You are using an older browser version. Please use a supported version for the best MSN experience.

Apple sues Qualcomm over patent royalties in antitrust case

Bloomberg logoBloomberg 21-01-2017 Susan Decker, Alex Webb and Ian King

The Apple logo is displayed on the exterior of an Apple Store on April 23, 2013 in San Francisco, California.© Justin Sullivan/Getty Images The Apple logo is displayed on the exterior of an Apple Store on April 23, 2013 in San Francisco, California. Apple filed a lawsuit accusing Qualcomm of monopolizing the market for chips for wireless devices, and of withholding $1 billion in retaliation for cooperating with antitrust authorities in South Korea.

Qualcomm has been under fire around the world by regulators for its patent licensing practices. The lawsuit filed Friday is the first direct challenge by one of its biggest customers.

Apple is demanding Qualcomm hand over money that was supposed to be a rebate for licensing fees. Qualcomm is holding back the money as punishment for Apple cooperating with Korean antitrust regulators, according to the complaint filed in San Diego, California, where Qualcomm is based.

Apple is facing pressure to squeeze more profit out of every iPhone after sales declined last year for the first time since 2001, dragged down by lower sales. It typically sources the same component from several suppliers, which helps secure lower prices by forcing the manufacturers to compete on price.

The complaint also challenges the validity of some key Qualcomm patents for wireless technologies. Apple asks the court to rule that, if the patents are upheld, that the royalty amount is significantly lower than what Qualcomm charges now.

“Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties,” Apple said in a statement. “Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.”

Antitrust Investigations

In December, South Korea, home to two of Qualcomm’s largest customers, fined the company 1.03 trillion won ($890 million) and described its practices as monopolistic. Qualcomm has said it will appeal the decision.

Under the agreement with Qualcomm, Apple said it was forced to refrain from taking any steps to challenge Qualcomm’s business model.

Apple complied with investigation demands from Korean regulators, an action Qualcomm claimed was in violation of the agreement. In retaliation, Qualcomm withheld money that it was due to pay Apple in royalty rebates, the iPhone maker said.

Qualcomm offered to pay the money “if Apple retracted and corrected its statements to government agencies,” according to the complaint.

South Korean regulators aren’t the only authorities investigating Qualcomm.

The U.S. Federal Trade Commission on Jan. 17 filed its own antitrust suit against Qualcomm. The chipmaker is also being investigated by the European Union and Taiwanese authorities.

At the heart of the dispute between Apple and Qualcomm is a push by phonemakers with the support of regulators to reduce the patent royalties Qualcomm charges. The chipmaker gets paid regardless of whether its chips are used in mobile phones or not.

One common thread in all of the cases is the contention that royalty rates should be calculated as a percentage of the price of the components in the phone that Qualcomm invents and sells -- measured in tens of dollars. Currently licensing is a percentage of the price of the entire phone, which is usually in the hundreds of dollars.

image beaconimage beaconimage beacon