Apple used Samsung to push for South Korean legal action, Qualcomm court filings claim

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An unnamed Apple executive -- possibly Chief Executive Tim Cook -- allegedly asked Samsung to pressure South Korean antitrust regulators into intensifying their investigation into Qualcomm, with the ultimate goal of reducing royalty payments, according to Qualcomm court filings unearthed on Wednesday.

Cook at last year's Sun Valley conference.
Cook at last year's Sun Valley conference.


The Apple executive spoke with a peer at Samsung Electronics at a conference in Idaho, Qualcomm said in documents seen by Bloomberg. The latter person was likely Jay Y. Lee, recently sentenced to five years in prison for a presidential corruption scandal. "Get aggressive," the Apple executive allegedly said, further insisting that the Korea Fair Trade Commission case would be the "best chance" to force Qualcomm to lower prices. The KFTC ultimately hit Qualcomm with a massive fine for its handling of patent licenses and chip sales.

Shortly after, Apple launched a lawsuit against Qualcomm claiming the latter withheld almost $1 billion in retaliation. The two corporations are now engaged in a global legal war, including countersuits. The U.S. Federal Trade Commission is pursuing a separate complaint against Qualcomm.

"I don't know what conversation they are talking about," Apple general counsel Bruce Sewell told Bloomberg. "For Apple to have said to Samsung, 'You guys are in Korea and you should be watching this case carefully,' doesn't seem to me to be anything beyond simply the kind of conversation two CEOs might have." A critical term of Apple's rebates was that it not push regulators into cracking down on Qualcomm, though it was allowed to answer any questions in existing investigations. The KFTC case had been ongoing since 2014.

The Apple executive referred to in court filings is almost certainly Cook, since the Idaho conference was presumably Sun Valley, open only to high-profile business executives, politicians, and other celebrities. It's not clear how Qualcomm might have learned the details of a conversation there.

The KFTC said that it launched its investigation on its own, and that Samsung was "only one of the companies we enlisted for reference."

Apple and other cellphone makers have regularly complained about the amount of money they pay Qualcomm, which both makes wireless chips and holds a wide assortment of patents, including one on CDMA. Qualcomm has been accused of pressuring chip buyers into signing patent licenses at the same time, and exploiting its market dominance to charge high rates.

One of Apple's specific arguments against Qualcomm's royalty demands is that it shouldn't have to pay an amount based on the overall price of a device, since the patented technology is related to just one part. The current scheme means that Apple pays Qualcomm more for iPhones with extra storage, even though the cellular modem remains the same.

Instead Apple is proposing paying based on the cost of modem. Sewell argued that the company shouldn't owe more than $4 in royalties per device, which would be a dramatic reduction even versus the amounts that were offset by rebates.

The counsel further dismissed Qualcomm CEO Steve Mollenkopf's suggestions that a settlement could happen soon, saying it won't happen "absent a complete reinvention of the licensing model that Qualcomm has adapted in the industry."

Comments

  • Reply 1 of 20
    JWSCJWSC Posts: 375member

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    tmayanton zuykovjbdragoncalibshankSpamSandwich
  • Reply 2 of 20
    gatorguygatorguy Posts: 20,442member
    According to the report Apple had been paying about $10 in Qualcomm royalties, (the Qualcomm rate tops out at a max of $30 per device) as a result of rebates Qualcomm was giving Apple in return for not challenging their patents or royalty basis. Qualcomm believes that Apple broke that agreement by conspiring with Samsung to in effect act as the hatchet man. Apple frames it as simply an informal discussion between two business partners rather than a strategy to bypass the agreement.  Lots of other great detail too in the Bloomberg source article.
    https://www.bloomberg.com/news/features/2017-10-04/apple-and-qualcomm-s-billion-dollar-war-over-an-18-part
  • Reply 3 of 20
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

  • Reply 4 of 20
    tmaytmay Posts: 3,644member
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    The same FRAND rates that Samsung, Apple, and everyone else should have been getting all along.

