After suing Apple, Qualcomm loses $816M arbitration case to BlackBerry

Posted:
in iPhone
An arbitration panel has awarded BlackBerry a preliminary $814.9 million to resolve its claim that it had overpaid patent royalties in its contract with Qualcomm. The specific issue pertains only to Qualcomm's contract with BlackBerry, but highlights the firm's series of parallel intellectual property disputes, most notably a trio of global cases involving Apple as well as government antitrust actions in China, Korea and the United States.



BlackBerry's dispute involved a contractual "unit royalty cap" involving devices it sold between 2010 and 2015. Qualcomm agreed to resolve the issue through arbitration, so even though it stated that it "does not agree with the decision," it recognized it as "binding and not appealable."

Qualcomm patents central to mobile technology

Qualcomm has patents on key aspects of mobile connectivity related to mobile networks and Baseband Processors. A Baseband Processor, also known as a mobile modem, is an independent ARM computer-on-a-chip that runs its own proprietary OS and handles mobile radio and analog audio processing. It talks to a device's main Application Processor, a separate ARM chip that runs an OS such as Android or iOS.

Qualcomm sells both its own Snapdragon Application Processor with an integrated mobile Baseband Processor (commonly used in higher-end Android devices), as well as the independent Baseband Processors it provides to Apple for use in conjunction with Apple's own A-series Application Processors in iOS devices.

Qualcomm also licenses its technology to most other mobile chipmakers, due to the fact that its IP is "standards essential" for building devices that work on existing CDMA and LTE mobile networks.

Apple's allegations of patent shenanigans

In January, Apple filed suits against Qualcomm in the U.S., China and the U.K. for what it called a nonpayment of royalty rebates, which it said Qualcomm had held up in retaliation for Apple's cooperation with the Korean Fair Trade Commission. That agency had previously investigated Qualcomm's business practices in South Korea and determined last December that it should be fined $854 million.

Apple alleged that Qualcomm subsequently withheld nearly $1 billion in rebates it was owed, and then "attempted to extort Apple into changing its responses and providing false information to the KFTC [related to its investigation] in exchange for Qualcomm's release of those payments to Apple. Apple refused."

Apple's lawsuit further revealed that Qualcomm had demanded IP royalties on mobile chips Apple had been buying from Infineon between 2007 and 2011, when Apple began using Qualcomm's chips. Samsung had similarly sought to double dip, demanding royalties from Apple over technology Samsung had already licensed to Infineon.



Apple also charged that Qualcomm forced Apple's smaller contract manufacturers to pay "exorbitant," secret royalties due to the lack of market leverage those suppliers had. That expense was then passed on to Apple in the form of higher costs.

Apple sought to negotiate a direct licensing agreement with Qualcomm as existing contracts began to expire at the end of last year, but Qualcomm wanted to maintain its lucrative status quo.

Apple's lawsuit seeks the return of unpaid reimbursements, as well as repayment of excessive royalties already paid that are much higher than the expected FRAND (fair, reasonable and non-discriminatory) royalties covering standards-essential technology patents.

One of the claims made by Apple is that Qualcomm--in demanding a fixed percentage of its finished products--is "charging royalties for technologies that they have nothing to do with them" effectively profiting off Apple's own, independent work to add value to its products.

Apple has stated that Qualcomm charges it five times as much as all other patent licensors combined, and that it has been fruitlessly working to resolve its disputes with Qualcomm for years.

Countersuit by Qualcomm

Earlier this week, Qualcomm responded with a countersuit of its own, claiming that "Apple has attempted to force Qualcomm to accept less than fair value for the use of its intellectual property by wielding its immense power over Qualcomm and by engaging in a host of unlawful acts."

Qualcomm charged that Apple has "interfered" in its secret relationships with contract manufacturers, and wrongly induced regulatory action against it in a number of jurisdictions.

