Qualcomm argues continued Chinese iPhone sales violate court injunction
Qualcomm has reportedly presented a Chinese court with video evidence that Apple is still selling iPhones in the country, and insisted that this violates an injunction imposed earlier this week.
The company is now waiting on whether the court will take action, CNBC said on Wednesday. The chipmaker won a ban on Chinese iPhone sales and imports on Monday, and claims that the injunction applies to wide array of devices up to and including the iPhone X, construed as violating patents on photo editing and managing apps with a touchscreen.
Apple contends that the injunction applies only to products running older versions of iOS. Any iPhone bought from Apple currently comes preloaded with iOS 12, which if Apple's reasoning is followed would make the injunction toothless. Qualcomm unsuccessfully petitioned for a block on manufacturing iPhones in China as well.
"Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world," Apple said in a statement on Monday to AppleInsider. "All iPhone models remain available for our customers in China. We will pursue all our legal options through the courts."
Apple first filed a $1 billion lawsuit against Qualcomm in January 2017, arguing that the latter was withholding patent royalty rebates as retaliation for cooperation with antitrust investigations. The battle quickly escalated, resulting in suits and countersuits around the world. In September, Qualcomm accused Apple of delivering trade secrets to Intel to improve the performance of modems.
An August settlement over similar matters saw Qualcomm pay $93 million in fines to Taiwan and promise to invest $700 million in the country over five years.
A U.S. Federal Trade Commission lawsuit actually precedes Apple's, and reached a critical turning point recently when District Judge Lucy Koh issued a preliminary ruling against Qualcomm, calling on it to license technology to rivals like Intel. Qualcomm and the FTC have been pursuing a settlement.
To put pressure on Qualcomm, Apple has been directing its manufacturers to withhold royalty payments, potentially in excess of $7 billion.
Some investors have expressed fears about the new ban, which could affect Apple's already volatile stock coping with worries about 2018 iPhone sales and the U.S.-China trade war.
The company is now waiting on whether the court will take action, CNBC said on Wednesday. The chipmaker won a ban on Chinese iPhone sales and imports on Monday, and claims that the injunction applies to wide array of devices up to and including the iPhone X, construed as violating patents on photo editing and managing apps with a touchscreen.
Apple contends that the injunction applies only to products running older versions of iOS. Any iPhone bought from Apple currently comes preloaded with iOS 12, which if Apple's reasoning is followed would make the injunction toothless. Qualcomm unsuccessfully petitioned for a block on manufacturing iPhones in China as well.
"Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world," Apple said in a statement on Monday to AppleInsider. "All iPhone models remain available for our customers in China. We will pursue all our legal options through the courts."
Apple first filed a $1 billion lawsuit against Qualcomm in January 2017, arguing that the latter was withholding patent royalty rebates as retaliation for cooperation with antitrust investigations. The battle quickly escalated, resulting in suits and countersuits around the world. In September, Qualcomm accused Apple of delivering trade secrets to Intel to improve the performance of modems.
An August settlement over similar matters saw Qualcomm pay $93 million in fines to Taiwan and promise to invest $700 million in the country over five years.
A U.S. Federal Trade Commission lawsuit actually precedes Apple's, and reached a critical turning point recently when District Judge Lucy Koh issued a preliminary ruling against Qualcomm, calling on it to license technology to rivals like Intel. Qualcomm and the FTC have been pursuing a settlement.
To put pressure on Qualcomm, Apple has been directing its manufacturers to withhold royalty payments, potentially in excess of $7 billion.
Some investors have expressed fears about the new ban, which could affect Apple's already volatile stock coping with worries about 2018 iPhone sales and the U.S.-China trade war.
Comments
Qualcomm does have good products, but they need a brain transplant at the top.
My first thought is break the company up. Unfortunately that would likely mean a new set of patent trolls... perhaps even worse that exists now.
It's reasonable to think that Apple expected its contract manufacturers to stop making royalty payments to Qualcomm in response to Apple's actions (e.g., Apple withholding from contract manufacturers funds to compensate for royalty payments, and telling them it was doing that because of its dispute with Qualcomm). But Apple said in a court filing that it did not direct contract manufacturers to withhold payments from Qualcomm.
