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Qualcomm hits back at Apple’s patent suit with barrage of accusations

The legal battle between Apple and Qualcomm has turned even nastier with the US chip giant hitting back with a counterclaim against Apple’s $1bn patent licensing lawsuit.

Apple filed suit against its primary modem supplier in January, accusing it of overcharging for patent royalties; withholding over $1bn which it owes the iPhone maker; and operating an “illegal scheme” to monopolize the smartphone chip market.

Now Qualcomm has hurled its own accusations, claiming that Apple has mischaracterized its agreements and the performance of its chips; encouraged recent regulatory attacks on Qualcomm’s business; and interfered in the chip provider’s agreements with other licensees which produce iDevices.

In its filing, Qualcomm denied “each and every allegation” made by Apple in its complaint. Another claim was that Apple chose not to use the full performance capabilities of the Qualcomm modem in its iPhone 7, but then issued threats to stop the chip company from making public comparisons between its own modem and that of Intel (which Apple has recently introduced to certain iPhone models).

Qualcomm said Apple “falsely claimed that there was ‘no discernible difference’ between iPhones with Qualcomm’s chipsets and iPhones with Intel’s chipsets”, and actively tried to stop the San Diego firm from correcting that view.

Don Rosenberg, EVP and general counsel at Qualcomm, said in the filing: “Apple could not have built the incredible iPhone franchise that has made it the most profitable company in the world, capturing over 90% of smartphone profits, without relying upon Qualcomm’s fundamental cellular technologies.”

The filing went on: “Apple achieved its success without contributing much, if anything, to the innovations at the heart of cellular communications”, but is now refusing to acknowledge Qualcomm’s role in that success. Instead, it has “launched a global attack” on Qualcomm to “coerce unfair and unreasonable license terms”.

Qualcomm is seeking damages from Apple for allegedly reneging on promises made in several agreements. It also wants an order blocking Apple from interfering further with Qualcomm’s agreements with other manufacturing companies.

This element of the case stems from the fact that Apple, uniquely among major handset makers, does not pay Qualcomm directly for patent fees, but instead pays through the contract manufacturers which build the iPhone, such as Foxconn, which have their own deals with the chip provider. Qualcomm says Apple is now pressurizing it to offer more favorable terms to those partners.

It also sees the hand of Apple behind some of the recent barrage of antitrust probes to which Qualcomm has been subjected in markets such as South Korea, Taiwan and the US. Apple has lobbied with “false and misleading statements to induce regulators to take action against us because it would be in their commercial interests,” Rosenberg said.

“We were really stunned by some of the things that they included in their suit,” he told Bloomberg. “This is our attempt to respond to some disturbing elements in their complaint.” He added: “We didn’t ask for this fight. Apple is a customer. We, of course, would like to continue to and will continue to do business with Apple.”

Qualcomm shares have fallen by 12% since Apple filed suit on January 20, wiping more than $10bn off its market value.

Since that date, Apple has petitioned unsuccessfully to have its case joined with one filed by the US Federal Trade Commission (FTC) in Northern California, also accusing Qualcomm of creating an illegal monopoly for handset chips. Apple’s request was denied earlier this month and Qualcomm is now trying to have the FTC case dismissed.

Meanwhile, in another dispute over royalty over-payments, Qualcomm has been ordered to pay BlackBerry almost $815m. According to a binding interim arbitration decision, BlackBerry overpaid Qualcomm in royalty payments from 2010 to 2015 under terms of a licensing deal.

“BlackBerry and Qualcomm have a long-standing relationship and continue to be valued technology partners,” BlackBerry CEO John Chen said in a statement. “We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry.” This is now the main area of hardware focus for BlackBerry, which has ceased direct smartphone activities to concentrate on enterprise software and the auto sector.

Its handset exit has freed BlackBerry, like Nokia, to pursue patent fees more aggressively, because it no longer has the incentive to sign cross-licensing deals. Earlier this year it filed a suit against Nokia itself, claiming the FInnish firm was infringing on as many as 11 of its patents.

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