have first agreed to license the SEPs, a practice Apple refers to as "double-dipping."

The impetus for Apple's suit is Qualcomm's refusal to pay nearly $1 billion in owed licensing rebates after Apple cooperated with a Korea Fair Trade Commission probe into the chipmaker's business practices. Qualcomm was fined $854 million as a result of the investigation, and Apple alleges the firm is withholding payment in retaliation.

Qualcomm is also the target of an FTC lawsuit alleging the company forced Apple to buy wireless chips in exchange for better royalty rates.

Responding to the recent legal barrage, Qualcomm calls the claims from both suits baseless, adding it was Apple who provoked the "regulatory attacks." As noted by today's report, Qualcomm believes Apple is in the wrong for turning a contract dispute into regulatory issue.

Re/code was unable to elaborate on Qualcomm's potential countersuit. Though specifics are unknown at this time, the company apparently believes it has sufficient legal fodder to file suit against Apple. Whether the case is to be lodged domestically or in an international court is also unclear.

In any case, the Apple and FTC filings put Qualcomm in a bind. Beyond the nearly $1 billion payout and related fines attached to the Apple action, the chipmaker could be facing a major change to its lucrative patent licensing operation as implied by the antitrust suit.

Comments

  • Reply 1 of 15
    calicali Posts: 3,495member
    I wish Apple could create their own modem tech and drop 3rd parties completely but Qualcomm's tech are world standards. 
  • Reply 2 of 15
    Qualcomm maybe crazy but they are not stupid. They are not about to stop selling chips -- even if they have to pay rebates. It would not make much sense for them to further piss off their single largest customer.
    edited January 2017
  • Reply 3 of 15
    radarthekatradarthekat Posts: 3,114moderator
    Who cares whether it was Apple that led to the Korean Fair Trade Commssion and U.S. FTC lawsuits.  Apple doesn't run either government agency and so those agencies determined on their own, perhaps with evidence provided by Apple, to launch their investigations and file suit.  For Qualcomm to blame Apple is like a bank robber blaming the police for bringing him before a judge.  Seems ludicrous.
    edited January 2017 tmay
  • Reply 4 of 15
    cali said:
    I wish Apple could create their own modem tech and drop 3rd parties completely but Qualcomm's tech are world standards. 
    Qualcomm currently has the best, but Intel's has been getting closer.  Qualcomm has entrenched (IP) in obsolete standards, and not so much in the new stuff... their influence is declining and blackmail is no longer as effective.

    When 5G is the new standard, and 4G LTE is around for backward compatibility (3G eliminated) Qualcomm will be hurting.  They better start playing nice, otherwise customers are going to walk.

  • Reply 5 of 15
    foggyhillfoggyhill Posts: 4,767member
    Going after Apple now would be a recipie for much more legal troubles for them (and a huge amount of money lost)
    tmay
  • Reply 6 of 15
    Rayz2016Rayz2016 Posts: 4,719member
    foggyhill said:
    Going after Apple now would be a recipie for much more legal troubles for them (and a huge amount of money lost)
    Really? Apple wins in court are few and far between. 
  • Reply 7 of 15
    Rayz2016 said:
    foggyhill said:
    Going after Apple now would be a recipie for much more legal troubles for them (and a huge amount of money lost)
    Really? Apple wins in court are few and far between. 
    I doubt the Korean FTC will lose their lawsuit. Qualcomm is in a world of hurt. 

    Don't take my word for it. Look at what's happening to the price of their stock. 
  • Reply 8 of 15
    Wouldn't denying Apple access be the very definition of fraND violation?
  • Reply 9 of 15
    gatorguygatorguy Posts: 20,899member
    Wouldn't denying Apple access be the very definition of fraND violation?
    Not if a company refuses to pay for a license. Not saying thats the case here as Apple has given no indication they're no longer paying royalties to them. But if a company won't pay the asking price because it might think it's not fair it does not automatically mean that it wasn't, and certainly doesn't confer IP rights to the refusing company. It then becomes a negotiation. It may also be common for the licensor to add contract stipulations that allow them to void the contract if they are sued by that signing licensee over the IP. 
    edited January 2017
  • Reply 10 of 15
    Wouldn't denying Apple access be the very definition of fraND violation?
    Refusing to sell Apple chips (if that's what you're referring to, as that's the subject of the OP) wouldn't in itself be a FRAND violation.

