Apple, Qualcomm spat intensifies, manufacturers drawn in

Audrey Hill
May 18, 2017

Qualcomm is still being paid royalties by these manufacturers for the use of its technology in non-Apple products.

Qualcomm has accused Apple of "strong arming" the contract manufacturers to stop paying the licensing fees they legally owe Qualcomm, which is a breach of the contract between Qualcomm and the manufacturers.

Qualcomm says Apple is making unreasonable demands for licenses at below-market prices.

Qualcomm in a statement said that the license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.

Qualcomm said in its complaint that Apple had advised the contract manufacturers to withhold royalty payments and agreed to indemnify them against any damages resulting from the breach of their agreements with Qualcomm. While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay.

Several other companies and trade associations seem to be of similar mind and have also filed briefs supporting the FTC.

The FTC brought the lawsuit against Qualcomm for anticompetitive patent-licensing practices in January in the U.S. District Court for the Northern District of California.

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Qualcomm said Apple has agreed to cover the costs incurred by the contract manufacturers.

Qualcomm is a major supplier to Apple and Samsung Electronics Co Ltd 005930.KS for modem chips that connect phones to wireless networks.

"Their gripe, their issue, appears to be with Apple", said Qualcomm General Counsel Don Rosenberg.

"We don't like suing our licensees", said Rosenberg, noting that in the past decade the company has brought just one patent infringement case against a smartphone maker. Apple-related royalties account for about 12% of Qualcomm's total revenue and as much as 30% of its per-share earnings, according to Srini Pajjuri, an analyst at Macquarie Capital (USA) Inc.

Then last month, Apple quit reimbursing Foxconn and the others altogether for Qualcomm patent royalties - claiming it couldn't pay until the dispute was resolved. He likened the resistance to pay for the use of Qualcomm technology to someone walking into an Apple store and refusing to pay full price for a smartphone.

Compal, Pegatron and Wistron representatives didn't respond to emails sent by The Wall Street Journal after working hours, nor did they pick up calls by the Journal after office hours.

Other reports by MaliBehiribAe

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