Apple's position is that the ban shouldn't apply to those older models if they are running iOS 12 either because the court found that iOS 12 didn't infringe (less likely) or because it didn't specifically find that iOS 12 did infringe. So, now, Apple will - along with other bases for appeal - argue that the ban shouldn't apply to older iPhone models if they are running iOS 12 because the court would first need to find that iOS 12 also infringes.
So, as issued the injunction may apply to older models even if they are running iOS 12. But Apple thinks that it shouldn't because such an injunction would go beyond what is supported by the findings that the court made.
I, of course, don't know that that is what has happened. I haven't found a copy of any written order that might have been issued. But that would be my best guess based on everything that I've seen reported.
As for why contract manufacturers are responsible for royalty payments. It's because Apple and Qualcomm haven't been able to agree on licensing terms. Apple says, basically, that's because Qualcomm won't offer FRAND terms. Qualcomm says, basically, that's because Apple won't accept FRAND terms. So the only way Qualcomm has to collect royalty payments on the products in question is to collect them from Apple's contract manufacturers. Otherwise it would have to wait for a court to sort out the proper licensing terms or agree to terms which Apple might offer.
Additionally, Apple's contract manufacturers have their own licensing agreements with Qualcomm. At least some of those agreements pre-date Apple's use of those contract manufacturers to, e.g., build iPhones. Those manufacturers are actually infringing Qualcomm patents because they are selling products (incorporating Qualcomm IP) to Apple, even though they are contract manufacturers. There are myriad aspects to this situation (e.g., the possibility that in some cases the contract manufacturers are using components from other suppliers where Qualcomm's patent rights are exhausted, or the possibility that Qualcomm's patent rights are exhausted in some cases because Qualcomm itself sold components to the contract manufacturers). I won't get lost in them. But I would add that Apple claims it hasn't been allowed to know the terms of Qualcomm's licensing agreements with Apple's contract manufacturers. Apple claims that Qualcomm won't let those contract manufacturers share the terms with Apple.
But the big picture reality is that the contract manufacturers are obliged to pay Qualcomm for using its IP (unless they are using components which are themselves properly licensed). If they are willing to accept a license, they can use that IP - while not making royalty payments - while they let a court sort out proper terms. But in at least some cases they already have licensing agreements which they are now, it would seem, breaching. Courts will have to sort out what happens from here. Or, more likely I think, the parties will eventually reach settlements.
That Qualcomm has to resort to buying iPhones with Intel chips in them is pitiful.
Let them burn in hell.
China's legal system does seem to work differently than the U.S.'s in important ways.
But, to be clear, Apple was never paying licensing fees directly to Qualcomm. It was always Apple's contract manufacturers paying those licensing fees and Apple remitting funds to those manufacturers to cover those costs. The double dipping is about Qualcomm selling components that incorporated some of its IP and then demanding to be paid licensing fees that were ostensibly, in part, for IP substantially embodied in those components. Under U.S. law, Qualcomm's patent rights in such IP is exhausted when it sells the components. But even that aspect is complicated by something else Qualcomm was doing: Refusing to identify the patents which licensees were paying for. That's something regulatory bodies have told Qualcomm it has to stop doing.
EDIT: That's interesting and is important. I wonder if those Apple sources were referring to the entire process (being ex parte) or just the issuance of the preliminary injunction (and, e.g., some aspect of the consideration of it).
Dragging on dribble over and over and over again.
https://www.chinapatentblog.com/blog/bilingual-english-chinese-version-of-apple-injunction-order-in-both-qualcomm-cases-from-fuzhou-intermediate-peoples-court
Rather than iOS12 being the differentiator it seems it's who the manufacturer is. Perhaps these two companies have been paying Qualcomm royalties despite Apple not reimbursing them?
You'll be interested in this speech from a couple days ago even if others may not immediately see the significance, and why SEP holders might be a bit more upbeat about licensing enforcement options.
https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-19th-annual-berkeley-stanford