Qualcomm files breach of contract complaint against Apple's manufacturers

Janie Parker
May 18, 2017

Four Asian contract manufacturers, including Foxconn Technology Group and Pegatron Corp., aren't complying with obligations to pay for the use of patented technology, according to a complaint Qualcomm said it filed in federal court in San Diego.

The lawsuit falls short of more drastic moves that media outlets speculated Qualcomm would pursue against Apple - including seeking to ban imports of iPhones and iPads into the U.S.

Don Rosenberg, executive vice president and general counsel of Qualcomm, said in a statement: "We can not allow these manufacturers and Apple to use our valuable intellectual property without paying the fair and reasonable royalties to which they have agreed". Qualcomm noted that the licences date in most cases from before the iPhone, and Apple is not party to the agreements. Our license agreements with Apple's manufacturers remain valid and enforceable. So far there has not been any comment from Apple or the companies mentioned in the latest lawsuit, but things are definitely turning ugly and pretty fast.

Apple sued Qualcomm in January in the US and later in China and the United Kingdom, claiming that Qualcomm abused its monopoly position in cellular chips to impose "onerous, unreasonable and costly" terms on customers and competitors.

The company licenses patents based on the price of the entire device, and it has agreed to provide certain patents under "fair, reasonable and non-discriminatory" terms because they are included in wireless industry standards. The company had already warned shareholders that earnings for the next quarter will be down by $500m thanks to Apple withholding royalties.

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Last week, Bloomberg reported Qualcomm would ask the U.S. International Trade Commission to issue an injunction prohibiting iPhone imports, citing sources familiar with the company's plans.

Apple's manufacturers, like Foxconn, used to pay Qualcomm for the intellectual property rights to make chips that connect phones online. Those contract manufacturers in turn had stopped paying Qualcomm by the same amount. "You are responsible for paying that".

"We are suing to get our money", Rosenberg said.

Qualcomm pioneered a good portion of 3G/4G cellular radio technology and holds thousands of patents on its inventions. While it is not unusual for the companies and other organizations to make such filings, for the briefs to be filed at such an early stage in the process shows the interest the case is garnering in the tech community. 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. A hearing is scheduled for June 15, and Koh has set a trial date of January 3, 2019.

Other reports by TheDailyFarc

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