What to expect from the Apple versus Qualcomm 'no license, no chips' trial

Posted:
in iPhone edited April 16
After a year of maneuvering. Apple and Qualcomm are set to face off in Judge Gonzalo Curiel's courtroom starting on Tuesday afternoon. AppleInsider breaks down the developments of the last year, leading up to the trial.

A Qualcomm modem chip, used in Apple's iPhone
A Qualcomm modem chip, used in Apple's iPhone


The public-facing fight between Qualcomm and Apple began in January 2017. On link textJanuary 17, 2017, after three years of investigation, the US Federal Trade Commission launched a lawsuit, accusing Qualcomm of forcing Apple into an exclusive deal to buy its baseband chips.

According to the FTC, when Apple sought to lower the patent royalties it was paying Qualcomm, the latter firm made that conditional on Apple buying Qualcomm chips exclusively between 2011 and 2016. The iPhone 7 and iPhone 7 Plus used Qualcomm chips in some configurations, and since then, Apple has shifted to Intel modems across the board.

On January 20, 2017, Qualcomm's legal woes connected to Apple escalated, as the iPhone manufacturer sued over $1 billion in unpaid rebates. Apple alleged that the payment hadn't been made because it had cooperated with the Federal Trade Commission's investigation of Qualcomm, which led to the lawsuit.

In April 2017, Qualcomm made its own filing with the court. In that filing, it attempted to refute Apple's complaint, accusing it of attempting to pay less than the fair market value for access to Qualcomm's standard essential payments, breach of contract, and wrongly inducing regulatory action in a number of jurisdictions, among other issues.

Qualcomm claims Apple stole trade secrets relating to its intellectual property that it then provided to Intel, specifically software used to improve the performance of its baseband chips.

A recurring theme in this complaint by Apple, and many others across the globe is the accusation that Qualcomm has abused its market dominance to make chip buyers sign unfair patent deals. This claim has in fact been the subject of several antitrust investigations, conducted by the U.S., Taiwan, and South Korea. An August 2018 settlement saw Qualcomm pay $93 million in fines to Taiwan and promise to invest $700 million in the country over five years.

To put pressure on Qualcomm, Apple has been directing its manufacturers to withhold royalty payments, potentially in excess of $7 billion.

At its core, the battle seems nearly philosophical. A report on Saturday by the Wall Street Journal claims that Apple CEO Tim Cook and Qualcomm CEO Steve Mollenkopf have no common ground to forge an agreement, that the battle has become "personal."

Qualcomm CEO Steve Mollenkopf
Qualcomm CEO Steve Mollenkopf


This is borne out in part by Apple Senior Vice President Jeff Williams' testimony at the Federal Trade Commission trial.

"The whole idea of a percentage of the cost of the phone didn't make sense to us," Mr. Williams said regarding Qualcomm's licensing practices. "It struck at our very core sense of fairness."

Since Apple filed its suit, Qualcomm Mollenkopf and Cook have made contradictory statements to the press regarding negotiations, each standing their ground on the matter. Where Qualcomm has maintained that a settlement was imminent on multiple occasions, Apple has denied that there were talks going on, and have reiterated that it will have its day in court.

On again, off again -- but mostly off

Mollenkopf has said that negotiations were happening, and progressing. His first remarks on the matter were in July of 2018.

However, in early November 2018, Apple sources denied that there had been talks for some time. No discussion is happening "at any level," a source inside Apple said. "There is absolutely no meaningful discussion taking place between us and Qualcomm, and there is no settlement in sight. We are gearing up for trial."

"We do talk as companies," Steve Mollenkopf told CNBC's Jim Cramer in an interview on November 18, 2018. The situation is consistent with "the fourth quarter of the game, and not the first quarter."