    However, refusing to sell Apple chips unless it agreed to unilateral licensing terms while at the same time refusing to license standard-essential patents (with proper pass-through rights) to your competitors in the chip supply space - such that Apple had little choice but to get certain chips from you - would be a FRAND violation. That would be especially true if the unilateral licensing terms you sought to impose were themselves non-FRAND in multiple ways - e.g., if you required the licensee to pay for licenses for patents they didn't want or need in order to get those they did want or need, if you refused to even identify which patents you were licensing to them, if you forced them to pay more than a fair rate based on your own SEPs contribution to the relevant standards, if you required that they cross license their own patents without fairly compensating them (even if it's just fair offsetting compensation), if you refused to even allow for a fair price determination process. Qualcomm is accused of doing all of those things and more.
  • Reply 11 of 15
    crowleycrowley Posts: 5,989member
    Who cares whether it was Apple that led to the Korean Fair Trade Commssion and U.S. FTC lawsuits.  Apple doesn't run either government agency and so those agencies determined on their own, perhaps with evidence provided by Apple, to launch their investigations and file suit.  For Qualcomm to blame Apple is like a bank robber blaming the police for bringing him before a judge.  Seems ludicrous.
    Aren't Apple actively suing Qualcomm on top of that though?

    Even then, severing a lucrative business deal because of a legal dispute would be cutting off their nose to spite their face, but at least it would be understandably petty.
  • Reply 12 of 15
    gatorguygatorguy Posts: 20,899member
    carnegie said:
    Wouldn't denying Apple access be the very definition of fraND violation?
    Refusing to sell Apple chips (if that's what you're referring to, as that's the subject of the OP) wouldn't in itself be a FRAND violation.

    However, refusing to sell Apple chips unless it agreed to unilateral licensing terms while at the same time refusing to license standard-essential patents (with proper pass-through rights) to your competitors in the chip supply space - such that Apple had little choice but to get certain chips from you - would be a FRAND violation. That would be especially true if the unilateral licensing terms you sought to impose were themselves non-FRAND in multiple ways - e.g., if you required the licensee to pay for licenses for patents they didn't want or need in order to get those they did want or need, if you refused to even identify which patents you were licensing to them, if you forced them to pay more than a fair rate based on your own SEPs contribution to the relevant standards, if you required that they cross license their own patents without fairly compensating them (even if it's just fair offsetting compensation), if you refused to even allow for a fair price determination process. Qualcomm is accused of doing all of those things and more.
    Where are you finding these FRAND laws? That's one of the big licensing problems There are none.

    As it's currently done it is typically defined in by-laws from the standards setting organizations themselves. It has been only somewhat recently that courts have tried to put some legal qualifications in there but most of those have stopped short of actually creating new case law. 

    The European Commission has for instance tried to arrive at a definition, but so far has not done so to the best of my knowledge. "Fair" changes depending on whether you are a buyer or a seller. Getting all the parties to agree on a FRAND definition, even determining whose responsibility it will be to do so, is going to be a tough nut to crack. In the meantime there are no clear red lines. 
    http://is.jrc.ec.europa.eu/pages/ISG/EURIPIDIS/documents/05.FRANDreport.pdf

    And if you're looking for US specific guidance only this link lists just about everything done so far.:
    http://www.allthingsfrand.com/letters-statements/regulatory-us/

    And finally this is one of my regularly visited blogs, at least every couple of weeks or so. Various articles here at AI over the years have lead to an interest in staying familiar with patent licensing, particularly SEP's. This is one of a couple very good resources.
    http://www.essentialpatentblog.com/

     My other go to is a subscription site, http://www.iam-media.com/Blog/
    edited January 2017 frac
  • Reply 13 of 15
    gatorguy said:
    carnegie said:
    Wouldn't denying Apple access be the very definition of fraND violation?
    Refusing to sell Apple chips (if that's what you're referring to, as that's the subject of the OP) wouldn't in itself be a FRAND violation.

