iPhone maker says chipmaker owes it a rebate for licensing fees

Apple has filed a $1bn lawsuit against Qualcomm accusing the chipmaker of abusing a monopoly position, after the US and South Korean regulators argued it exploited its market dominance at the expense of handset makers.

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Shares in Qualcomm fell 2.4 per cent to $62.88 just before the markets closed on Friday when the lawsuit was published. This is the first direct challenge by one of Qualcomm’s major customers but it follows a lawsuit by the US Federal Trade Commission on Tuesday, and an $890m fine from the South Korean antitrust authorities late last year.

Apple is demanding a payment of $1bn it believes is due as a rebate for licensing fees, which it claims the chipmaker is holding back as punishment for Apple “responding truthfully” to the South Korean investigation. Qualcomm, it claims, charges Apple at least five times more than what it pays all its other cellular patent licensers combined.

“Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties,” Apple said in a statement.

“We are extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty we have no choice left but to turn to the courts.”

Qualcomm said that Apple had “intentionally mischaracterised” the agreements and negotiations between the two companies.

The smartphone patent wars are heating up, as questions left unanswered in the last round of litigation between Apple, Samsung, Google and Motorola emerge again.

Last month, Apple and Nokia launched legal challenges against each other on both sides of the Atlantic, with Apple accusing two companies associated with the Finnish group of trying to extract and extort exorbitant revenue, and Nokia claiming Apple had infringed 32 of its patents in products that include the iPhone and iPad.

In the complaint in the Qualcomm case, Apple asks the court to look at a representative sample of Qualcomm’s patents to see if they are valid and to examine if the royalties are too high. Every time Apple adds a new feature, such as touch ID to access Apple Pay, or increasing the memory on an iPhone, Qualcomm collects a larger royalty, the complaint claims.

“Apple products are among the most innovative in the world, yet because of its monopoly power, its suppression of the disclosure of information to government agencies investigating Qualcomm, and an abusive licensing model, Qualcomm believes it is entitled to collect its ‘tribute’ on every such improvement,” it writes.

Apple also accuses Qualcomm of coercing customers into remaining quiet in an effort to keep courts and regulators in the dark.

“Qualcomm pursues its illegal practices through a secret web of agreements designed to obfuscate its conduct,” it added.

Dan Rosenberg, Qualcomm’s executive vice-president and general counsel, said Qualcomm was still reviewing the complaint but it was clear the claims were “baseless”.

“Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world,” he said. “We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits.”

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Source : https://www.ft.com/content/3c84651a-df52-11e6-9d7c-be108f1c1dce
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