Apple is suing Qualcomm for $1 billion, saying that the mobile chip maker has been dramatically overcharging it for the use of basic patents, according to CNBC.
The lawsuit comes just days after the US Federal Trade Commission began suing Qualcomm for anti-competitive practices over the same issue. The commission said that Qualcomm had been forcing phone manufactures to pay “disproportionately high” fees for use of patents necessary to make a smartphone. This is exactly what Apple is arguing, too.
Because these patents are essential to industry-wide standards, they’re supposed to be licensed out on fair, reasonable, and non-discriminatory (“FRAND”) terms. The commission argued that Qualcomm was using its market position as the dominant smartphone modem supplier to force manufacturers into paying excessive fees.
Qualcomm denied all of the commission’s claims, and it says in a statement that Apple’s claims are “baseless.” But Apple argues here that there’s a very expensive truth to them.
In a statement provided to CNBC, Apple says that Qualcomm withheld nearly $1 billion “as retaliation for responding truthfully to law enforcement agencies investigating them.” That was apparently related to a South Korean investigation of Qualcomm, which led to an $853 million fine last month.
“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," Apple said.
Apple is said to have made a sweetheart deal with Qualcomm lasting several years as a way to evade its excessive patent fees, granting it exclusivity as a modem supplier in exchange. That deal had Qualcomm giving rebates to Apple, which seems to be why this suit is over withheld payments, rather than the fees themselves.
In a statement, Qualcomm general counsel Don Rosenberg said that Apple was “has intentionally mischaracterized” the companies’ agreements and has been “actively encouraging regulatory attacks on Qualcomm’s business” around the world. “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,” Rosenberg said.
These lawsuits pose a real problem for Qualcomm. Though Qualcomm is best known for its chips, most of its profits come from licensing patents.
If these allegations are true, it’s pretty clear why that is. And with the potential to disrupt such a critical revenue stream, Qualcomm has reason to be worried.