Apple has already returned to use some rival Baseband Processors from Intel (which acquired Infineon), resulting in a mix of modems used in iPhone 7 models. Qualcomm has further claimed that Apple's throttling of the performance of Qualcomm chips to match the performance of Intel's offerings has caused it additional damages.Qualcomm's chief executive Steven Mollenkopf said he expects to resolve its issues with Apple out of court.

Billions on the line

In addition to losing nearly a billion to BlackBerry and to Korean regulators, Qualcomm's leverage in demanding IP royalties has also been called into question by Chinese chip manufacturers. In 2015 the company was charged a $975 million fine by Chinese antitrust authorities to resolve a dispute. Last year Qualcomm resolved another ongoing dispute it had with Chinese phone maker Meizu.

In January, the U.S. FTC also launched its own lawsuit against Qualcomm related to violations of anti-competition laws.

Beyond the potential consequences of action from the FTC and fallout from Apple's series of global lawsuits against it, Qualcomm also faces the potential of a loss in business from Apple, the world's largest maker of premium, high-end phones.



In February, Intel unveiled a new Baseband Processor with support for CDMA as well as modern LTE Category 16/13 support across 35 bands.

That chip is fast enough to match the top speeds of virtually all existing mobile networks that have been deployed. A reduction of dependence upon Qualcomm could significantly reduce Apple's costs, while also giving it leverage in its negotiations with Qualcomm.

In addition to affecting Qualcomm directly, the loss of Apple's business would also make it more difficult for the chipmaker to aggressively advance its technology, as it would be left dependent upon Android devices that make up a shrinking segment of the most valuable premium tier of the market.

Comments

  • Reply 1 of 19
    mejsricmejsric Posts: 130member
    Next, 2B$ to Apple
    watto_cobraadm1jbdragon
  • Reply 2 of 19
    SoliSoli Posts: 7,333member
    Damn! Good for BB. I hope they do something useful with that money, if and when they get paid.
    brakkenwatto_cobrajbdragon
  • Reply 3 of 19
    k2kwk2kw Posts: 1,246member
    I would hate to think that the iPhone would get stuck with another cheap substandard modem just so Apple could screw Qualcomm some more.
  • Reply 4 of 19
    robin huberrobin huber Posts: 3,161member
    Lawsuits, the last refuge of companies who make buggy whips. 
  • Reply 5 of 19
    Lawsuits, the last refuge of companies who make buggy whips. 
    This was an arbitrated decision. Seems like QCOM grossly overcharged Blackberry to the tune of nearly a billion dollars. 

    This has to do far more with QCOM tactics than an irrelevant company trying to stay afloat. 

    The South Korean govt. has a judgment against them also for nearly a billion. Apple has initiated a lawsuit also and Apple isn't making "buggy whips." The justice department has also decided to sue them. The Chinese have already won a substantial judgment. 

    There is a pattern here and QCOM must be doing some awfully odious things. 
    watto_cobrapscooter63randominternetpersonjbdragon
  • Reply 6 of 19
    dasanman69dasanman69 Posts: 12,947member
    Soli said:
    Damn! Good for BB. I hope they do something useful with that money, if and when they get paid.
    Really? Like what? I don't think that's nearly enough money to get them back in the game. 
  • Reply 7 of 19
    brakkenbrakken Posts: 655member
    Why is QC so intent on destroying itself?
    How bad is upper management there?

    I'd be licking Apple's crack if I were a key partner, not pretending my product could not be replaced and acting like Adobe, Google, Microsoft or Samsung!

