The legal battle between Qualcomm, Inc. (NASDAQ:QCOM) and Apple, Inc. (NASDAQ:AAPL) has escalated to alarming levels, with Apple now accusing Qualcomm of blatantly illegal practices. This marks a seminal moment in a long and tedious dispute between Apple and Qualcomm and could have serious ramifications in the very near future.
A while back, Dazeinfo outlined the ongoing dispute between these two tech giants, where the latter seeks a ban on iPhone in the US. The crux of the issue surrounded the royalty paid to Qualcomm by Apple.
According to Apple, these royalties were excessive and unfair. As a result, Apple stopped payments to Qualcomm and sued them. Qualcomm responded by counter-suing Apple and accusing them of misrepresenting information and facts.
Now Apple has filed a new court document, accusing Qualcomm of abusing the licensing system by bundling patents which are non-critical for cellular communication. This allows Qualcomm to charge exorbitant and unwarranted royalties on its wireless and connectivity chip patents. Apple has termed this practice as “illegal”, and has accused them of overcharging them billions of dollars. The amended complaint to the US District Court in Southern California also aims to get 18 of Qualcomm’s patents invalidated.
And this is not the end either. Apple is also claiming to possess increasing evidence of other wrong doings by Qualcomm. They are accusing Qualcomm of “burdening innovation” and monopolising the market, and calling many of Qualcomm’s patents as invalid as they are conflicting with other patents. Apple’s updated claim is that Qualcomm first sells its mobile chipsets, and then charges hardware makers like Apple a licensing fee for patents associated with the chips. This way, they essentially get paid twice for the same invention.
In response to Apple’s claims, Qualcomm’s executive vice president, Don Rosenberg says, “Apple is trying to distract from the fact that it has made misleading statements about the comparative performance of its products, and threatened Qualcomm not to disclose the truth”.
So where does this leave both of these tech giants? If they come to some sort of mutual agreement, this issue can be laid to rest and both companies can move on. However, if that is not the case, both companies stand a lot to lose. Qualcomm’s royalty business is highly lucrative and makes up the lion’s share of their profits. Apple is also one of their biggest clients. Losing both would be a catastrophic disaster for the current largest chip maker in the world.
On the other end of the spectrum, Apple cannot afford to be embroiled in this dispute for too long either. That could lead to legal injunctions severely delaying the launch of the iPhone 8 in the US, or maybe even block it completely. This would be catastrophic for Apple, as nearly 63% of their revenue came from the iPhone in fiscal Q2 2017.