Qualcomm shouldn't win iPhone import ban, says ITC judge
The iPhone will not be subjected to an import ban to the United States, a judge for the U.S International Trade Commission presiding over the patent row between Apple and Qualcomm, despite determining Apple has likely infringed one of three Qualcomm patents at the center of the case.
In an initial ruling that effectively sides with Apple for the most part, ITC Judge Thomas Pender ruled banning imports of iPhones into the United States would be against the public interest, Bloomberg reports. The full details of the judges findings are not yet available, but will be published once both companies have redacted any confidential information they do not wish to make public.
While an import ban is not on the cards, the judge doesn't entirely rule out any further action, as the judge did declare Apple did infringe one of the three patents owned by Qualcomm.
The decision effectively prevents Qualcomm from applying pressure on Apple over the matter, which could have coerced Apple into agreeing to pay license fees, if only to continue selling its devices in the major market.
Qualcomm claimed Apple was infringing on its patents relating to carrier aggregation, graphics processing, and signal amplification, in a complaint that was introduced to the ITC last year. In June, consumers fought against the prospect of the ban by filing a motion with the ITC against Qualcomm, suggesting a ban would amplify anticompetitive behavior.
This is not the only ITC activity between the two companies, with a second Qualcomm complaint also making its way through the Commission under similar claims. Qualcomm has suffered an early blow in that case, with agency staff recommending none of the remaining patents-in-suit are being infringed by Apple, and that an import ban would adversely impact the cellular modem market in the United States.
The ITC complaints are part of a long line of actions in the legal spat between the two companies.
Apple hurled the first stone in the legal scrum early last year in a lawsuit claiming Qualcomm abuses its "monopoly power" over the wireless modem industry to demand excessive royalties. That suit further claims Qualcomm withheld almost $1 billion in promised rebates as retribution for Apple's participation in a South Korean antitrust investigation.
Qualcomm counter-sued three months later and has since filed multiple claims against Apple including two complaints with the ITC and lawsuits in China. Apple, too, has lodged Chinese actions.
Qualcomm seeks the ban of iPhone models powered by Intel baseband chips, which if effected would leave only those models with Qualcomm chips for sale. None of the iPhone XS line has a Qualcomm modem.
In an initial ruling that effectively sides with Apple for the most part, ITC Judge Thomas Pender ruled banning imports of iPhones into the United States would be against the public interest, Bloomberg reports. The full details of the judges findings are not yet available, but will be published once both companies have redacted any confidential information they do not wish to make public.
While an import ban is not on the cards, the judge doesn't entirely rule out any further action, as the judge did declare Apple did infringe one of the three patents owned by Qualcomm.
The decision effectively prevents Qualcomm from applying pressure on Apple over the matter, which could have coerced Apple into agreeing to pay license fees, if only to continue selling its devices in the major market.
Qualcomm claimed Apple was infringing on its patents relating to carrier aggregation, graphics processing, and signal amplification, in a complaint that was introduced to the ITC last year. In June, consumers fought against the prospect of the ban by filing a motion with the ITC against Qualcomm, suggesting a ban would amplify anticompetitive behavior.
This is not the only ITC activity between the two companies, with a second Qualcomm complaint also making its way through the Commission under similar claims. Qualcomm has suffered an early blow in that case, with agency staff recommending none of the remaining patents-in-suit are being infringed by Apple, and that an import ban would adversely impact the cellular modem market in the United States.
The ITC complaints are part of a long line of actions in the legal spat between the two companies.
Apple hurled the first stone in the legal scrum early last year in a lawsuit claiming Qualcomm abuses its "monopoly power" over the wireless modem industry to demand excessive royalties. That suit further claims Qualcomm withheld almost $1 billion in promised rebates as retribution for Apple's participation in a South Korean antitrust investigation.
Qualcomm counter-sued three months later and has since filed multiple claims against Apple including two complaints with the ITC and lawsuits in China. Apple, too, has lodged Chinese actions.
Qualcomm seeks the ban of iPhone models powered by Intel baseband chips, which if effected would leave only those models with Qualcomm chips for sale. None of the iPhone XS line has a Qualcomm modem.
Comments
But, you aren’t using the term “clickbait” remotely correct. An article is considered clickbait if it tries to misrepresent what a company is doing- to make it seem more impressive/newsworthy. In this case: Qualcomm was ABSOLUTELY seeking a ban; reporting that is not clickbait in any way, shape, or form.
If someone wrote a title like “Apple likely will have all US sales banned!” that would be clickbait, but “Qualcomm seeks wide ban on Apple products in the US” is factually accurate & in no way sensationalism.
A problem is that FRAND licensing has not been well defined by either courts or regulatory agencies responsible for adopting standards and their essential patents.
For instance the smallest unit upon which royalty should be based the radio chip or the entire phone is not agreed upon.
For those who don’t follow these issues QCOM has licensed patents to chip makers, but in some instances eg iphone wants patents based upon the final product rather than the part that uses the patent. Of course by this logic a high end BMW with Qualcomm’s chip would owe a royalty based on the cost of the car. QCOM has also wanted a royalty from chip makers and the final product so called double dipping.
What I find amazing is that their stock QCOM has risen despite the apple disputes and movement to INTL modem chips.
Also, the issue with Qualcomm's alleged double dipping isn't about it trying to collect royalties on consumer devices after having already collected royalties from the other chip makers (whose chips are used in those devices). Indeed, one of the things that Qualcomm is accused of (by Intel and others) is refusing to license FRAND patents to competitors such as Intel. That's a pretty clear FRAND violation.
