Apple $7B behind in royalty payments to Qualcomm

Posted:
in General Discussion
Apple is now $7 billion behind in patent royalty payments to Qualcomm after directing contract manufacturers to withhold further remittance on grounds that the chipmaker participates in unfair licensing practices, according to testimony presented in court Friday.

iPhone XApple's iPhone X used both Qualcomm and Intel modems.


Qualcomm commented on Apple's unpaid royalties in a court hearing in California, reports Reuters.

Apple does not directly license Qualcomm patents, though money from the tech giant does end up in the chipmaker's coffers through reimbursements made to partner manufacturers that do pay royalties.

The $7 billion figure, and a number of other major details surrounding the sprawling legal battle, are in dispute. Apple for its part argues Qualcomm's royalty rates are unfair and amount to price gouging and extortion.

Last year, Apple filed suit against Qualcomm, claiming the chipmaker participates in monopolistic practices and other nefarious business strategies including withholding nearly $1 billion in rebates as retribution for participating in a South Korean antitrust investigation. The initial case ultimately spawned some 100 separate suits and countersuits around the world.

As it applies to royalties, Apple alleges Qualcomm flouts FRAND (fair, reasonable and nondiscriminatory) patent commitments to charge customers, including suppliers, exorbitant rates on standard-essential patents. The chipmaker further restricts sales to buyers who agree to license its SEPs, a practice Apple refers to as "double-dipping."

When Apple halted royalty payments, so too did partner suppliers using Qualcomm IP.

During today's proceedings, Qualcomm also attempted to forward a motion to render moot Apple's patent validity challenges, reports Bloomberg. The company filed the motion earlier this month and presented its case in court on Friday.

At issue are nine Qualcomm patents "handpicked" by Apple to illustrate weak spots in the chipmaker's portfolio of mobile technology IP. Apple is attempting to invalidate the inventions that Qualcomm asserts is essential to current mobile standards. Qualcomm is attempting to avoid scrutiny of the patents by saying it has no plans to leverage them in infringement assertions against Apple and its contract manufacturers.

Apple in its own filing opposed the request, saying Qualcomm is attempting to deflect allegations of double-dipping. Specifically, Apple argues that Qualcomm should not be able to demand a license on patented technology if that same technology is built into its baseband chips sold to smartphone makers.

In addition to the California court action, Qualcomm lodged a complaint with the U.S. International Trade Commission that seeks to halt the import of iPhones powered by Intel modems.

For its part, Qualcomm on multiple occasions has said the legal battle comes down to favorable IP pricing, and that it expects the fight to end in a settlement.
«1

Comments

  • Reply 1 of 22
    After this chip incident, Bloomberg should not be looked at as a reliable source.
    chabiglkruppStrangeDaysgrifmxmagman1979
  • Reply 2 of 22
    entropysentropys Posts: 1,431member
    I haven’t looked at Bloomberg as a reliable source for years.  
    I would expect Apple has the cash set aside as a risk management strategy just in case the court case is unsuccessful.
    chabigmagman1979
  • Reply 3 of 22
    radarthekatradarthekat Posts: 2,898moderator
    That’s a lot of royalties, and suggests that Apple had been paying a lot back when they actually were putting Qualcomm modems in all new models.  Unless Qualcomm is attempting to charge even for intel-equipped iPhones.   $7 billion, no matter how you cut it, shows how pricing based on the total cost of the phone is a bit heavy handed.  
    bb-15jbdragonmagman1979watto_cobra
  • Reply 4 of 22
    I wonder how much money has already gone to the lawyers regarding this issue, just out of curiosity. I mean if you really want to settle is it necessary to fire up > 100 law suits? Also, I’m curious whether it’s “all green” on the Android side of things and the corresponding OEMs and suppliers happily pay what Qualcomm is asking for? Or are they paying less?
    watto_cobra
  • Reply 5 of 22
    I'm really, really not a fan of Qualcomm. I thought they were a real innovative company advancing the industry forward for a while. Now when I hear them extorting money from their customers in this manner, it's highly disturbing. I hope they lose every case they have, not only against Apple, but through others too. I just hope Intel and others can step up their game and compete on equal footing.
    aegeanmagman1979watto_cobra
  • Reply 6 of 22
    knowitallknowitall Posts: 1,109member
    marsorry said:
    I'm really, really not a fan of Qualcomm. I thought they were a real innovative company advancing the industry forward for a while. Now when I hear them extorting money from their customers in this manner, it's highly disturbing. I hope they lose every case they have, not only against Apple, but through others too. I just hope Intel and others can step up their game and compete on equal footing.
    They lost Apple as a custommer and now grapes are sour.
    The U.S. patent system is the biggest culprit in my opinion. When a patent like “an apparatus being able to receive some type of information ...” is valid and can be used to extort all mobile device makers and thwart all inventors from making new inventions, something is really wrong.