    Legally, Qualcomm would have to prove conspiracy. The problem for Qualcomm is that while they might win an argument in Court over how the investigation came about, they'll almost certainly lose their power over licensing costs. 

    jbdragonstompy
  • Reply 5 of 20
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    edited October 2017
  • Reply 6 of 20
    jbdragonjbdragon Posts: 2,071member
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    That's not it at all. Samesung also wants lower over priced FRAND rates for the chips just like Apple and others.
    propodbshank
  • Reply 7 of 20
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    Except that Samsung is not an Apple adversary and hasn't been since Apple filed that (mostly) losing lawsuit against Samsung to try to force them out of the mobile space - and Android with it - only to then go out and do the same thing to Samsung - copy their trade dress - as they sued Samsung for doing to them.
  • Reply 8 of 20
    Rayz2016Rayz2016 Posts: 4,563member
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    Which no one else can make in the quantities (or quality) that Apple needs. 
  • Reply 9 of 20
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    Not at all. Or were you somehow not aware that Samsung has been a critical Apple supplier for everything from SOCs to memory all this time, and the only reason why Apple didn't use them for screens as well as because Apple used LCD instead of OLED for now? (Doesn't the Apple Watch use Samsung OLED also?) An Android blog gave an excellent writeup on this. https://www.androidcentral.com/qualcomm-licensing-blocked-samsung-selling-exynos-chips Samsung can't use their Exynos processors - which are reportedly superior to the Qualcomm Snapdragon line, and there is evidence for this because Samsung was able to create 64 bit SOCs over 6 months before Qualcomm was, and 18 months if you consider that the first Qualcomm 64 bit SOCs overheated and had to be underclocked - in devices sold outside of South Korea because of complicated patent issues. They can't use them in their own phones - apparently they can in tablets and Chromebooks however - and they can't sell them to other manufacturers like LG, Xiaomi and Huawei for their phones either. If Apple wins this lawsuit, Samsung will no longer need to buy the SOCs from Qualcomm, and no one else will need to either. Another wrinkle ... Google continues to prefer the Qualcomm standard for now, but they want to design their own SOCs too. (Don't laugh ... Google has years of experience in chip design for their own internal hardware needs for custom applications that they can't buy off-the-shelf parts for, so designing a good mobile SOC would be easy in comparison.) So Apple and Samsung winning this lawsuit may make it that much easier for them to use their own SOC in future phones also.
    edited October 2017
  • Reply 10 of 20
    tmay said:
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    The same FRAND rates that Samsung, Apple, and everyone else should have been getting all along.

    Legally, Qualcomm would have to prove conspiracy. The problem for Qualcomm is that while they might win an argument in Court over how the investigation came about, they'll almost certainly lose their power over licensing costs. 

    "Conspiracy" is not relevant; that would be relevant if the investigation was about price fixing by Apple and Samsung.  It has nothing to do with the civil investigations against Qualcomm in multiple countries.  It's only potential elevance would be if Qualcomm wanted to file a separate breach of contract claim against Apple regarding their purported agreement that Apple challenge certain aspects of Qualcomm's patents in return for a cap/rebate on royalties.
    edited October 2017
  • Reply 11 of 20
    ceek74ceek74 Posts: 323member
    Qualcomm-gate
  • Reply 12 of 20
    patsupatsu Posts: 429member
    gatorguy said:
    According to the report Apple had been paying about $10 in Qualcomm royalties, (the Qualcomm rate tops out at a max of $30 per device) as a result of rebates Qualcomm was giving Apple in return for not challenging their patents or royalty basis. Qualcomm believes that Apple broke that agreement by conspiring with Samsung to in effect act as the hatchet man. Apple frames it as simply an informal discussion between two business partners rather than a strategy to bypass the agreement.  Lots of other great detail too in the Bloomberg source article.
    https://www.bloomberg.com/news/features/2017-10-04/apple-and-qualcomm-s-billion-dollar-war-over-an-18-part
    It's irrelevant. When Apple decided to sue Qualcomm, whatever benefits "for not challenging their patents or royalty basis" were already thrown out of the window. They don't really need Samsung to push the Korean regulator since FTC also started their own antitrust investigation.

    The case is also not just about the money. It clarifies the meaning and enforcement of FRAND. And it will affect everyone in the IT industry. There has been discrepancies in enforcement (e.g., like whether a patent can be double charged).

    Qualcomm used a number of carrots and sticks to coerce everyone. Bottom-line is since IBM and Samsung both have modem chips, they can develop their tech and business further if the FRAND rules are clarified. Some of these Qualcomm patents should be usable by IBM and Samsung at fair price too, even though they are competing with Qualcomm in the modem business. It should open up innovation in cell tech.

