Apple is suing one its most important chip suppliers, Qualcomm.
According to records witnessed by Business Insider, the Cupertino-based tech behemoth is “accusing Qualcomm of withholding $1 billion in rebates under a deal [the two] had struck to keep Qualcomm modems in Apple products, including the iPhone and iPad.” As such, Apple is seeking approximately $1 billion in royalties, hoping the chip giant pays the full amount. This lawsuit comes right on the heels of another accusation filed by the Federal Trade Commission (FTC).
Earlier in this week, the government agency alleged that “Qualcomm entered into an anticompetitive deal with Apple to keep its modem chips in Apple’s products.” As purported by these accusations, Qualcomm seems to want to have a choke hold on the iPhone company, making it so that if Apple decides to use different chips then revert back to Qualcomm’s chips, the San Diego-based company increases the money collected. Apple states that “Qualcomm charges Apple ‘at least five times more in’ royalty payments than all of Apple’s other patent licensors combined.” This monopolistic practice is exactly why the FTC accused Qualcomm of “[entering] into an anticompetitive deal with Apple.”
Apple provided the following statement to Business Insider.
“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.”
The lengthy 104-page document found on Business Insider goes in-depth into the complaint Apple filed against Qualcomm. Not even 10 pages into the document sees Apple slamming Qualcomm.
“Qualcomm broke its promise and has breached its [fair, reasonable, and non-discriminatory (FRAND)] commitments. Qualcomm illegally double-dips by selling chipsets that allow mobile telephones to connect to cellular networks and then separately licensing (but never to competitors) the purportedly necessary intellectual property. By tying together the markets for chipsets and licenses to technology in cellular standards, Qualcomm illegally enhances and strengthens its monopoly in each market and eliminates competition. Then, Qualcomm leverages its market power to extract exorbitant royalties, later agreeing to reduce those somewhat only in exchange for additional anticompetitive advantages and restrictions on challenging Qualcomm’s power, further solidifying its stranglehold on the industry. All of this has been forced on Apple because the iPhone and the iPad have required Qualcomm chips.”
This indictment by Apple really sticks a thorn into the side of Qualcomm; however, there’s no word on the adverse effects of this lawsuit and it isn’t confirmed whether it will be recognized and billed as true. At the moment, it’s nothing more than legal slander by Apple, so, depending on which side the government decides to teeter on, Qualcomm may get away with it. With the FTC investigating Qualcomm, though, it may be very unlikely that the chipmaker will make it out of this bout unscathed.
[Featured Image by Stephen Lam/Getty Images]