Apple hatched years-long plan to reduce royalty payments to Qualcomm, documents reveal
Though in its court battles Apple argued that Qualcomm patents weren't any more valuable than those of companies like Ericsson and Huawei, in private the company praised them -- and was aiming to sue Qualcomm as far back as 2014, according to newly-exposed documents.
"Engineering wise, they have been the best," said Apple's senior VP of hardware, Johny Srouji, in a March 2015 email quoted by the Washington Post. Another document shown in court, a 2009 internal Apple memo from an accountant, stated that Qualcomm is "widely considered the owner of the strongest patent portfolio for essential and relevant patents for wireless standards."
Apple decided it wouldn't sue Qualcomm until after the end of 2016, when Qualcomm would've paid out billions of dollars under their exclusive partnership, the Post continued. A third Apple document from June 2016 was labeled "Qualcomm Royalty Reduction," with one section explicitly stating "Goal: Reduce Apple's net royalty to Qualcomm."
The strategy was to "hurt Qualcomm financially" and "put Qualcomm's licensing model at risk," the document said. Apple didn't launch its first lawsuit against Qualcomm until January 2017, at which point it argued that Qualcomm not only owed nearly $1 billion in royalty rebates but maintained abusive practices forcing chip buyers to sign patent license agreements.
Apple lawyer Ruffin Cordell made the Ericsson and Huawei references on Tuesday, during the first and only day of the Apple v. Qualcomm trial. Cordell's argument was that a group of patents twice the size of Qualcomm's cost Apple a fraction of what Qualcomm was asking. Qualcomm lawyers, however, claimed that internal Apple documents revealed the iPhone maker intentionally licensed other, less expensive patents to make Qualcomm look overbearing.
The idea was to "selectively filter" a group of patent licenses that would serve as "evidence as a comparable in disputes with others," according to the Apple material.
The trial came to an abrupt end after opening statements, at which time the two companies announced a settlement of all ongoing litigation. Apple is paying an undisclosed amount to Qualcomm and entering into a new licensing agreement -- UBS analysts speculated that former may be worth $6 billion, and the latter almost $9 per iPhone.
The Post report may suggest that Apple settled not just to put 5G modems in 2020 iPhones, but because it couldn't succeed with clear evidence it wanted to reduce royalties.
"Engineering wise, they have been the best," said Apple's senior VP of hardware, Johny Srouji, in a March 2015 email quoted by the Washington Post. Another document shown in court, a 2009 internal Apple memo from an accountant, stated that Qualcomm is "widely considered the owner of the strongest patent portfolio for essential and relevant patents for wireless standards."
Apple decided it wouldn't sue Qualcomm until after the end of 2016, when Qualcomm would've paid out billions of dollars under their exclusive partnership, the Post continued. A third Apple document from June 2016 was labeled "Qualcomm Royalty Reduction," with one section explicitly stating "Goal: Reduce Apple's net royalty to Qualcomm."
The strategy was to "hurt Qualcomm financially" and "put Qualcomm's licensing model at risk," the document said. Apple didn't launch its first lawsuit against Qualcomm until January 2017, at which point it argued that Qualcomm not only owed nearly $1 billion in royalty rebates but maintained abusive practices forcing chip buyers to sign patent license agreements.
Apple lawyer Ruffin Cordell made the Ericsson and Huawei references on Tuesday, during the first and only day of the Apple v. Qualcomm trial. Cordell's argument was that a group of patents twice the size of Qualcomm's cost Apple a fraction of what Qualcomm was asking. Qualcomm lawyers, however, claimed that internal Apple documents revealed the iPhone maker intentionally licensed other, less expensive patents to make Qualcomm look overbearing.
The idea was to "selectively filter" a group of patent licenses that would serve as "evidence as a comparable in disputes with others," according to the Apple material.
The trial came to an abrupt end after opening statements, at which time the two companies announced a settlement of all ongoing litigation. Apple is paying an undisclosed amount to Qualcomm and entering into a new licensing agreement -- UBS analysts speculated that former may be worth $6 billion, and the latter almost $9 per iPhone.
The Post report may suggest that Apple settled not just to put 5G modems in 2020 iPhones, but because it couldn't succeed with clear evidence it wanted to reduce royalties.
Comments
A good start.
There's a lot in this story that fits with everything else - QC has good engineers and makes good chips and they have one of the largest (if not the largest) portfolio of patents, many of which are required for mobile phones. They used their position to strong-arm companies into paying high royalties. If you're QC, you say that's the cost of using our tech. If you're Apple, Samsung, or some other company, they're excessive.
From what I've read, many of the patents were or should have been covered under FRAND, but 'should have been covered' is far different from the company actually abiding by it in good faith, and the 'Reasonable' portion of FRAND leaves a lot of wiggle room. I'm sure QC would say $100 per device is very reasonable.
You forget Qualcomm has lost 5 major antitrust cases around the world costing them billions in fines. The FTC case is currently awaiting a decision.
So yes, Qualcomm has been found guilty of being greedy and breaking the law.
Edit: Just read the source article. So a reporter at the trial is talking about things they heard/saw during the beginning of the trial (during opening arguments for both sides).
Curious why they decided to focus on items that make Apple potentially look bad and Qualcomm good. Opening arguments typically contain damning things about both sides. Yet we only really heard from one side.
In that context (information from the horse's mouth), we now, as Gatorguy points out, have a take that adds some more colour to the picture.
That we didn't learn more is due to Apple stopping the case.
Apple settled this case because it would have been business malpractice not to do so after Intel could not meet their 5G modem deadlines.
With regard to this news, it all comes down to what is meant by “selectively filter” — here it just means Apple created a strategy to expose Qualcomm’s abuse of its patents by creating equivalent, comparable sets of patents from others.
The Qualcomm opening statement desperately tries to spin this, but in the end Apple would have just explained it — it’s not criminal or underhanded, it’s just prudent — take measures to defend yourself and to expose the abuser.
If your best opening statement is to spin your opponent’s choice of words, you have a weak case, especially when said opponent is focused on facts in their opening statement.
EDIT: To observe that my statement, “Qualcomm cannot charge whatever they want. For their modems, yes. For their patents, no.” may sum up the settlement itself — Apple agrees to a Qualcomm-friendly price for the modems, while Qualcomm gives Apple what it wants with regard to the patents.
Qcom being the only supplier, Apple clearly is not in the same position..
they were trying to bully a big company but it backfired on them
It's time for Apple pay the piper