    As for saying Qualcomm let everyone, like Essentials, compete at a level 
    playing field with Apple. That actually has nothing to do with the case. Every good part supplier enables vendors to build great products. They can do it without sidelining FRAND, and without getting into antitrust troubles.

    Besides, comparing Essential to iPhone X in a random article is just paying for a writeup. It doesn't necessarily amount to anything. One modem chip doesn't benefit the entire phone's performance and value. But I suspect paying for article to insinuate regulators in Asia may actually have some undesirable outcome further down the road.
    edited October 2017 tmay
  • Reply 13 of 20
    jbdragon said:
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    That's not it at all. Samesung also wants lower over priced FRAND rates for the chips just like Apple and others.
    Compare the iPhone 5 to the iPhone X and iPhone 8/Samsung Galaxy Note/Galaxy S6 devices. You will see that Apple abandoned their own design language for Samsung's, and did it twice within the last 4 years. Meanwhile, Samsung hasn't copied a single feature or idea from Apple in years. So please, no more Samesung. It is clear who has been following who for a long time.
  • Reply 14 of 20
    Rayz2016Rayz2016 Posts: 4,563member
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?

    That would be Sog35   
    propodcali
  • Reply 15 of 20
    boltsfan17boltsfan17 Posts: 2,160member
    jbdragon said:
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    That's not it at all. Samesung also wants lower over priced FRAND rates for the chips just like Apple and others.
    Compare the iPhone 5 to the iPhone X and iPhone 8/Samsung Galaxy Note/Galaxy S6 devices. You will see that Apple abandoned their own design language for Samsung's, and did it twice within the last 4 years. Meanwhile, Samsung hasn't copied a single feature or idea from Apple in years. So please, no more Samesung. It is clear who has been following who for a long time.
    That's nonsense. Samsung still continues to copy Apple. The new Note 8 is trying to copy Apple's Portrait Mode with Live Focus. Samsung is also copying the digital touch feature in iMessage. Apple announced Apple Pay then Samsung copies Apple with Samsung Pay. Did you see the Samsung S7 commercials? Those totally copied Apple's "Shot on iPhone" commercials. The list seriously goes on and on. 
    propodcalibshankwatto_cobra
  • Reply 16 of 20
    If there is a "story" here, I must confess to totally missing it.
    SpamSandwich
  • Reply 17 of 20
    gatorguygatorguy Posts: 20,442member
    If there is a "story" here, I must confess to totally missing it.
    You should read the Bloomberg article I linked earlier if you have any interest in the dispute. Lots of good info including the way the royalties are set up, what Apple has been paying per device, what Apple wants to pay per-device, etc. 
    It's a worthwhile read IMO.
  • Reply 18 of 20
    calicali Posts: 3,495member
    jbdragon said:
    JWSC said:

    And who said that Tim Cook wasn’t earning his pay?  Brilliant strategy.  Use one adversary to go after another.

    But what did Samsung want in return?

    They got a big fat contract to manufacture OLED panels.

    That's not it at all. Samesung also wants lower over priced FRAND rates for the chips just like Apple and others.
    Compare the iPhone 5 to the iPhone X and iPhone 8/Samsung Galaxy Note/Galaxy S6 devices. You will see that Apple abandoned their own design language for Samsung's, and did it twice within the last 4 years. Meanwhile, Samsung hasn't copied a single feature or idea from Apple in years. So please, no more Samesung. It is clear who has been following who for a long time.
    “Samsung’s design language”
    You actually said that. 

    Those phones you mentioned all look like the original iPhone. The edge display is an old Apple patent that Samsung ran to copy and say “me first!” Even though their iPhone knockoff did it all wrong lol.(sound familiar?)

    You’re the type of person to say androids look different and Apple copied the Samsung Gear. 
    watto_cobra
  • Reply 19 of 20
    gatorguy said:
    If there is a "story" here, I must confess to totally missing it.
    You should read the Bloomberg article I linked earlier if you have any interest in the dispute. Lots of good info including the way the royalties are set up, what Apple has been paying per device, what Apple wants to pay per-device, etc. 
    It's a worthwhile read IMO.
    That may be true, but that was not my question!

    Anyway, not that important...
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