    radarthekataegeanStrangeDaysgrifmxmagman1979watto_cobrajony0
  • Reply 7 of 22
    radarthekatradarthekat Posts: 2,898moderator
    I wonder how much money has already gone to the lawyers regarding this issue, just out of curiosity. I mean if you really want to settle is it necessary to fire up > 100 law suits? Also, I’m curious whether it’s “all green” on the Android side of things and the corresponding OEMs and suppliers happily pay what Qualcomm is asking for? Or are they paying less?
    Not sure if they’re happy or otherwise, but for sure they’re paying less, as Qualcomm’s royalty structure is based upon the price the device is sold for, not the inherent value of their IP.  
    watto_cobra
  • Reply 8 of 22
    gatorguygatorguy Posts: 19,699member
    I wonder how much money has already gone to the lawyers regarding this issue, just out of curiosity. I mean if you really want to settle is it necessary to fire up > 100 law suits? Also, I’m curious whether it’s “all green” on the Android side of things and the corresponding OEMs and suppliers happily pay what Qualcomm is asking for? Or are they paying less?
    Not sure if they’re happy or otherwise, but for sure they’re paying less, as Qualcomm’s royalty structure is based upon the price the device is sold for, not the inherent value of their IP.  
    ...with a value limit and so not quite that simple.  I think it was previously $600 and now set at $500, but not entirely sure that applies across the board to all Qualcomm IP. 

    "Specifically, Qualcomm said that it would offer a royalty rate for its patents on the 5G NR standard, up to and including release 15 of the 3GPP specifications, of 2.275% of the selling price of branded single-mode 5G handsets; and a royalty rate of 3.25% of the selling price of branded multi-mode (3G/4G/5G) handsets. And for manufacturers that want to license both Qualcomm’s “cellular standard essential patents” as well as its patents that are not essential to the standard, the company said it would charge a royalty rate of 4% of the selling price for branded single-mode handsets and 5% of the selling price for branded multi-mode handsets.

    The company added that its rates were capped at $500 for the selling price of the phone."

    That's still one heck of a lot of money considering how many iPhones are sold, so of course Apple will fight it. Whatever they can trim goes in the bank. 

    muthuk_vanalingam
  • Reply 9 of 22
    roakeroake Posts: 619member
    Bankruptcy!  It’s the future of Qualcomm.  They not only bite the hand that feeds them; they try to tear it off.
    magman1979watto_cobra
  • Reply 10 of 22
    You left out the best quote by the judge after Qualcomm wanted to withdraw those 9 patents. Said it was like Lucy pulling the football away from Charlie Brown just before he kicked it.
    edited October 2018 aegeanmagman1979watto_cobra
  • Reply 11 of 22
    radarthekatradarthekat Posts: 2,898moderator
    gatorguy said:
    I wonder how much money has already gone to the lawyers regarding this issue, just out of curiosity. I mean if you really want to settle is it necessary to fire up > 100 law suits? Also, I’m curious whether it’s “all green” on the Android side of things and the corresponding OEMs and suppliers happily pay what Qualcomm is asking for? Or are they paying less?
    Not sure if they’re happy or otherwise, but for sure they’re paying less, as Qualcomm’s royalty structure is based upon the price the device is sold for, not the inherent value of their IP.  
    ...with a value limit and so not quite that simple.  I think it was previously $600 and now set at $500, but not entirely sure that applies across the board to all Qualcomm IP. 

    "Specifically, Qualcomm said that it would offer a royalty rate for its patents on the 5G NR standard, up to and including release 15 of the 3GPP specifications, of 2.275% of the selling price of branded single-mode 5G handsets; and a royalty rate of 3.25% of the selling price of branded multi-mode (3G/4G/5G) handsets. And for manufacturers that want to license both Qualcomm’s “cellular standard essential patents” as well as its patents that are not essential to the standard, the company said it would charge a royalty rate of 4% of the selling price for branded single-mode handsets and 5% of the selling price for branded multi-mode handsets.

    The company added that its rates were capped at $500 for the selling price of the phone."

    That's still one heck of a lot of money considering how many iPhones are sold, so of course Apple will fight it. Whatever they can trim goes in the bank. 

