Some items on our site have recently moved. Visit our News Hub for selected articles, special reports, podcasts and other resources.
In Apple-Qualcomm dispute, tens of billions of dollars at stake
28 February 2019 00:00
The centerpiece of the years-long legal battle between Apple and Qualcomm, an antitrust and contract fight scheduled to begin in fedral court in April, could yield more than $30 billion in damages.
The exact figures haven’t been fully disclosed or even fully tallied. But Apple, along with its contract manufacturers including Foxconn, could extract as much as $30 billion in antitrust, breach of contract and other damages, according to recently filed documents in the case.
By a rough estimate, Qualcomm is asking for more than $11 billion for past-due patent royalties, its own breach of contract claims, punitive damages and other claims.
On April 15, Apple, Foxconn, Pegatron, Wistron, and Compal Electronics are set to square off against Qualcomm in San Diego federal court for a four-week combined jury and bench trial. The two sides outlined their various contract disputes in a filing this month.
That filing brings into focus each side's allegations and the staggering amount of money involved in the dispute.
The four contract manufacturers are seeking as much as $27 billion in trebled antitrust damages. It is understood that Apple is seeking several billion in restitution for royalties paid on exhausted patents owned by Qualcomm. It also wants nearly $1 billion in rebates that Qualcomm withheld.
Qualcomm is seeking more than $11 billion from Apple and its contract manufacturers in suspended patent royalty payments, interest on those payments and for Apple’s alleged breach of a 2013 Business Cooperation and Patent Agreement, or BCPA, between the companies.
“Since late 2016, the CMs have withheld, in aggregate, more than $7 billion in royalty payments due under their SULAs for the devices they have manufactured and sold to Apple,” Qualcomm said in the filing.
Apple and the manufacturers say they don’t owe more than $7 billion because the contract is unenforceable.
Qualcomm is also seeking overpayments of royalties, Apple says, calling Qualcomm’s demands “royalties on royalties.” Qualcomm wants 5 percent of every transaction between Apple and the contract manufacturers, whether that involves Qualcomm’s technology or not, the iPhonemaker says.
Qualcomm maintains it is only seeking to collect royalties on the final price of the phone.
Qualcomm says it is also owed $1.3 billion in late charges on the disputed royalties, charges that are compounding at 1.5 percent per month.
“The CMs owe a significant amount of late fees only because they have refused to make royalty payments for Apple products entirely for more than 2 years while still continuing to manufacture and sell those devices,” Qualcomm said in the filing. “Thus, the CMs have continued to reap the benefits of Qualcomm’s technology while paying nothing for it at all. Had the CMs continued to pay while Apple sued Qualcomm (or stopped manufacturing and selling Apple devices), they would owe no late fees.”
Qualcomm is also seeking to recover “billions of dollars” in payments it made to Apple under the BCPA signed between the companies Jan. 1, 2013. Qualcomm already withheld $963.5 million in payments for the final year of that four-year deal. The exact amount Qualcomm is seeking has not been publicly disclosed.
The four-year contract provided rebates on chips to Apple as long as the iPhonemaker didn’t suggest or initiate litigation or regulatory proceedings against Qualcomm related to patent exhaustion issues or fair, reasonable and non-discriminatory royalty rates.
Qualcomm says Apple pushed regulators in the US, South Korea, Europe, Taiwan and China to open antitrust investigations or directed the course of existing probes. Apple counters that it is following its obligations to cooperate with government inquiries.
“The agreement was in part a truce,” Qualcomm said of the BCPA in the filing. “For a four-year period, the parties agreed to work together and to refrain from taking certain actions that could harm each other’s interests.”
The pact also prohibited Apple from complaining to regulators such as the Korea Fair Trade Commission about Qualcomm’s business model. Although Apple cooperated with a KFTC investigation of Qualcomm, the phone maker says it has not breached that pact.
“Apple could not have initiated or ‘actively induced’ any government agency to ‘initiate’ an investigation where that investigation was already ongoing before Apple made any statements,” Apple said, quoting from the BCPA.
The trial is one of many ongoing cases between Apple and Qualcomm.
The companies already fought an initial round of patent litigation before the US International Trade Commission in Washington. They will also begin a patent infringement trial in San Diego federal court Monday related to three companion patents that Qualcomm says were infringed by Apple. The jury in that patent case may render a decision before the ITC does on March 26.
Later this year and again in early 2020, Apple will bring its own patent infringement claims against Qualcomm to a trial. Qualcomm is also pursuing allegations in a California state court that Apple leaked Qualcomm’s trade secrets to Intel through “sloppy” and “deceitful” conduct .
Apple wasn’t a party in the January antitrust trial between the US Federal Trade Commission and Qualcomm in San Jose, California. But the relationship between Apple and Intel emerged as an important element of that case. A decision from US District Judge Lucy Koh is expected this spring.
No results found