Qualcomm files breach of contract complaint against Apple's manufacturers

Posted May 18, 2017

Qualcomm Inc filed a complaint against Foxconn Technology Group and three other Apple Inc contract manufacturers for not paying royalties, firing the latest salvo in its fight with the iPhone maker. The FTC is investigating Qualcomm's alleged antitrust practices, while Apple went ahead and sued the company for overcharging for critical chips used in the iPhone.

"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", Qualcomm said on Wednesday.

Apple said that Qualcomm has "refused to negotiate fair terms", and made a decision to stay paying until a judge can determine how much they should cough up in royalties. Apple has promised to indemnify the manufacturers for any damages resulting from breaching their agreements with Qualcomm.

I talked to Founder & Principal Analyst of Moor Insights & Strategy, Patrick Moorhead, and he said: "Apple does not have an IP license with Qualcomm, but rather Qualcomm has IP licenses with Apple's ODMs, so it makes sense that Qualcomm would need to sue the ODMs for payment due to their breach of contract". Qualcomm has already filed a separate claim against what it describes as Apple's "interference".

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But why? Back in January 2017, the U.S. Federal Trade Commission filed a complaint charging Qualcomm with using anticompetitive tactics.

Qualcomm noted in its statement that the suppliers have still not disputed their contractual obligations to pay the royalties, which could give the company some ammunition in its lawsuit.

An escalating battle between Apple and Qualcomm over money and patent rights is drawing in Taiwanese contractors that assemble Apple's iPhones.

"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. "And we said, that is interesting, but that is between you and Apple".

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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.

Even Samsung is on Apple's side, but Qualcomm isn't giving up ... To deny the case would continue to impede the progression of the technology and drive up the cost of smartphones for consumers, it argued.

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.

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