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January 23, 2017
Two of the world’s biggest mobile tech companies have directed their respective legal armies at each other over the amount Apple has to pay Qualcomm for its cellular patents.
Apple filed a complaint against Qualcomm (see below) late last week, just days after the US Federal Trade Commission narrowly voted to take action against Qualcomm too. Both complaints essentially focus on the same topic – the amount Qualcomm charges for its standard-essential patents and the FTC even explicitly flagged up Apple in its one.
Apple’s fresh litigation can be summarised as follows:
Qualcomm has a track record of monopolistic behaviour
Qualcomm over-charges for standard-essential technology
Qualcomm charges royalties for technologies it didn’t develop
Qualcomm is withholding nearly $1 billion it owes Apple, claiming it forfeited that money when it cooperated with the Korea Fair Trade Commission, which recently fined Qualcomm a similar amount of money
Apple wants compensation for general monopolistic abuse by Qualcomm
Common standards are a good thing
Standard-essential patents should be governed by FRAND licensing principals
Qualcomm abused that system in the way the FTC action describes
Because Apple is the best phone company Qualcomm’s actions are especially damaging to it
Qualcomm is quick to litigate
Qualcomm is horrid
The Apple complaint is littered with the kind of hyperbole and self-promotion we have come to expect from its marketing department. You almost have to admire the how Apple manages to even squeeze marketing into its law-suits, indicating just how engrained cultish zeal is into the cultural fabric of the company.
As is nearly always the case with things like this, public litigation is the culmination of years of private negotiations that have failed and is, in fact, part of that process. To paraphrase von Clausewitz: litigation is merely the continuation of negotiation by other means.
Apple hasn’t issued a press release but the following statement has been sent to multiple media: “For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with. The more Apple innovates with unique features such as TouchID, advanced displays, and cameras, to name just a few, the more money Qualcomm collects for no reason and the more expensive it becomes for Apple to fund these innovations.
“Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.
“To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1B in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them. Apple believes deeply in innovation and we have always been willing to pay fair and reasonable rates for patents we use. We are extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty we have no choice left but to turn to the courts.”
Qualcomm has responded publicly and seems to think the only reason it is getting all this grief from Korea and the US is because Apple is putting them up to it.
“While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless,” said busy Qualcomm General Counsel Don Rosenberg. “Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program.
“Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”
It’s hard to feel much sympathy for either company – obscenely profitable as they are – but when a million lawyers have finished enriching themselves some significant legal precedent could be set. Handset makers have been grizzling for years about what they perceive as the ‘Qualcomm tax’, but seem to have resigned themselves to paying it nonetheless. If this action goes Apple’s way it could change the Qualcomm dynamic for all other device-makers too.
As the Editorial Director of Telecoms.com, Scott oversees all editorial activity on the site and also manages the Telecoms.com Intelligence arm, which focuses on analysis and bespoke content.
Scott has been covering the mobile phone and broader technology industries for over ten years. Prior to Telecoms.com Scott was the primary smartphone specialist at industry analyst Strategy Analytics’. Before that Scott was a technology journalist, covering the PC and telecoms sectors from a business perspective.
Follow him @scottbicheno
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