Qualcomm to continue supplying Apple with chips despite $1B lawsuit, considering legal reb...
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.
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
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.
Don't take my word for it. Look at what's happening to the price of their stock.
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.
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.
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/
https://morningconsult.com/wp-content/uploads/2016/12/kftc-issued-press-release-dated-december-28-2016-unofficial-english-translation.pdf
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