Apple has fired its latest legal salvo at Qualcomm, broadening its multibillion-dollar battle over wireless chip royalties by attacking the validity of the chipmaker’s patents and leaning on a US Supreme Court decision to support its allegation of “double-dipping”.
The tech groups have spent recent months raising the legal stakes after Apple in January accused Qualcomm of “exclusionary tactics and excessive royalties”, running into billions of dollars over the past few years. The world’s leading mobile chipmaker has argued that claim is baseless, accusing Apple of encouraging regulatory attacks against it around the world by “misrepresenting facts and making false statements” and of interfering in its business by withholding royalties it is owed by the iPhone’s manufacturers.
In a legal filing on Tuesday, Apple pointed to a ruling by the US Supreme Court to try to bolster its case that Qualcomm is charging too much for access to patents covering cellular and WiFi connectivity in mobile devices.
At the end of May, the court found that patent law cannot be used to prevent the resale of Lexmark printer cartridges refilled with toner by other suppliers.
“A patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose,” Chief Justice John Roberts wrote in the court’s ruling, reversing a decision by the US Court of Appeals for the Federal Circuit.
Apple’s lawyers say the “landmark decision” suggests Qualcomm’s practice of obliging customers that buy its chip modems to also pay a patent royalty — which the US Federal Trade Commission called in its own complaint a “no license, no chips” model — is a “violation of US patent law”.
“This is precisely the kind of double-dipping, extra-reward system that the Court’s decision in Lexmark forbids,” Apple argues in its filing.
Qualcomm responded to Apple’s latest legal broadside late on Tuesday, accusing the iPhone maker of “distortions” to minimise the importance of the chipmaker’s technology and misrepresent its licensing practices. Don Rosenberg, general counsel, said Qualcomm’s technology was behind many of the iPhone’s most important features, including the App Store, mobile video and audio quality.
In the document, Apple calls for the “restitution of all excessive license fees that Apple paid”, after its initial demand for a “fair and reasonable” royalty.
Qualcomm, which countersued Apple in April, has said it will “vigorously defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry”. The maker of wireless communication modems for the iPhone and Snapdragon processors for smartphones such as Samsung’s Galaxy S8 warned in April of a significant revenue shortfall after Apple stopped paying the equivalent of royalties to the contract manufacturers that build the iPhone, choking their ability to pay Qualcomm.
After Qualcomm sued four top manufacturers including Foxconn last month for breach of contract, Apple on Tuesday described the action as “bullying” the suppliers, amounting to “retaliation, obstruction of justice, and greed”.
In the 160-page filing, Apple also asked the court to declare invalid a selection of Qualcomm patents the chipmaker has deemed “essential” to the 3G and 4G standards. In doing so, Apple is hoping to emulate its legal strategy in another case over wireless patents against Ericsson, which ended in a settlement in December 2015.
The case between Apple and Qualcomm is likely to take years. Qualcomm’s request for a preliminary injunction against Apple’s contract manufacturers, to force them to continue paying royalties while its fight with the iPhone maker continues, will be heard in California in a few months.
(Published by Financial Times - June 20, 2017)