Apple has filed a lawsuit against Qualcomm in California today, claiming damages around $1 billion. The damages stem from what Apple claims are rebate payments Qualcomm refused to pay. Specifically, Apple alleges Qualcomm withheld the payments after the iPhone-maker began to cooperate with Korea authorities who later fined Qualcomm $850 million in an antitrust investigation.
Earlier this week, the FTC filed suit against Qualcomm for anti-competitive practices. Apple seems to have taken the federal government's action as a "green light" to litigate, specifically citing what it believes are unfairly high royalties charged by Qualcomm for its cellular technology patents.
Apple, of course, is one of Qualcomm's biggest customers, and has been using Qualcomm's baseband modems (cellular radios) in the iPhone since its inception. Until recently, Qualcomm had actually been Apple's sole supplier of mobile radios, but the newest iPhones also have Intel baseband modems in some models.
The money probably isn't what Apple is after here first and foremost, but rather, to help legitimize the idea that Qualcomm isn't playing fair with its business partners. The timing is hard to ignore, and Apple likely hopes it can use its leverage along with the FTC to strong-arm what it views as Qualcomm's chip racket into submission. If Apple and the FTC are successful, Qualcomm could be forced to substantially change its licensing terms and royalty fees, potentially opening up the chipset and baseband modem market to a wider variety of vendors, especially in the United States, where Qualcomm's LTE radios are in essentially every smartphone sold today (apart from those iPhones with Intel modems).
Apple's statement, via CNBC, is below.
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 to the suit, predictably denouncing it.
"While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple's claims are baseless. 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," said Don Rosenberg, executive vice president and general counsel, Qualcomm Incorporated.