Qualcomm hit by huge Taiwan fine, sues Apple in China

Qualcomm continues to be embroiled in a host of legal battles, and in the past week its lawyers will have been looking east. It has extended its litigation against Apple to China, as Taiwanese regulators have fined it about $774m for anti-competitive behaviour.

Taiwan’s Fair Trade Commission (TFTC) said in its statement last week that Qualcomm’s business model harms competition and violates the country’s Fair Trade Act. This is the largest fine ever imposed by the TFTC.

Qualcomm said in a statement: “The fine bears no rational relationship to the amount of Qualcomm’s revenues or activities in Taiwan, and Qualcomm will appeal the amount of the fine and the method used to calculate it.” The judgement follows fines from regulators in several major countries, including $975m in China in 2015 and $865m in South Korea last year. A case brought by the US Federal Trade Commission (FTC) alleging monopoly practices is still pending.

The common thread in all these investigations, including the TFTC’s, is that Qualcomm’s standards-essential patent (SEP) licensing practices do not conform to the fair, reasonable and non-discriminatory (Frand) terms required by standards bodies. The TFTC also charged that Qualcomm refuses to sell chips to customers which do not sign up to its stringent conditions.

There may be connections between the TFTC decision and the ongoing Apple patent dispute. Jim McGregor, principal analyst at chip specialist Tirias Research, thinks the fine may be connected to Qualcomm’s decision to sue Apple’s Taiwanese manufacturers for withholding royalty payments, which they pay on behalf of Apple. “I don’t see anything of substance to the [TFTC] claim,” McGregor told EETimes. “In fact, the request for contractual information makes it look like they don’t have a case yet and are just trying to reach a conclusion.”

As for that Apple dispute, it has extended still further, with Qualcomm filing suit in China. It is seeking a ban on the sale and manufacture of iDevices which, it claims, are infringing on its patents, since Apple stopped paying royalties when the two giants failed to agree a renewed licensing deal.

This is a high-stakes tactic, given that China is the world’s largest smartphone market and most iPhones are made there or in Taiwan. Qualcomm filed the suits in a Beijing intellectual property court claiming patent infringement and seeking injunctive relief, citing three non-standards essential patents covering power management and the Force Touch touchscreen technology.

Christine Trimble, a company spokesperson, said: “Apple employs technologies invented by Qualcomm without paying for them … these patents are a few examples of the many Qualcomm technologies that Apple uses to improve its devices and increase its profits.”

Apple responded: “In our many years of ongoing negotiations with Qualcomm, these patents have never been discussed. Like their other courtroom maneuvers, we believe this latest legal effort will fail.”

There is very little precedent for a Chinese court to issue injunctions at the request of a US and the country’s regulators would be concerned at actions which could create job losses at local manufacturers or restrict availability of popular devices. On the other hand, there might be some incentive to weaken Apple and so boost Chinese phonemakers, which are already gaining market share from the iPhone.

The legal battle started earlier this year when Apple filed an antitrust suit against Qualcomm, claiming it abuses its market lead to impose unfair licensing practices. Qualcomm countered with its first patent suit, in the US, and has since extended these to other jurisdictions. Soon after its first legal attack, Apple cut off licensing payments to Qualcomm, which has hit the chip provider’s revenues (it is estimated to get about $2bn a year from licensing fees from Apple and its partners, and of course, royalties are the most profitable aspect of its business). Apple continues to use Qualcomm modems in some iPhone models, though it has also introduced Intel alternatives in some devices.