Apple Blasts Qualcomm With $1 Billion Licensing Suit
The dispute follows on the heels of a suit filed by the FTC, and an $853 million fine levied on Qualcomm by South Korea's antitrust authority. Shares fell 2.4%.
Qualcomm (QCOM) is getting tag teamed by Apple (AAPL) and a South Korean regulator in a smackdown that has already resulted in Qualcomm receiving an $853 million fine. Apple has now filed a federal court lawsuit seeking $1 billion in damages based on allegations that Qualcomm meddled in the Korean regulatory investigation.
The Federal Trade Commission jumped into the melee earlier this week when it sued Qualcomm over allegedly unfair patent licensing activity.
"To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1 billion in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them," Apple said in a news release on the suit.
Qualcomm "reinforces its dominance through exclusionary tactics and excessive royalties" according to the release, which says Qualcomm charges Apple five times the amount charged by all of Apple's other patent licensors.
In its lawsuit Apple said: "Qualcomm was one among many companies that contributed to the development of standards related to how cellular phones connect to voice and data networks."
"As a contributor, Qualcomm is entitled to a fair royalty based on the value of its particular contribution. Qualcomm is not entitled to collect royalties based on the contribution of others to the standard, or unrelated innovation by companies that utilize the standard -- but this is precisely the business model that Qualcomm has established and that it protects through monopoly power and unlawful licenses.
"In order to purchase Qualcomm chips or obtain access to patents pledged to a cellular standard, Qualcomm demands that third parties pay Qualcomm a royalty much greater than the value of Qualcomm's contribution to the standard -- a value based on the entire price of the innovative products that only incidentally incorporate the standard," Apple's lawsuit stated.
"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 at Qualcomm.
The FTC suit had harsh words for Qualcomm's alleged "no license-no chips" policy that can distort customers' cost structure.
"As a result, Qualcomm's customers have accepted elevated royalties and other license terms that do not reflect an assessment of terms that a court or other neutral arbiter would determine to be fair and reasonable," according to the FTC suit.
Qualcomm took issue with the FTC suit in a press release, and its chairman said this week that the FTC "rushed" to get the lawsuit filed ahead of Donald Trump's inauguration. The company did not immediately respond to inquiries about the dispute with Apple.
Qualcomm shares were trading roughly flat for most of the day, but fell 2.4% to $62.88 at the end of the trading day on Friday when Apple's lawsuit was announced.