After Apple’s frivolous refusal to pay royalties to Qualcomm, preceded by a billion-dollar lawsuit in the US and a billion-yuan lawsuit in China, the American chipmaker might be considering the nuclear option against Apple.
According to a report by Bloomberg, Qualcomm is preparing an appeal asking the United States International Trade Commission (USITC) to block iPhone imports into the country.
The past couple of years have been tough for Qualcomm, legally speaking. In February of 2015, the chipmaker paid around 900 million dollars to settle an anti-trust dispute in China, in December 2016 it paid almost 800 million dollars to settle an anti-trust dispute in South Korea, and in January of this year, the FTC sued it for bullying the industry.
The root of Apple and Qualcomm’s feud can be found with Qualcomm’s cellular communications technology patents that licensees acquire for a hefty royalty fee that Apple recently decided to withhold. Why is Apple withholding Qualcomm’s royalty fees? An investor asked Apple CEO Tim Cook the same question at Apple's earnings call this week, and he responded:
Anyone that has a standards-essential patent has a responsibility to offer it to everyone that would like it under what are called FRAND terms. FRAND stands for fair, reasonable, and non-discriminatory terms. That’s both the price and the business terms. Qualcomm has not made such an offer to Apple. And so I don’t believe that a – I don’t believe anyone is going to decide to enjoin the iPhone based on that. I think that there’s plenty of case law around that subject, but we shall see.
In terms of why we’re withholding royalties, you can’t pay something when there’s a dispute about the amount. You don’t know how much to pay. And so they think we owe some amount, we think we owe a different amount, and there hasn’t been a meeting of the minds there. And so at this point, we need the courts to decide that. Unless we are able to, over time, settle between us on some amount, but right now we’re depending upon the courts to do that. And so that is the thinking.
The reason that we’re pursuing this is that Qualcomm’s trying to charge Apple a percentage of the total iPhone value. And they do some really great work around standards-essential patents, but it’s one small part of what an iPhone is. It’s not – it has nothing do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we don’t think that’s right, and so we’re taking a principled stand on it. And we strongly believe we’re in the right, and I’m sure they believe that they are. And that’s what courts are for. And so we’ll let it go with that.
Apple, with the iPhone 7, also started using Intel’s modems, but didn’t abandon Qualcomm entirely. In tests, iPhones with Qualcomm’s modems were not only establishing a stronger LTE connection but also provided an overall 30% increase in performance.
Just days after FTC sued Qualcomm, Apple followed with three lawsuits, first in the US, then in China, and finally in the UK. In March, Qualcomm countersued Apple, alleging that the iPhone-maker misrepresented its chips’ performance against Intel.
The USITC may seem like the next logical step after these recent court disputes, but it remains unconfirmed at the time of this writing. In an email to Mashable, USITC Public Affairs Officer Peg O’Laughlin said that "no complaint has been filed with the Commission at this time.”
Qualcomm and Apple’s feud is a convoluted mess, but it has only just started to unfold.
Editor's note: The article was updated to more clearly illustrate the actual timeline of the Qualcomm legal disputes. We apologize for the mistake.