In late November, it was discovered that Qualcomm hired Definers Public Affairs to conduct opposition research against Apple. Definers used the NTK Network to disseminate stories hyper-critical of Apple and its CEO Tim Cook. The network had posted at least 57 articles pertaining to the company in 2018, some of which directly address the dispute with Qualcomm.

Screenshot of
Screenshot of "Draft Tim Cook 2020," a website supposedly created by Definers Public Affairs.


The report claimed that Definers hawked "anti-Apple research" to various media outlets without divulging a funding source. One memo, titled "Apple Bowing to Chinese Cyber Regulators," took Apple to task over a seemingly contradictory stance on privacy in China.

Rolling into the new year

On January 8, 2019, Cook talked with Cramer again. In a wide-ranging discussion focusing mostly on the hammering Apple stock had recently taken, and an income revision, Cook addressed the international Qualcomm battle, which hadn't been going that well for Apple at that point.

Qualcomm had just won a Chinese sales ban against certain iPhone models that contain software in infringement of two owned patents. That court decision was followed by a similar finding in Germany, which resulted in a sales ban on all iPhone models save for the iPhone XR and XS series.

But, Cook repeated the same missive that Apple had maintained in regards to discussions with Qualcomm -- specifically, that there was nothing going on in that regard.

"Look, the truth is, we haven't been in any settlement discussions with them since the third calendar quarter of last year," he said. "That is the truth. So I'm not sure where that thinking is coming from."

Tim Cook during Jim Cramer's interview
Tim Cook during Jim Cramer's interview


A few days later, Qualcomm disagreed with Cook's remarks, calling them "misleading"

Regardless if there were talks or not, Apple attorney William Isaacson made it clear that Apple and Qualcomm wouldn't have any settlement before the trial.

"The parties are going to need to go to trial," advised Isaacson. "There have been unfortunate articles lately that the parties are close to a settlement, and that is not true. There haven't been talks in months."

Qualcomm has publicly said, that if Apple wants, it will provide 5G modems for a future iPhone. At this juncture, that seems unlikely.

The trial

The suit filed by the Federal Trade Commission concluded on January 30, but a ruling by Judge Lucy Koh has yet to be issued. That matter hangs above the proceedings, and a timetable for a ruling isn't known at this point.

Like the similarly contentious Apple versus Samsung patent trials that Judge Koh also presided over, the Apple versus Qualcomm trial will be star-studded, as far as Silicon Valley heavyweights are concerned.

According to a joint witness list filed with the U.S. District Court for the Southern District of California, Cook will offer testimony alongside other top Apple executives including COO Jeff Williams, SVP of Worldwide Marketing Phil Schiller and chief IP counsel B.J. Watrous. Former hardware chief and current special advisor Bob Mansfield and former general counsel Bruce Sewell are providing depositions for the trial. Cook is expected to offer direct testimony on Apple's business practices and strategy, agreements with cellular network carriers, licensing practices and other topics germane to the suit asserted by Apple over Qualcomm's alleged abuse of monopoly power in the wireless modem industry.

Qualcomm is expected to provide co-founder and former chairman Irwin Jacobs, Mollenkopf, and president Cristiano Amon. for testimony Jacobs is expected to testify about Qualcomm's founding, contributions to cellular technology and standardized cellular technologies, and ongoing business practices. Mollenkopf will also appear live in court to testify on Qualcomm business practices, the firm's "no license, no chips" policy, incentives and rebates, FRAND practices and more.
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Comments

  • Reply 1 of 44
    Qualcomm’s recent statement about providing Apple with 5G modems makes sense now. They want to create a scare tactic in warding off potential iPhone buyers due to fear of not being able to use 5G when in reality, the network isn’t even complete and where it is working, the real world results are mixed. Check out CNET’s article on it:

    https://www.cnet.com/news/testing-verizons-early-5g-speeds-was-a-mess-but-im-still-excited-about-our-data-future/?adTargeting_campaign=5g

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    Solironn
  • Reply 2 of 44