The alleged double dipping is about Qualcomm imposing licensing fees on companies even though those companies have bought chips from Qualcomm. Qualcomm has allegedly been double dipping by selling chipsets to companies and also requiring those companies to pay licensing fees for the IP which is incorporated in those chipsets. That was part of a scheme that Qualcomm allegedly employed, using a number of contract violative and illegal actions that worked together, to inhibit competition and extract improperly inflated licensing fees.
I won't get lost in the various aspects of Qualcomm's alleged behavior, but if the numerous government regulators and other market participants (e.g. Apple, Intel, Samsung) are correct with regard to what Qualcomm has been doing, then its actions are egregious. They're not only clear violations of the contractual obligations which Qualcomm made (and in return for which Qualcomm got considerable benefit), but in many jurisdictions they're illegal.
Not often mentioned of course is that there are upper-limits to the cost. I think Qualcomm's tops out at $400 device cost and perhaps Ericsson's is a bit less or maybe the same? Not sure I've ever noted Nokia's or even if they have a cost limit. So it's not exactly an unlimited royalty when it comes to Qualcomm.
Example: A $500 OnePlus smartphone would be tagged for the same royalties as a $1500 iPhone under the current licensing model.
Perhaps Apple was paying even less than some of the more budget handset makers when this all started since they were getting a secret, and substantial, and likely illegal kickback from Qualcomm amounting to $B's.
And don't mistake this as giving my stamp of approval to Qualcomm's greedy licensing. I'm not, simply making note of how things work.
There are big differences between situations where all parties freely agree to certain things and situations where some parties have those certain things unilaterally, and improperly, imposed on them. Life is full of things which are fine if all involved parties agree to them but which aren’t fine - which might even be illegal, perhaps even heinous - if all parties don’t agree to them. Take borrowing a neighbor’s car or sex, for examples.
Anyway suing Qualcomm over a device-cost royalty basis is Apple's third attempt at arguing it's not fair. In the first two they settled instead. I think they saw an opening with China's lawsuit not going Qualcomm's way so they're more aggressive with the arguments now.
That said, as I've suggested, parties (to include would-be licensees) might find certain terms agreeable or even favorable. If, e.g., agreeing to us entire market value as the base meant getting a considerably lower rate, Apple might think that was agreeable. Or another party might have other (proper, not contract-violative or illegal) leverage which might encourage Apple to agree to certain terms.
Not speaking to the patents at issue in the ITC case which is the subject of this thread, but to the legal fights between Apple and Qualcomm in general: One of the reasons it matters that Qualcomm isn't, in accordance with U.S. case law (which of course could change), entitled to royalties based on the entire market value of iPhones is the following. It matters whether Apple is what is considered a willing licensee. Qualcomm's ability to, e.g., get some kind of block of iPhone sales would depend in part on Apple not being a willing licensee. That would, roughly, mean that Apple wasn't willing to accept a license even if fair licensing terms were offered - that it was just set on infringing on Qualcomm's patents.
So long as Apple is a willing licensee, even if no licensing agreement is in place, Qualcomm isn't even supposed to be pursuing blocks on iPhone sales. Apple, so long as it's willing to negotiate in good faith, can use Qualcomm's IP with the expectation that licensing terms will be worked out or decided by a court at some later point. Since Qualcomm isn't entitled to royalties based on the entire market value of iPhones, Apple's refusal to accept such terms (even though it could if it wanted to) doesn't demonstrate that Apple isn't negotiating in good faith or that it isn't a willing licensee. That's why (or part of why) it matters now, regardless of what terms Apple later agrees to or what terms a court eventually imposes.
BTW Carnegie, here's an eye-opening spreadsheet detailing all the fingers and the money they're picking up in smartphone patent royalties, much of it FRAND-encumbered.
http://hooverip2.org/wp-content/uploads/New-Dataset-on-Mobile-Phone-Patent-License-Royalties_082217GHZ_August_2017_release.xlsx
You're probably one of the few here that would be interested in it. The "Apple-effect" is evident too if you match up big revenue changes with lawsuits.
Oh, and if you're curious about recent SEP lawsuits and the results:
https://www.iam-media.com/frand-royalty-and-mobile-telecoms-seps-analysis-recent-court-cases
Note the number of them where the lawsuits resulted in royalties based on device cost, yes even in the US. See Table 3.
But patent holders aren't entitled to such royalties. U.S. courts have ruled, in multiple cases, that they are only entitled to royalties based on the entire market value when they can demonstrate that the entire market value derives from the patents in question. That's referred to as the entire market value rule. Courts have said what is and isn't reasonable when determining patent royalties, both for SEPs and for patents on which FRAND commitments haven't been made. (I've cited a number of cases elsewhere. I can dig more up if needed, but one of them is LaserDynamics v Quanta (Federal Circuit). I won't get lost in the reasoning for now, but we can discuss some of the cases in more detail if you'd like.)
Thanks for the link to that smartphone royalties spreadsheet. I'm familiar with it, I have a copy of it in my Qualcomm / Apple litigation folder.
Would this one be at odds with what you believe was decided by the LaserDynamics v Quanta ruling? You're a pretty knowledgeable person and the subject is very interesting to me.
Generally speaking, I don't pay a lot of attention to district court decisions (unless I'm interested in the case itself for some reason) because they don't set precedents which other courts are bound to follow.