Qualcomm files countersuit against Apple in royalty-driven legal battle

Four months after Apple Inc. – one of its biggest customers – filed a lawsuit against Qualcomm Inc., the San Diego, Calif.-based microchip manufacturer has struck back.

On Monday Qualcomm filed a countersuit against Apple, seeking damages for alleged contract pledges, mischaracterized agreements, and misrepresented facts, and accusing the Cupertino, Calif. tech giant of both lying to regulators to spur federal investigations, and lodging threats against Qualcomm to hide its own use of inferior parts in some iPhones, according to Bloomberg.

“We were really stunned by some of the things that they included in their suit,” Qualcomm general counsel Don Rosenberg told Bloomberg. “This is our attempt to respond to some disturbing elements in their complaint.”

At the standoff’s heart is a dispute between Apple and Qualcomm over how much the latter is allowed to charge device manufacturers to use its patented technology, which underpins all modern smartphone systems; Qualcomm earns the majority of its revenue by licensing its technology to manufacturers – including Apple – whether they use its chips or not.

Bloomberg notes that the company has lost $10 billion USD in market value since Apple’s suit was filed on Jan. 20.

Apple’s declined to comment on Qualcomm’s suit, referring Bloomberg to its earlier lawsuit, in which it accused Qualcomm of illegally trying to control the chip market and withholding more than $1 billion USD in “rebates” to punish Apple for talking to regulators in South Korea.

“We are extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty we have no choice left but to turn to the courts,” the company said in its Jan. 20 statement.

Unlike its rivals, Apple does not pay Qualcomm directly, opting instead to pay the chip maker through its Asian contract manufacturers who build the iPhone. Rosenberg alleges that it’s currently meddling in Qualcomm’s agreements with those suppliers, such as Foxconn Technology Co., in a bid to negotiate more favourable licensing fees, and is behind regulatory investigations of Qualcomm’s worldwide business practices as well, lobbying with “false and misleading statements to induce regulators to take action against us because it would be in their commercial interests,” according to Bloomberg.

Reporters Ian King and Susan Decker note that in December, Qualcomm was given a record fine of $1.03 trillion USD won (approximately $1.167 billion Canadian) for violating antitrust laws, and that in January it was accused by the U.S. Federal Trade Commission of forcing Apple to exclusively use its chips in return for lower licensing fees. The company is also under investigation in Europe and Taiwan.

Qualcomm’s Rosenberg told Bloomberg that his employers didn’t ask to fight Apple, which remains a valued customer.

“We, of course, would like to continue to and will continue to do business with Apple,” he said.

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Jim Love, Chief Content Officer, IT World Canada

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Eric Emin Wood
Eric Emin Wood
Former editor of ITBusiness.ca turned consultant with public relations firm Porter Novelli. When not writing for the tech industry enjoys photography, movies, travelling, the Oxford comma, and will talk your ear off about animation if you give him an opening.

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