    These fucking fools never learn...
    watto_cobraStrangeDays
  • Reply 8 of 19
    sergiozsergioz Posts: 200member
    Qualcomm loses either way! Legal battles are irrelevant, it's all about business. If Qualcomm doesn't want to play nice. Apple will go with XMM 7650 modem from Intel, It’s not quite able to match the peak speeds of Qualcomm’s new wireless chip, which can reach peaks of up to 1.2Gbps. But it’s fast enough to download an HD movie in about 8 seconds, or 10GB of music in a minute and a half. It would not impact average customer because it’s compatible with multiple cellular technologies, including LTE, GSM, and CDMA and oh yes better deal for Apple. In the meantime, it would give Andriod users bragging rights that they have a faster modem, which is also irrelevant as we know speeds are various depending on where you are. Qualcomm is getting greedy and they can lose their best customer now that Apple has options!
    Deelronlkruppjbdragon
  • Reply 9 of 19
    Rayz2016Rayz2016 Posts: 3,601member
    brakken said:
    Why is QC so intent on destroying itself?
    How bad is upper management there?

    I'd be licking Apple's crack if I were a key partner, not pretending my product could not be replaced and acting like Adobe, Google, Microsoft or Samsung!

    These fucking fools never learn...
    I'd probably just go as far as buying Apple a beer or something…
    randominternetperson
  • Reply 10 of 19
    Rayz2016Rayz2016 Posts: 3,601member

    k2kw said:
    I would hate to think that the iPhone would get stuck with another cheap substandard modem just so Apple could screw Qualcomm some more.
    Don't see why it would. 

    Years of acrimonious lawsuits hasn't stopped Apple from buying up every Samsung component under the sun. 

    Qualcomm and Blackberry have already said that they will carry on with their business arrangements.  

  • Reply 11 of 19
    lkrupplkrupp Posts: 5,994member
    Lawsuits, the last refuge of companies who make buggy whips. 
    Some here would consider Apple to be a buggy whip maker when it comes the Mac. 
  • Reply 12 of 19
    freeperfreeper Posts: 77member
    @brakken:

    Actually, those "fools" do learn ... from the long list of companies that have partnered with Apple in the past only to be left high and dry - even to the point of bankruptcy - when Apple dumps them. And some have - allegedly - gone bankrupt even while supplying Apple because (again allegedly) Apple wields such influence over smaller suppliers that it negotiates deals that leaves the suppliers with virtually no profit margins. Of course, when this happens, Apple fans don't exactly shed a tear. Quite the contrary, Apple fans BRAG about Apple's former suppliers going broke AND ROOT FOR EVEN MORE with http://appleinsider.com/articles/17/04/04/why-apples-new-gpu-efforts-are-a-major-disruptive-threat-to-nvidia as evidence. 

    By the way, Google and Samsung are doing fine. Both are making far more money competing with Apple using Android than they would have merely settling for being Apple's "partner" in a relationship that would have been negotiated on Apple's terms and severed as soon as Apple decided they could get a better deal. And of course, while also still making money by selling critical components to Apple that only they can manufacture in volumes large enough (Samsung) and while still making money off their products and services that are present on Apple hardware (Google). Microsoft showed decades ago that if you are good enough at what you do, competing with Apple is preferable to "aligning" with Apple with Apple setting the terms. Apple looks out for itself and makes no pretenses otherwise. Everyone else should do the same, especially considering Apple is so willing to pay as little as possible while the deal lasts and dump the partner or supplier when the deal is over.

    Finally, Qualcomm doesn't need Apple's business to survive anyway. They are #1 in their area. MediaTek is #2. The others are too small to matter, including being able to even compete with Qualcomm without needing Qualcomm's patents to. The whole idea that a company needs Apple's money to survive is ridiculous wishful thinking. 
    edited April 2017
  • Reply 13 of 19
    nhtnht Posts: 4,125member
    freeper said:
    Microsoft showed decades ago that if you are good enough at what you do, competing with Apple is preferable to "aligning" with Apple with Apple setting the terms.
    My, how the world has changed.
  • Reply 14 of 19
    freeperfreeper Posts: 77member
    "In addition to affecting Qualcomm directly, the loss of Apple's business would also make it more difficult for the chipmaker to aggressively advance its technology, as it would be left dependent upon Android devices that make up a shrinking segment of the most valuable premium tier of the market."

