Apple Sues Qualcomm for $1 Billion over Unpaid Rebates
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UPDATED: May 9, 2017
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Apple has sued Qualcomm, claiming that the company overcharged for its chips and withheld about $1 billion in rebates promised to Apple.
According to the New York Times, Apple said that the companies had an agreement that Qualcomm would pay Apple “not to buy chips from other suppliers or to divulge Qualcomm’s intellectual property licensing practices.”
Apple’s complaint calls Qualcomm “the world’s dominant supplier” of the chips that go into smartphones. Qualcomm was the only supplier of modem chips for Apple phones until the release of the iPhone 7 last year.
Apple claims that Qualcomm withheld the rebates because Apple discussed Qualcomm’s patent licensing practices with the Korean Fair Trade Commission (KFTC).
The KFTC fined Qualcomm $854 million in December for what it said were unfair patent licensing practices.
Apple claims that
Qualcomm… attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm ‘s release of those payments to Apple. Apple refused.
Shortly after filing its first billion dollar lawsuit against Qualcomm, Apple filed two more complaints via its Chinese subsidiary, according to engadget.
One of the Chinese cases seeks damages of $145 million (over 1 billion yuan) for alleged violations of China’s anti-monopoly law.
Qualcomm had earlier been fined $975 million by China.
Qualcomm said that Apple’s claims were “baseless” and that “Apple has been actively encouraging regulatory attacks on Qualcomm ‘s business in various jurisdictions around the world.” Qualcomm is also reportedly planning to countersue Apple, according to recode.
However, even though they’re fighting in court, the companies are continuing to do business together.
Apple sued Qualcomm just three days after the Federal Trade Commission (FTC) accused Qualcomm of anticompetitive practices.
The FTC said that Qualcomm used its dominant position in the chip market to weaken its competitors and impose “onerous” terms on cellphone makers.
Qualcomm owns thousands of patents, including certain patents that are considered “standards-essential.” This mean that the cellphone industry has to use Qualcomm technology to make phones that will work with the existing cellphone infrastructure.
The law requires that standards-essential patents be licensed on “fair, reasonable, and non-discriminatory” terms. (These are sometimes abbreviated as “FRAND” terms.)
The FTC complaint says that
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.
The FTC also claims Qualcomm refused to license some of its standards-essential patents to rival makers of chips.
The FTC complaint was filed under the leadership of Edith Ramirez, a Democrat. She stepped down as head of the FTC after President Trumpwas elected. President Trump subsequently appointed Maureen Ohlhausen, a Republican, as acting chairman of the FTC.
Ohlhausen is one of three current FTC commissioners. (There are normally five, but two slots are vacant.) She voted against the filing of the suit against Qualcomm.