In the ongoing feud between Apple and Qualcomm, the latter company today has brought four of Apple’s main iPhone and iPad suppliers into the legal battle by filing a breach of contract complaint against Foxconn, Pegatron, Wistron, and Compal.
Qualcomm has sued the four manufacturers for “breaching their license agreements” by failing to pay royalties on the use of Qualcomm’s technology in the assembly of Apple’s devices. For its part in the production of iPhones, Qualcomm supplies the LTE modem in Apple’s smartphone.
The cessation of royalty payments by the iPhone manufacturers isn’t too surprising, as it follows a report from April in which Apple itself stopped paying its suppliers for royalties related to Qualcomm. According to Qualcomm, “the manufacturers say they must follow Apple’s instructions not to pay,” so in retaliation Qualcomm is suing the four companies, asking them to comply with long-standing contractual obligations as well as pay any withheld royalties.
Qualcomm said that Foxconn, Pegatron, Wistron, and Compal are still paying royalties for Qualcomm technology related to non-Apple products “under the very same agreements that apply to the Apple products.” Qualcomm further mentioned that its license agreements with the manufacturers began before Apple even sold its first iPhone, meaning that “Apple is not a party to the agreements” and shouldn’t be able to interfere so heavily in its business.
“It is unfortunate that we must take this action against these long-time licensees to enforce our agreements, but we cannot allow these manufacturers and Apple to use our valuable intellectual property without paying the fair and reasonable royalties to which they have agreed,” said Don Rosenberg, executive vice president and general counsel of Qualcomm.
“As Apple continues to collect billions of dollars from consumer sales of its Qualcomm-enabled products, it is using its market power as the wealthiest company in the world to try to coerce unfair and unreasonable license terms from Qualcomm in its global attack on the company. Our license agreements with Apple’s manufacturers remain valid and enforceable. The manufacturers must continue to live up to their obligations under these agreements and Apple should immediately cease its tortious interference.”
In the original report relating Apple’s suspension of royalty payments, the move was suggested to hurt Qualcomm to the tune of $500 million, causing the company to adjust its third quarter guidance from $5.3 billion – $6.1 billion in revenue down to $4.8 billion – $5.6 billion. The argument between the two companies originates back to an FTC complaint regarding Qualcomm’s anticompetitive patent licensing practices, for which Apple sued Qualcomm, accusing the company of charging unfair royalties for “technologies they have nothing to do with.”
The feud reached a boiling point in April due to Apple’s decision to stop royalty payments to its manufacturers in relation to Qualcomm technology, and would continue doing so until the conflict was resolved. The move particularly hurt Qualcomm because the company’s licensing deals are directly with iPhone suppliers, like the four it is now suing, and not Apple itself.
In a statement given last month, Apple said, “We’ve been trying to reach a licensing agreement with Qualcomm for more than five years but they have refused to negotiate fair terms.” The company called Qualcomm’s demands “unreasonable,” arguing that Qualcomm has been “charging higher rates” based on Apple’s own innovation in its devices, “not their own.”
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