    It sure is a lot, and enough android phones fall considerably below the $500 cap to push the average royalty per android phone meaningfully below that of pretty much the lowest priced iPhone, except in a few markets where Apple still sells iPhones prior to the iPhone 7.  
    edited October 2018 ericthehalfbeeRayz2016watto_cobra
  • Reply 12 of 22
    chasmchasm Posts: 1,049member
    The problem here is that Qualcomm's business model, for whatever reasons, is illegal. Numerous courts have weighed in on this, and the pattern is pretty clear. I don't think they're ever going to see that $7 billion, but once a US court with sufficient authority finally weighs in (or a settlement is reached that includes Qualcomm's reform on this model), they might get $2B -- which will then mostly go to the lawyers ... a decade from now.
    backstabwatto_cobra
  • Reply 13 of 22
    tundraboytundraboy Posts: 1,593member
    "Apple argues that Qualcomm should not be able to demand a license on patented technology if that same technology is built into its baseband chips sold to smartphone makers."

    If that's not a clear case of patent exhaustion, I don't know what is.  Samsung tried to do this years ago and lost in the courts.  What I find surprising is that Apple didn't contest this from the get go.
    edited October 2018 magman1979JWSCwatto_cobra
  • Reply 14 of 22
    MplsPMplsP Posts: 893member
    So any idea how much that works out to per phone?

    the sad thing is consumers probably won’t see any direct benefit. If a company is paying $30 per phone and that gets cut to $5 or eliminated, are they going to drop the price from $599 to $574 or $569? Maybe, but my guess is most of them are going to pocket the extra. 
  • Reply 15 of 22
    Fricking ouch!!!  
    Lesson??  Don’t frack the organizations that put food on your table!!!
    Greedy asswipes charging for aloe saturated buttwipes when supplying sandpaper.  :0. 
    magman1979watto_cobra
  • Reply 16 of 22
    sflocalsflocal Posts: 4,339member
    chasm said:
    The problem here is that Qualcomm's business model, for whatever reasons, is illegal. Numerous courts have weighed in on this, and the pattern is pretty clear. I don't think they're ever going to see that $7 billion, but once a US court with sufficient authority finally weighs in (or a settlement is reached that includes Qualcomm's reform on this model), they might get $2B -- which will then mostly go to the lawyers ... a decade from now.
    Well... if it were truly "illegal", they why is QC's mentality still business as usual?  Why hasn't a court yet chimed in saying, "you can't do that"?

    JWSC
  • Reply 17 of 22
    if it's the same product (IP) going into a phone why is the royalty based on unit sale price and not per device - their charging model makes apple pay it's competitors for making cheap copies of its own IP!
    watto_cobra
  • Reply 18 of 22
    wood1208wood1208 Posts: 1,703member
    Qualcommedy can higher collection agency!!!
  • Reply 19 of 22
    WonkiWonki Posts: 1unconfirmed, member
    You Apple fans do not see the big picture, if Qualcomm dies, Huawei will dominate 5g. Apple can bully all other suppliers, but sorry not Qualcomm.  Anyway I expect Qualcomm to settle with FTC then Apple.
  • Reply 20 of 22
    MplsPMplsP Posts: 893member
    sflocal said:
    chasm said:
    The problem here is that Qualcomm's business model, for whatever reasons, is illegal. Numerous courts have weighed in on this, and the pattern is pretty clear. I don't think they're ever going to see that $7 billion, but once a US court with sufficient authority finally weighs in (or a settlement is reached that includes Qualcomm's reform on this model), they might get $2B -- which will then mostly go to the lawyers ... a decade from now.
    Well... if it were truly "illegal", they why is QC's mentality still business as usual?  Why hasn't a court yet chimed in saying, "you can't do that"?

    To be a bit glib, it’s only illegal if you get caught, and one can argue that until the court process has played out, they haven’t fully gotten caught. The reason QC is sticking with their model is because it’s enormously profitable for them. If you had a set up that was giving you several billion dollars a year would you just walk away from it?

    QC has had a virtual monopoly on cellular modems for quite a while and has taken full advantage of their position. Intel is starting to come up, but the general agreement is that their chips are still not on par with QC’s. I suspect other companies have been similarly dissatisfied with QC’s licensing arrangements but have not been in a position like Apple to actively challenge them.

    How 5G plays out remains to be seen. I don’t necessarily want QC to die, but I do think they’re due a comeuppance. What the marketplace needs is fair competition with appropriate regulation to ensure that vital technology patents  are reasonably licensed. Having QC go bankrupt only to leave another company with a monopoly accomplishes nothing.
Sign In or Register to comment.