Qualcomm Wants Apple to Pay $31 Million in Damages in Patent Battle

Oh Qualcomm, you're really setting yourself up for disaster. Do you know why Apple is opening a tech campus here in San Diego with 1,200+ employees? It's so they can poach your best and brightest away from you.

I like to imagine the collective sigh of MacRumors' writers whenever more news of patent litigation comes in. Then they all gather around and draw straws to see who has to type it up.


Did… did I just write and animate MacRumors fan fiction? :eek:

And, yes, that's Tim Hardwick, @earthTOmitchel, and @jclo all on @Joe Rossignol's body. I got lazy.

I would say PAY and move on. Indeed lawyers are probably more expensive. These court actions will go at the expense of going forward.

I'd be inclined to pay too. But it would create legal precedents. That's all Apple would be worried about.

Doesn't make sense to me. If Apple used Intel chips, and it's the chips that violate the patent, then shouldn't they be suing Intel?

Intel could, existing contractual commitments to Intel aside, sue Intel for infringement. In theory it could also sue users of infringing iPhones. If the iPhones infringe the patents in question, and no license has been granted (to, e.g., Intel or Apple), then users of those iPhones are infringing those patents as well. Qualcomm, of course, isn't going to sue iPhone users.

But Qualcomm doesn't want to sue Intel either because, among other reasons, it wants to be able to collect royalties based on the value of end devices rather than, e.g., on the value of chips. A reasonable royalty rate applied to the value of chips would net Qualcomm far less than it's been forcing device makers to pay. It's desperately trying to cling to a model that no longer makes sense and which, likely, is already effectively lost.

Here's the long and short of the business model Qualcomm has been trying to hold onto. There was a time when it perhaps made sense to base cellular technology licensing on the value of the devices which used it. The cellular technology is what those devices were. There wasn't much else noteworthy to them. They were pieces of plastic with buttons, crude displays, microphones, speakers, etcetera - mostly basic stuff that had been around forever. Cell phones were, fundamentally, the cellular technology inside of them. There wasn't much else interesting or useful about them, and the other aspects of them were there to make use of the cellular technology.

That changed over time, but fairly quickly after - and in part due to - the iPhone. The smartphone consumed the cellular technology which it made use of. The cellular technology became just one aspect of what a modern phone was. There were now many other interesting - and technologically advanced - parts to a phone. Hoping to cash in on the increased value and role of smartphones, and seeking to prevent the loss of the revenue which had rightfully for a time come from the proliferation of basic cell phones, some industry participants - to include Qualcomm - tried hard to hold onto the device-level royalty base model which had made sense before but which now really didn't. Simply put, modems were now just parts of phones rather than, meaningfully, what phones were.

Those industry participants used a number of tactics to try to hold onto the outdated model. Things moved so quickly that existing contracts served the purpose to some extent. But Qualcomm at least did a number of other things (which have been discussed at length elsewhere) to force industry participants to continue to agree to the outdated model. At the same time, some industry participants likely went along happily. Those making inexpensive smartphones benefited from the model, as did the cellular licensors - at least those like Qualcomm with the leverage needed to impose higher (actual as opposed to published) royalty rates. But continuing with the outdated model wasn't the choice of some industry participants. They went along because they had to.

Being able to extend the model a little longer, Qualcomm could then point and say - look, this is industry standard practice (at least when it came to the royalty base aspect). It was industry standard not because it still made sense, but because it once made sense with a very different class of products which - rather than being displaced by - quickly evolved into a new class of products. And it was industry standard in part because Qualcomm was in a position - thanks in part to its improper tactics - to unilaterally impose it.

Anyway... Qualcomm is suing Apple rather than Intel because it still wants to hold onto device-level royalty bases.
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Aside from the scale and scope of the rocks that each company is throwing at each other is this: Apple is legendary for really putting the screws to its suppliers, often unfairly. That's what leverage will do. In this case, they don't have that kind of leverage.

In this case, it was a matter of Qualcomm putting the screws to an entire industry - and using illegal and contract-violative tactics to do so. Apple isn't the only industry participant that believes Qualcomm's behavior has been improper. And, of course, a number of regulatory bodies have concluded the same.

It was Qualcomm which had the leverage, and it wielded that leverage, arguably illegally, to great effect. Qualcomm's leverage has, for a number of reasons, been greatly reduced though. Now it's, e.g., Apple which has the leverage. That's what this suit is about. It's Qualcomm desperately seeking any bit of leverage it can find in hopes of eventually being able to negotiate slightly better terms.
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What you just stated is the reason the FTC brought a suit against Qualcomm for anti-competitive practices. The reason these fees are being assessed against the Intel phones is because Qualcomm's policy has been that you can't license their patents unless you buy their hardware. Since Apple was still using Qualcomm's licensed technologies with phones that they weren't paying Qualcomm to put chips in, they feel entitled to extra money to offset the "loss" in profits by not being the chipset provider for those devices.

Legally speaking, the practice of tie-in purchases is monopolistic which is forbidden by anti-trust laws in the US. Hence the FTC's suit. I find it interesting, therefore, that they are so boldly asserting a right to EXTRA royalties on these Intel devices. To me, this is a flagrant admission of serious anti-competitive practices and I am starting to side more and more with Apple.

To be clear, the FTC and other parties allege the reverse: That Qualcomm wouldn't sell someone chips - to include chips it effectively had a monopoly on - unless they agreed to Qualcomm's licensing terms (and not just with regard to the chips they bought from Qualcomm).
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For Pete's sake Apple, pay Qualcomm and get some decent modems back in your damn phones! It's a pittance for you and I'm paying $1000 per phone for a vastly inferior setup from Intel. My Verizon iPhone 6 with had better reception than my iPhone Xs. This is going to magnified when you move to 5G and Qualcomm is the international leader

That's cheap compared to losing customers due to inferior Intel radios.

It's unfortunate that, e.g., Intel was behind Qualcomm with regard to certain kinds of modems. But that was in part due to the illegal and/or contract-violative tactics Qualcomm had employed. Qualcomm was intentionally stifling competition. At some point, parties with the power to do so needed to step up and try to disrupt Qualcomm's stranglehold on the industry.

Apple, among others, did that. It meant taking some pain in the short-term. It was going to take a while to get certain Intel chips to be competitive with certain Qualcomm chips. But there was no way around that, other than to continue to let Qualcomm do what it had been doing - while the industry in general, and chip competition in particular, suffered. Going forward chip competition, and the industry in general, should benefit.

Also, as others have pointed out... Apple paying Qualcomm $31 million wouldn't resolve the broader dispute between Apple and Qualcomm. This case is just a bit of a sideshow. It was filed at the same time as an ITC action, and as part of Qualcomm's attempts to find some leverage against Apple when it comes to negotiating a resolution of the broader dispute. But of the two cases - this district court case and the ITC case - the ITC case was likely the more important. If Qualcomm could have somehow gotten an exclusion order from the ITC (which it could, in theory, still get), that might have mattered some. This district court case is more about getting a win that Qualcomm could publicly point to - see, Apple is infringing our patents. The money doesn't much matter.

You guys are missing the big picture here in all of this. A few have tried to point it out, the 31 million is nothing, yes, we all know that. It’s what it means for them if they roll over on this and accept that. Sets a precedent for the rest of their ongoing battles going forward with Qualcomm

Nobody missed it. That got pointed out in several posts already.

$31 Million to irrevocably ruin your relationship with Apple.

Qualcomm is making bad decisions here IMHO.