Apple, Qualcomm spat intensifies, manufacturers drawn in

How Licensing Disputes Are Affecting Qualcomm’s Balance Sheet

The company has sued the manufacturers for allegedly breaching their licence agreements by failing to pay royalties on the use of Qualcomm's technology in the assembly of Apple iPhones.

Our report covers Qualcomm's press release and a Scribd document of the actual court filing against Apple's iPhone suppliers.

Qualcomm said last month that Apple had chose to withhold royalty payments to its contract manufacturers that are owed to the chipmaker, for sales made in the first quarter of 2017, until the dispute is resolved in court. Qualcomm's lawsuit says those contractors are still paying royalties for non-Apple products. "The manufacturers must continue to live up to their obligations under these agreements and Apple should immediately cease its tortious interference". The two companies have sued and countersued each other since January. "As immersed as the larger dispute between Apple and Qualcomm is in IP, the suit between Qualcomm and Apple's ODMs is about breach of contract due to non-payment which, ironically, is slated to be heard in San Diego, Qualcomm's home town".

"Their gripe, their issue, appears to be with Apple", said Qualcomm General Counsel Don Rosenberg.


Compal, Pegatron and Wistron representatives didn't respond to emails sent by The Wall Street Journal after working hours, nor did they pick up calls by the Journal after office hours. Qualcomm said it is seeking an order to require all of those companies to comply with "long-standing contractual obligations" to Qualcomm, and is also seeking declaratory relief and damages.

Last week, Bloomberg reported Qualcomm would ask the U.S. International Trade Commission to issue an injunction prohibiting iPhone imports, citing sources familiar with the company's plans. 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. "You are responsible for paying that".

Apple's manufacturers, like Foxconn, used to pay Qualcomm for the intellectual property rights to make chips that connect phones online.

"We are suing to get our money", Rosenberg said. Further, the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products. To deny the case would continue to impede the progression of the technology and drive up the cost of smartphones for consumers, it argued.

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