    However, refusing to sell Apple chips unless it agreed to unilateral licensing terms while at the same time refusing to license standard-essential patents (with proper pass-through rights) to your competitors in the chip supply space - such that Apple had little choice but to get certain chips from you - would be a FRAND violation. That would be especially true if the unilateral licensing terms you sought to impose were themselves non-FRAND in multiple ways - e.g., if you required the licensee to pay for licenses for patents they didn't want or need in order to get those they did want or need, if you refused to even identify which patents you were licensing to them, if you forced them to pay more than a fair rate based on your own SEPs contribution to the relevant standards, if you required that they cross license their own patents without fairly compensating them (even if it's just fair offsetting compensation), if you refused to even allow for a fair price determination process. Qualcomm is accused of doing all of those things and more.
    Where are you finding these FRAND laws? That's one of the big licensing problems There are none.

    As it's currently done it is typically defined in by-laws from the standards setting organizations themselves. It has been only somewhat recently that courts have tried to put some legal qualifications in there but most of those have stopped short of actually creating new case law. 

    The European Commission has for instance tried to arrive at a definition, but so far has not done so to the best of my knowledge. "Fair" changes depending on whether you are a buyer or a seller. 
    http://is.jrc.ec.europa.eu/pages/ISG/EURIPIDIS/documents/05.FRANDreport.pdf
    FRAND terms aren't defined. What would or wouldn't qualify as FRAND terms depends on the context and gets determined by typical (and accepted) industry practices and relevant adjudications. It's similar to the role played by common law as distinguished from statutory law. At the margins it remains somewhat unclear (and always will, as is the case with legal issues more generally), but at the core it becomes more and more settled and there are certain things that can be said to be non-FRAND with a high degree of confidence.
  • Reply 14 of 15
    fracfrac Posts: 480member
    gatorguy said:
    carnegie said:
    Wouldn't denying Apple access be the very definition of fraND violation?
    Refusing to sell Apple chips (if that's what you're referring to, as that's the subject of the OP) wouldn't in itself be a FRAND violation.

    However, refusing to sell Apple chips unless it agreed to unilateral licensing terms while at the same time refusing to license standard-essential patents (with proper pass-through rights) to your competitors in the chip supply space - such that Apple had little choice but to get certain chips from you - would be a FRAND violation. That would be especially true if the unilateral licensing terms you sought to impose were themselves non-FRAND in multiple ways - e.g., if you required the licensee to pay for licenses for patents they didn't want or need in order to get those they did want or need, if you refused to even identify which patents you were licensing to them, if you forced them to pay more than a fair rate based on your own SEPs contribution to the relevant standards, if you required that they cross license their own patents without fairly compensating them (even if it's just fair offsetting compensation), if you refused to even allow for a fair price determination process. Qualcomm is accused of doing all of those things and more.
    Where are you finding these FRAND laws? That's one of the big licensing problems There are none.

    As it's currently done it is typically defined in by-laws from the standards setting organizations themselves. It has been only somewhat recently that courts have tried to put some legal qualifications in there but most of those have stopped short of actually creating new case law. 