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
  • Reply 3 of 44
    LatkoLatko Posts: 398member
    Without a proper multi-supplier strategy, Apple seems to lose bigtime in the PR war.
    Having passed on the extra  license fee of $30 in a near fivefold manner onto the customer , this quarrel wasn’t worth it in the first place -  while running the risk of not being in time for 5G costs them far more money than QC could have ever costed them  

    The recent tragedy with Intel modems and the slew of stability fixes to get them working in a more stable manner has shown the added value of their haphazard modern policy  
    edited April 13
  • Reply 4 of 44
    "Definers used the NTK Network to disseminate stories hyper-critical of Apple and its CEO Tim Cook." That helps to explain why, perhaps, I've been seeing a fair number of news stories critical of Apple in the tech press, newspapers, and general blogs over the last year. It may be no more than these outlets just using a press release from Definers without any further thought.
    ronnbadmonk
  • Reply 5 of 44
    flydogflydog Posts: 328member

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    edited April 13 MplsPronn1stjbdragonStrangeDays
  • Reply 6 of 44
    flydog said:

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    and who decides what is a SEP?
    Will something becoming a SEP and therefore under FRAND end QC's policy of double dipping when it comes to licensing?

    The whole system is screwed.
    muthuk_vanalingam
  • Reply 7 of 44
    flydog said:

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    and who decides what is a SEP?
    Will something becoming a SEP and therefore under FRAND end QC's policy of double dipping when it comes to licensing?

    The whole system is screwed.

    The patent holder typically declares patents they own as being part of a standard.

    Some patent holders may try to “reserve” a few key patents and not declare them, hoping to use them to extract additional royalties or gain product bans for infringement later on once the standard is established. This rarely works as a court would likely deem the patent essential and therefore it must be licensed along with the other pool of patents declared.

    I believe Samsung tried this on Apple in Europe and lost.
    ronnfotoformatmacplusplusjbdragon
  • Reply 8 of 44
    normmnormm Posts: 570member
    flydog said:
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    and who decides what is a SEP?
    Will something becoming a SEP and therefore under FRAND end QC's policy of double dipping when it comes to licensing?
    Standards committees define standards, and companies offer their patented technology to be included in the standard.  No industry would include patented technology in a standard without some commitment that the patent holder won't bleed them, once the standard becomes widespread.  This is the FRAND commitment that a company makes, to get their technology used.
    ronncornchip1stmacplusplusjbdragonStrangeDays
  • Reply 9 of 44
    wood1208wood1208 Posts: 1,989member
    5G is a global battle, Hope Intel is capable of producing 5G modem in-time for Apple's 2020 iPhone. People are not jumping up and down for 5g iphone in 2019 or 2020 or run in mass to buy/upgrade but symbolic that Apple have it too. We all know there won't be enough 5G coverage until 2022..
    From my point of view, Apple either overlooked need for a home-grown 5G modem chip or over trusted Intel's ability to finish 5G modem on schedule. If Intel 10nm chip history is any witness, I would not trust Intel's promise vs on-time delivery. What happens if Intel prioritizes efforts to other chips development and fabrication where they make higher margins.
    ronnhammeroftruth
  • Reply 10 of 44
    MplsPMplsP Posts: 1,569member
    Qualcomm’s recent statement about providing Apple with 5G modems makes sense now. They want to create a scare tactic in warding off potential iPhone buyers due to fear of not being able to use 5G when in reality, the network isn’t even complete and where it is working, the real world results are mixed. Check out CNET’s article on it:

    https://www.cnet.com/news/testing-verizons-early-5g-speeds-was-a-mess-but-im-still-excited-about-our-data-future/?adTargeting_campaign=5g

