Published: Thu, May 18, 2017
Sci-tech | By Jose Becker

Apple, Qualcomm spat intensifies, manufacturers drawn in

Apple, Qualcomm spat intensifies, manufacturers drawn in

Qualcomm says that the companies acknowledge the debts but Apple has told them not to pay.

The chip maker stated in the complaint that since the start of 2017 "Apple has interfered with Defendants' long-standing payment obligations to Qualcomm".

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 said it has license agreements stretching back 17 years.

Apple doesn't have a patent license directly with Qualcomm, relying instead on licenses held by the contract manufacturers, whom Apple reimburses.

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Samsung Electronics Co. and Intel Corp., two competing chipmakers, are backing a U.S. Federal Trade Commission antitrust suit against Qualcomm that was filed just before the Apple case.

"Specifically, Apple has withheld substantial payments from Defendants that it owes for Qualcomm royalties and has directed Defendants not to make corresponding royalty payments to Qualcomm". Apple's suit built upon a wave of global resistance to Qualcomm's patent-licensing business that has included investigations and fines in several countries.

The case underscores the influence Apple wields over the companies that make its products and parts for them.

Qualcomm's patent-licensing segment in fiscal 2016 contributed roughly 80% of its pretax profit. With the contractors in turn not paying Qualcomm - at Apple's direction, Qualcomm says - the chipmaker last month was forced to slash third-quarter forecasts because it's unclear when the royalties will be paid.

The FTC alleges that Qualcomm has used its dominant position as a supplier of certain baseband processors to impose anticompetitive supply and licensing terms on cell phone manufacturers and to weaken competitors. "And we said, that is interesting, but that is between you and Apple". Apple-related royalties account for about 12% of Qualcomm's total revenue and as much as 30% of its per-share earnings, according to Srini Pajjuri, an analyst at Macquarie Capital (USA) Inc. 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.

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