    First off, if Qualcomm does go belly up, who replaces them? Samsung with their Exynos chips and Intel. Except that Samsung and Intel's taking over wouldn't exactly kill off Qualcomm, as Intel and Samsung can't make their own mobile chips without Qualcomm's patents in the first place. Because Qualcomm owns patents that are so vital to mobile, any mobile company would need to pay royalties to Qualcomm in order to come up with a competitive product. This is going to remain the case until/unless some truly revolutionary next generation technology comes along and makes existing mobile tech - which is still only iterating on the old original standards that Qualcomm, Motorola and the rest created - obsolete.

    Second, the writer is pretending as if the products that are relevant to Apple and its iPhone/iPad/Apple Watch lines are the only ones that Qualcomm makes. Not by a long shot. In addition to making the semiconductor components that are the scope of this argument, Qualcomm makes billions as a maker and seller of telecommunications equipment and services. Similar to Nokia: they didn't just dry up and blow away - or become a patent troll - when they ceased to compete with Apple in mobile phones because they have telecom equipment, software, services and other business lines. Apple is rare in that it became this massive global company while only actually making and selling a few products and services: iPod, Apple TV, Apple Watch, Macs, iPad, iPhone along with iCloud, iTunes and App Store to support the previous. Nearly everyone else - Microsoft, Google, Amazon, Samsung, HP etc. - has a much larger array of products and services. This is especially true in the mobile area, because selling mobile hardware wasn't big business before the iPhone. Nokia made a good bit but some of the other major players - HTC and Blackberry - were actually comparatively tiny companies, and this was with Blackberry trying to augment their hardware business by trying to become an enterprise software and services company. That software and services division is the only reason why they still exist, and yes the nearly $1 billion from Qualcomm will be a huge shot in the arm in that regards. Blackberry isn't patent trolling to survive but instead seeking the capital that it needs to reinvent themselves into a software/services company. But the bottom line is that Qualcomm makes plenty of money off their other divisions to subsidize research into their mobile processors.

    Finally, the idea that losing Apple's "premium tier" will do devastating harm to Qualcomm is hilarious. First, please prove that Qualcomm makes any more money off the sale of a $700 iPhone than they do on a $100 Android phone. The part - or the license - costs the same no matter what product it goes in. Second, even if it were true, there is volume. You can make the same amount of money by selling 10 million Fords as you can by selling 1 million BMWs. You get more prestige by selling the 1 million BMWs, of course, but the other guy is just as rich. Third - and this is the best part - Apple only gets the baseband from Qualcomm. The Android manufacturers get the baseband AND the SOC. So that $100 Android phone has BOTH the Qualcomm baseband AND the Qualcomm 200 SOC. And since far more $100 Android phones with the baseband AND the SOC by Qualcomm sell than iPhones, it is safe to say that Apple only accounts for a fraction of Qualcomm's revenue despite their products costing a lot more. Oh yes, and they do not cost "a lot more" anyway. Apple advocates play this game of defining "premium" as "phones that cost as much as the iPhone 7" and stating that Apple dominates that market. Well they don't really ... Apple sells more devices that cost $600 and up than any individual manufacturer, but not more than the combination of Samsung, LG, HTC, Huawei, Lenovo, Google etc. So while the average selling price of an Android device is $180, it still includes A LOT of devices at the high end. But the best part: even that analysis doesn't fly anymore. Why? Because it isn't just the iPhone 7 anymore. It is the iPhone SE. Which starts at $400. Meaning that the number of Android devices sold that costs $400 or more crushes the number of iPhones sold. 

