Apple Qualcomm War: The Patent War is Hopefully to End

 Apple Qualcomm War: The Patent War is Hopefully to End

Netease Technologies News, April 16, according to foreign media reports, on Monday, Apple and Qualcomm held a key patent lawsuit in San Diego, and the outcome of the trial may end a two-year patent war between the two.

For two years, Apple and Qualcomm have been fighting in courts around the world over patent licensing for technologies used on the iPhone, but neither side has hurt their vitality. But that could change as Apple and Qualcomm hold a key lawsuit in San Diego on Monday, local time.

In the lawsuit, the federal jury will decide for the first time whether Qualcomms business model is legal and whether Apple has the right to stop paying for the technology.

A complete victory on either side could force the losers to make concessions and fundamentally resolve the legal conflict that has sparked dozens of lawsuits in North America, Asia and Europe. The outcome of the trial is so important that Tim Cook, Apples chief executive, is expected to be summoned to defend the companys business and explain its relationship with Qualcomm. This will be Cooks first public appearance in court.

From Apples point of view, cash compensation is a drop in the bucket for Apple, which has about $245 billion in cash flow. On the other hand, if a San Diego jury decides that Qualcomm abuses its market dominance and charges excessive licensing fees from mobile phone manufacturers, Qualcomm may ask it to abandon the business model. Qualcomm currently charges patent licensing fees based on the price of each smartphone, even up to 5% of its net sales.

Shannon Cross of Cross Research LLC, a market research firm, said: From an investors point of view, Qualcomm will get more attention because a large part of their business is royalties. From Apples point of view, investors just want to know if Apple can use the latest technology.

In addition to the patented technology involved in the lawsuit, the world is competing to develop smartphones and other devices that can connect to future 5G networks. The 5G technology involved is expected to lead an innovative world. In the coming year, the major U.S. network operator Yuanyuan will expand 5G technology to more areas, making the Internet faster. The problem for Apple is that Qualcomm is now the market leader in 5G modem technology, while Intel, Apples supplier of 4G modem chips, will not launch 5G modem chips until next year.

Resolving the issue with Qualcomm through this lawsuit may help Apple to bring 5G devices to market faster. In the long run, this will also allow Apple to purchase key components from multiple suppliers. Apple has said it prefers to buy components from a single supplier.

If Apple and Qualcomm reach a solution, Apple will be able to get a second supply of modem chips and share 5G technology with all other companies. Usually to some extent, Apple is just a follower of technology, because they dont want to launch products that dont work properly first.

On Monday, local time, the San Diego court began to select juries for a five-week trial.

As of October last year, Qualcomm had lost about $7 billion in revenue because the Apple Mobile Generation Factory, including Foxconn, began to stop paying patent fees for the assembled iPhone and iPad in 2017. Apple did not reach a direct licensing agreement with Qualcomm, nor did it pay Qualcomm directly. Instead, it compensated the agent who paid Qualcomms patent fees through an additional contract. These agent manufacturers also include Renbao, Heshuo and Weichuang.

In court, Qualcomm will try to persuade the jury that Apples agents are responsible for breaching contracts, and that Apple maliciously interferes with their contracts. This may allow Qualcomm to claim additional punitive damages in addition to billions of unpaid patent fees to the court.

Apple and its suppliers will argue that these contracts violate the anti-monopoly law and cannot be enforced. They also violate Qualcomms obligation to provide patent licences under fair, reasonable and non-discriminatory terms. This FRAND clause applies to standard basic patents widely used to ensure compatibility between wireless devices and networks.

Tamlin Bason, an analyst at Bloomberg Intelligence, said: After entering the trial, Qualcomm will win not only on Anti-trust issues, but also on compliance with the promises of FRAND terms. Failure on either side could affect its patent licensing model, and Qualcomms victory in both areas could bring Apple back to the negotiating table.

In addition, Qualcomm may face up to $9 billion in compensation from these agents. These agents claim that they have been forced to pay excessive patent licensing fees for years. According to the antitrust law, judges can double the corresponding fines.

Apples view is consistent with that of other antitrust regulators in Asia and Europe of the Federal Trade Commission. Qualcomm, using its dominant market position as a supplier of baseband chips, requires other manufacturers to pay excessive fees for the use of the patented technology. It is baseband chips that enable mobile phones to connect to operatorstelecommunications networks.

Qualcomm is awaiting the ruling of the Federal Trade Commission on its anti-monopoly charges. In January, Qualcomm was tried by U.S. District Judge Lucy Koh in San Jose District Court, California. Apple and its factories said they would try to cite the ruling in Santiago if Galanway ruled against Qualcomm in the above-mentioned case.

Apple had reached an agreement with Qualcomm that Qualcomm was the sole supplier of baseband chips for the iPhone, while Apple paid Qualcomm $7.5 in royalties for each phone. But according to Qualcomms contract with Apple Mobile Agent, the latter pays Qualcomm much more for patent licensing fees. Qualcomm then pays Apple Quarterly fees to make up for the difference in royalties for different patents. Qualcomm questioned Apples claim that these payments were described as rebates.

Qualcomm suspended quarterly payments to Apple in 2016. Qualcomm accused Apple of inciting government agencies to launch anti-monopoly investigations against Qualcomm in violation of the agreement between the two sides. Qualcomm was fined $853 million by Korean courts that year. Meanwhile, Apple has switched to Intel as its baseband chip supplier.

Anti-competitive charges against Qualcomm by Apple and its affiliates include Qualcomms refusal to sell its chips without its technology license. They claim that this means that mobile phone manufacturers have no choice but to pay the highest price for packaged patented technologies, regardless of whether they will be used for their mobile phones.

Because Qualcomm is the largest manufacturer of CDMA and high-end LTE modem chips, manufacturers have to acquiesce to Qualcomms patent licensing requirements, they said.

Qualcomm argues that its contract with mobile phone manufacturers has been negotiated in good faith, having signed more than 300 similar licensing agreements. Many agreements include tens of thousands of patents for video and audio broadcasting technology that are not subject to FRAND provisions. Qualcomm also points out that rivals such as Intel dont need a patent license at all, which means that if mobile phone manufacturers choose to buy chips from other places, they dont have to pay double the cost.

The case is currently pending in the Southern District Court of California in San Diego. (Han Bing)

Source: Responsible Editor of Netease Science and Technology Report: Wang Fengzhi_NT2541