Apple and Qualcomm have gone to war. apple recently filed a one billion dollar lawsuit against Qualcomm Inc. This comes coupled with the U.S. government accusation that Qualcomm is engaging in illegal tactics to maintain superiority in the market. Qualcomm is one of the largest manufacturers of the semiconductors used by both Apple and by rival company Samsung.
The lawsuit alleges that Qualcomm overcharged Apple and refused to honor one billion in promised rebates. Apple has claimed that Qualcomm revoked the rebates because of Apple's involvement with South Korea's Fair Trade Commission. Additionally Apple contends that Qualcomm is refusing to license chip technology to other manufacturers to keep them from being competitive. The patents in question are required by law to be licensed broadly and on “reasonable” terms. The violation of this law is a major component of the lawsuit.
According to Reuters, the lawsuit’s paper’s about Qualcomm, “That if that were not enough, Qualcomm then 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”. Apple’s charge of extortion against Qualcomm is a serious one and earned an equally serious response. Both companies command serious power in their respective markets; charges like this deserve full attention and investigation.
Qualcomm general counsel Don Rosenberg blasted back calling the accusations “baseless” and saying that “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”. Far from apologetic, Rosenberg was not afraid to go on the offensive “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” he continued.
The official statement from Qualcomm showed a unapologetic stance with Apple, saying that, “While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless.” Qualcomm defended its practices and the value of its products by stating that “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”
Qualcomm wasted no time in accusing Apple of attempting to sabotage them. The official statement blames Apple as a primary instigator for its legal trouble around the world. “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”. If this is true, the fight between Qualcomm and Apple is likely to get very ugly.
The lawsuit comes at a time when Qualcomm has been taking fire from multiple directions regarding practices with its patents. Qualcomm was fined 854 million dollars by the KFTC in December for what they claimed were unfair patent practices. In February of 2015 China fined Qualcomm 975 million. That same year, the European Union accused Qualcomm of abusing market power. On Tuesday,the FTC chimed in with its own lawsuit against Qualcomm claiming it was using its power in the market to exert “onerous” pressure. Qualcomm has indicated that they will contest the FTC complaint. Qualcomm's looming struggle with Apple caused Qualcomm stock to drop 2.4% ending the week trading at $62.88.
It will be up for the courts to determine whether Qualcomm has erred. Fights between titans like Apple and Qualcomm are often settled out of court, but when they are not the can produce significant outcomes both in markets and in legal precedent. This is especially important due to the power of both companies. Apple and Qualcomm are both technology giants. Qualcomm helped to pioneer 3G and 4G technology and paved the way for further advancements in communication. The issue of patents is a serious one for all business but especially tech heavy industries. The ability to control the use of patents is a critical issue. Qualcomm’s defense with that understanding is intelligent and justified. If this proves to be nothing more than one company using courts to bully another, it will reflect poorly on the leadership of the company at fault. The legal decisions will potentially have far-reaching consequences at home and abroad. A victory for Apple may mean access to cheaper technology and money returned. A victory for Qualcomm will be a defense of its patents and use. Both outcomes will be far reaching. Apple and Qualcomm are now engaged in a war of titans. The outcome remains uncertain. This is a case to keep an eye on.
Follow this author on twitter @realrobertowens