Apple battles Qualcomm in Legal tussle this Week
Although there’s a fierce rivalry between smartphone manufacturers, companies are usually on much better terms with their suppliers. But over the past two years, the relationship between Apple and Qualcomm has been anything but amicable. The two companies have been locked in an intense legal fight that pits one of the biggest smartphone sellers in the world, Apple, against one of the biggest designers of smartphone processors and modems, Qualcomm. The two have sued one another across the globe, claiming monopolistic practices, patent infringement, and even theft.
At the heart of the conflict is one core question: how much is Qualcomm’s technology worth? Apple claims that Qualcomm has demanded excessive fees to use its modems and patents, while Qualcomm asserts that Apple is using the legal system to try to get a good deal on its technology. It’s a critical question for the entire industry — you can’t make a modern smartphone without coming into contact with Qualcomm’s patents, so the outcome of these lawsuits could have an enormous effect on every company that manufactures phones, as well as Qualcomm’s bottom line.
In recent months, the battle has escalated. Qualcomm claimed that Apple stole “vast swaths” of its “confidential information and trade secrets,” and it’s chipped away at Apple with small but meaningful court victories, leading to partial iPhone bans in Germany and China.
Now, the main event has finally arrived. On Monday, Apple and Qualcomm will face off in San Diego federal court, and Qualcomm will be forced to answer Apple’s accusations that its patent costs are unreasonable and its licensing terms are unfair. If it can’t, then Qualcomm risks losing a chunk of the billions of dollars it currently makes from patent licensing.
At its core, Apple’s lawsuit is all about patents, specifically the patents that cover the design and functionality of a phone’s modem. You can’t make a smartphone that doesn’t wirelessly connect to the internet, which means you can’t make a phone without coming into contact with these patents — and a huge number of them are owned by Qualcomm.
The way Qualcomm sees it, those patents are a hard won product of billions of dollars of research and development, and it’s reasonable to now rely on them for billions in revenue. When Qualcomm sells its modems, it’s not just selling hardware. It’s also selling a license that’s bound up with that hardware, part of an alleged “no license, no chips” policy. But Apple says that Qualcomm has been able to charge more for these patents than it should have because the company is also the dominant supplier of smartphone modems. If any manufacturer doesn’t agree to the license fees, Qualcomm has the power to cut them off from modems, too.