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    wood1208 said:
    5G is a global battle, Hope Intel is capable of producing 5G modem in-time for Apple's 2020 iPhone. People are not jumping up and down for 5g iphone in 2019 or 2020 or run in mass to buy/upgrade but symbolic that Apple have it too. We all know there won't be enough 5G coverage until 2022..
    From my point of view, Apple either overlooked need for a home-grown 5G modem chip or over trusted Intel's ability to finish 5G modem on schedule. If Intel 10nm chip history is any witness, I would not trust Intel's promise vs on-time delivery. What happens if Intel prioritizes efforts to other chips development and fabrication where they make higher margins.
    Domestically, 5G is entirely a PR battle for the near term. Not that PR is worthless, but not only are there no real-world uses for 5G on a mobile device. Being able to download an album in 15 seconds instead of a minute is nice, but if you have decent coverage, it really doesn't matter. Beyond that, as is almost always the case with new technologies like this, there are significant logistical and technical hurdles that need to be ironed out before it becomes truly useful. The CNET reporter showed this quite clearly.

    Hopefully, Intel, Apple, or someone else will release a decent 5G modem to compete with QC. If they do it in the next 2 years it will still be in devices before it really matters, and one thing the industry desperately needs is more competition. 
    ronnfotoformatjbdragon
  • Reply 11 of 44
    carnegiecarnegie Posts: 726member
    AppleInsider said:...

    To put pressure on Qualcomm, Apple has been directing its manufacturers to withhold royalty payments, potentially in excess of $7 billion.

    ...
    Have you concluded that Apple has been dishonest about this in its court filings? Because, it has expressly denied directing its contract manufacturers to withhold payments from Qualcomm.

    There's a difference between withholding payments from one of your suppliers, even if you tell them you're doing it because of a dispute you have with one of their licensors, and directing them to withhold payments they might owe to that licensor. That's particularly true in the context of a tortious interference claim. Apple has asserted, in no uncertain terms, that it didn't direct its contract manufacturers to withhold payments from Qualcomm. Apple has, however, acknowledged that it has withhold certain payments from its contract manufacturers and told them it was doing so because of a dispute with Qualcomm.
    ronnradarthekatstompy
  • Reply 12 of 44
    flydog said:

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    What law requires that?
  • Reply 13 of 44
    Qualcomm is the best modem technology company in the world. No one should compare Intel and Samsung with them. It costs a lot of money to develop cellular capable products that don't fade. Writing software around the modem for a cellphone is not a science. That's what Apple does and they charge $1000 for it. It is time they pay for the real engineering that Qualcomm is providing. 

    The only thing Apple has got going for them is friends in high places. 


  • Reply 14 of 44

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Wait.... what??
    You're saying that you believe the Intel chips are licensed from Qualcomm??

    Ummm.... no.
  • Reply 15 of 44
    MplsPMplsP Posts: 1,569member

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Wait.... what??
    You're saying that you believe the Intel chips are licensed from Qualcomm??

    Ummm.... no.
    Except if QC owns patents essential to the technology - then the must be licensed from them. See the FRAND discussion above.

    I don't claim any sort of expertise in this area, but from various articles, it seems that QC owns several essential patents, meaning anyone developing a 5G modem would need to license them from QC. That should be more or less, automatic, but with QC's history, that's not a safe assumption.
    muthuk_vanalingam
  • Reply 16 of 44
    sflocalsflocal Posts: 4,684member
    modemax said:
    Qualcomm is the best modem technology company in the world. No one should compare Intel and Samsung with them. It costs a lot of money to develop cellular capable products that don't fade. Writing software around the modem for a cellphone is not a science. That's what Apple does and they charge $1000 for it. It is time they pay for the real engineering that Qualcomm is providing. 

    The only thing Apple has got going for them is friends in high places. 


    Before even reading your shill rant, I saw your one-post designation and immediately knew that you were QC’s lap dog.

    Writing software IS a science Einstein, not that you would know anything about that.