    The European Commission has for instance tried to arrive at a definition, but so far has not done so to the best of my knowledge. "Fair" changes depending on whether you are a buyer or a seller. Getting all the parties to agree on a FRAND definition, even determining whose responsibility it will be to do so, is going to be a tough nut to crack. In the meantime there are no clear red lines. 
    http://is.jrc.ec.europa.eu/pages/ISG/EURIPIDIS/documents/05.FRANDreport.pdf

    And if you're looking for US specific guidance only this link lists just about everything done so far.:
    http://www.allthingsfrand.com/letters-statements/regulatory-us/

    And finally this is one of my regularly visited blogs, at least every couple of weeks or so. Various articles here at AI over the years have lead to an interest in staying familiar with patent licensing, particularly SEP's. This is one of a couple very good resources.
    http://www.essentialpatentblog.com/

     My other go to is a subscription site, http://www.iam-media.com/Blog/
    Another good read - a translation of the KFTC ruling ironically provided by Qualcomm...
    https://morningconsult.com/wp-content/uploads/2016/12/kftc-issued-press-release-dated-december-28-2016-unofficial-english-translation.pdf
    tmaygatorguy
  • Reply 15 of 15
    gatorguygatorguy Posts: 20,899member
    frac said:
    gatorguy said:
    carnegie said:
    Wouldn't denying Apple access be the very definition of fraND violation?
    Refusing to sell Apple chips (if that's what you're referring to, as that's the subject of the OP) wouldn't in itself be a FRAND violation.

    However, refusing to sell Apple chips unless it agreed to unilateral licensing terms while at the same time refusing to license standard-essential patents (with proper pass-through rights) to your competitors in the chip supply space - such that Apple had little choice but to get certain chips from you - would be a FRAND violation. That would be especially true if the unilateral licensing terms you sought to impose were themselves non-FRAND in multiple ways - e.g., if you required the licensee to pay for licenses for patents they didn't want or need in order to get those they did want or need, if you refused to even identify which patents you were licensing to them, if you forced them to pay more than a fair rate based on your own SEPs contribution to the relevant standards, if you required that they cross license their own patents without fairly compensating them (even if it's just fair offsetting compensation), if you refused to even allow for a fair price determination process. Qualcomm is accused of doing all of those things and more.
    Where are you finding these FRAND laws? That's one of the big licensing problems There are none.

    As it's currently done it is typically defined in by-laws from the standards setting organizations themselves. It has been only somewhat recently that courts have tried to put some legal qualifications in there but most of those have stopped short of actually creating new case law. 

    The European Commission has for instance tried to arrive at a definition, but so far has not done so to the best of my knowledge. "Fair" changes depending on whether you are a buyer or a seller. Getting all the parties to agree on a FRAND definition, even determining whose responsibility it will be to do so, is going to be a tough nut to crack. In the meantime there are no clear red lines. 
    http://is.jrc.ec.europa.eu/pages/ISG/EURIPIDIS/documents/05.FRANDreport.pdf

    And if you're looking for US specific guidance only this link lists just about everything done so far.:
    http://www.allthingsfrand.com/letters-statements/regulatory-us/

    And finally this is one of my regularly visited blogs, at least every couple of weeks or so. Various articles here at AI over the years have lead to an interest in staying familiar with patent licensing, particularly SEP's. This is one of a couple very good resources.
    http://www.essentialpatentblog.com/

     My other go to is a subscription site, http://www.iam-media.com/Blog/
    Another good read - a translation of the KFTC ruling ironically provided by Qualcomm...
    https://morningconsult.com/wp-content/uploads/2016/12/kftc-issued-press-release-dated-december-28-2016-unofficial-english-translation.pdf
    Thanks. Nice to see others with an interest in going after facts, and a very good find.

    Note that the official English-translation document (your link is to Qualcomm's unofficial one. Don't know if there are any differences) is available at the EssentialPatentBlog link I included earlier. Lots of good stuff there if SEP licensing and legal actions interest you. 
    http://www.essentialpatentblog.com/wp-content/uploads/sites/64/2017/01/2016.12.28-KFTC-Summary-Press-Release-English.pdf
    edited January 2017
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