    Sorry, the iPhone is the world's most profitable product, but only for Apple. It doesn't put nearly as much money in the hands of anybody else, which is that everyone BUT small suppliers for whom Apple is their only real customer like Imagination Technologies and GT Advanced, they can take or leave Apple's business. 
  • Reply 15 of 19
    robin huberrobin huber Posts: 3,161member
    lkrupp said:
    Lawsuits, the last refuge of companies who make buggy whips. 
    Some here would consider Apple to be a buggy whip maker when it comes the Mac. 
    Cars haven't made trucks obsolete yet. Macs, in one form or another, will be needed for heavy lifting for a long time to come. It's good news that a new evolution of them is coming next year. 
  • Reply 16 of 19
    robin huberrobin huber Posts: 3,161member
    Lawsuits, the last refuge of companies who make buggy whips. 
    This was an arbitrated decision. Seems like QCOM grossly overcharged Blackberry to the tune of nearly a billion dollars. 

    This has to do far more with QCOM tactics than an irrelevant company trying to stay afloat. 

    The South Korean govt. has a judgment against them also for nearly a billion. Apple has initiated a lawsuit also and Apple isn't making "buggy whips." The justice department has also decided to sue them. The Chinese have already won a substantial judgment. 

    There is a pattern here and QCOM must be doing some awfully odious things. 
    I agree that QCOM has been engaged in dubious business practices, and that's why theyare being challenged. But there is also some truth in my facetious remark. As chip design and fab become more ubiquitous, Apple and others will just take it in-house. Not a good trend for QCOM. 
  • Reply 17 of 19
    freeper said:

    Finally, the idea that losing Apple's "premium tier" will do devastating harm to Qualcomm is hilarious. First, please prove that Qualcomm makes any more money off the sale of a $700 iPhone than they do on a $100 Android phone. The part - or the license - costs the same no matter what product it goes in. Second, even if it were true, there is volume. You can make the same amount of money by selling 10 million Fords as you can by selling 1 million BMWs. You get more prestige by selling the 1 million BMWs, of course, but the other guy is just as rich. Third - and this is the best part - Apple only gets the baseband from Qualcomm. The Android manufacturers get the baseband AND the SOC. So that $100 Android phone has BOTH the Qualcomm baseband AND the Qualcomm 200 SOC. And since far more $100 Android phones with the baseband AND the SOC by Qualcomm sell than iPhones, it is safe to say that Apple only accounts for a fraction of Qualcomm's revenue despite their products costing a lot more. Oh yes, and they do not cost "a lot more" anyway. Apple advocates play this game of defining "premium" as "phones that cost as much as the iPhone 7" and stating that Apple dominates that market. Well they don't really ... Apple sells more devices that cost $600 and up than any individual manufacturer, but not more than the combination of Samsung, LG, HTC, Huawei, Lenovo, Google etc. So while the average selling price of an Android device is $180, it still includes A LOT of devices at the high end. But the best part: even that analysis doesn't fly anymore. Why? Because it isn't just the iPhone 7 anymore. It is the iPhone SE. Which starts at $400. Meaning that the number of Android devices sold that costs $400 or more crushes the number of iPhones sold.  
    Any numbers to backup your claim? Based on the 90% of profits, I would assume Apple owns about 80% to 90% of the premium segment (smartphones with >$600 pricetag). I know I am also speculating here, but at least with a better base data (Profit share) to infer from. I am fairly confident someone else in this forum would be able to point to proper data, which would show the reality. Can you share data to backup your claim?
  • Reply 18 of 19
    StrangeDaysStrangeDays Posts: 4,764member
    freeper said:
    Meaning that the number of Android devices sold that costs $400 or more crushes the number of iPhones sold. 
    And yet, that pesky profit problem -- despite being only one seller, Apple scoops up the lion's share of the profit from the entire product category. Market share alone doesn't matter. Profit is the air corporations breathe. 
  • Reply 19 of 19
    Soli said:
    Damn! Good for BB. I hope they do something useful with that money, if and when they get paid.
    Really? Like what? I don't think that's nearly enough money to get them back in the game. 
    They can buy Fitbit and rebrand themselves as Fitberry.
Sign In or Register to comment.