    When the judicial hammer drops straight on QC’s head, It’ll be whiners like you that will be wondering where your next shill check will come from.
    ronnradarthekatmacplusplusStrangeDays
  • Reply 17 of 44
    wood1208wood1208 Posts: 1,989member
    modemax said:
    Qualcomm is the best modem technology company in the world. No one should compare Intel and Samsung with them. It costs a lot of money to develop cellular capable products that don't fade. Writing software around the modem for a cellphone is not a science. That's what Apple does and they charge $1000 for it. It is time they pay for the real engineering that Qualcomm is providing. 

    The only thing Apple has got going for them is friends in high places. 


    QC is a good engineering company and doing wireless modems for a long time. Intel came very late to the cellular modem market but kudos to Intel that in a short time(some help from Apple) it produced a modem chip that is in iPhone and works well.                                                                                                                                                          
    Apple designs heart of iPhone, A series processor which you have no clue how complex that chip is and what it takes to design and build it. Apple also design and writes OS that runs on it. Both are so complex and that is real science/engineering. God have mercy on your ignorance.
    edited April 13 muthuk_vanalingamradarthekatmacplusplusStrangeDays
  • Reply 18 of 44
    MacProMacPro Posts: 18,359member
    sflocal said:
    modemax said:
    Qualcomm is the best modem technology company in the world. No one should compare Intel and Samsung with them. It costs a lot of money to develop cellular capable products that don't fade. Writing software around the modem for a cellphone is not a science. That's what Apple does and they charge $1000 for it. It is time they pay for the real engineering that Qualcomm is providing. 

    The only thing Apple has got going for them is friends in high places. 


    Before even reading your shill rant, I saw your one-post designation and immediately knew that you were QC’s lap dog.

    Writing software IS a science Einstein, not that you would know anything about that.

    When the judicial hammer drops straight on QC’s head, It’ll be whiners like you that will be wondering where your next shill check will come from.
    It's a shame AI can't check the IP address of these 1 post-anti-Apple comments that are remarkably similar in style to well known ant-Apple posters with higher counts but not as blatant and compare them.  
    radarthekat
  • Reply 19 of 44
    FatmanFatman Posts: 308member
    Raise your hand if 5G is offered in your area, Raise your hand if you are willing to carry a phone with an external 5G antennae. Raise your hand if you are willing to pay your telco a lot more money for 5G service, raise your hand if you know more than two people that could even tell you what 5G is.

    The reality is, this is now a battle about 5G capable chips. Qualcomm has them now and is doing a full court press on building awareness and getting them to as many Android handset manufacturers that they can. Apple made a bet that Apple would have a viable alternative to Qualcomm’s 5G chip once there is infrastructure in place plus significant demand for the feature. So far it appears Apple’s prediction is in good shape - in the US at least. If they have a chip (either their own, from Intel, or from another company) by the Sept 2020 iPhone launch, they should be fine - since that will be when 5G will actually be usable/gaining momentum. And like many technologies, once Apple adopts the technology and educates the public, it will take off.
    llamabadmonk
  • Reply 20 of 44
    radarthekatradarthekat Posts: 3,117moderator
    flydog said:

    The news reports like to point out that Apple has no public 5G modem plan in place, but fails to mention several other phone manufacturers who don’t have a 5G phone and only have a commitment to making one. 
    What happens after the trial?
    Lets assume that Apple wins big time.
    Can QC refuse to license their 5G patents to anyone who supplies Apple with 5G capable chips?
    Can QC refuse to license their 5G patents to Apple for their supposed 5G Modem?

    Apple needs at the very least some licenses from QC unless a 3rd party would step in an license everything from QC and take the inevitable Patent lawsuit storm... Somehow I doubt it. QC's practices stink big time but they hold all the patents.
    Even if Apple lose I think that QC will want blood and lots of it from Apple for the hit on their reputation.
    Patent holders cannot refuse to license IP covered by a standard essential patent, and the license must be on fair and non-discriminatory terms. 
    What law requires that?
    Contract law.
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