Apple Sues Qualcomm for $1 Billion in Unpaid Royalty Rebates [Updated]

Following an FTC complaint alleging Qualcomm engaged in anticompetitive patent licensing practices, Apple has filed a lawsuit against Qualcomm claiming the company has charged unfair royalties for "technologies they have nothing to do with."

qualcomm_logo
According to a statement Apple shared with several news sites, Qualcomm "reinforces its dominance" through exclusionary tactics and high patent licensing fees. Apple's full statement is below:

"For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with. The more Apple innovates with unique features such as TouchID, advanced displays, and cameras, to name just a few, the more money Qualcomm collects for no reason and the more expensive it becomes for Apple to fund these innovations. Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.

To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1B in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them.

Apple believes deeply in innovation and we have always been willing to pay fair and reasonable rates for patents we use. 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."

In the lawsuit, filed in a federal district court in the Southern District of California, Apple accuses Qualcomm of using its position as the supplier of a key iPhone component to drive up patent licensing fees.

Qualcomm supplies the LTE modems used in Apple's line of iPhones, and up until 2016, the company was Apple's sole supplier. The iPhone 7 and the iPhone 7 Plus use modems from both Qualcomm and Intel.

Qualcomm reportedly forced Apple to use its LTE chips exclusively in iOS devices and pay a percentage of the total average selling price of an iPhone for access to Qualcomm patents.

Qualcomm is supposed to provide Apple with quarterly rebates, but has failed to do so for the past year because of Apple's participation in an antitrust investigation against Qualcomm in South Korea. That investigation led to an $850+ million fine against Qualcomm for anticompetitive licensing practices.

Apple is seeking $1 billion in rebate payments that have been withheld.

Earlier this week, the United States Federal Trade Commission filed a lawsuit against Qualcomm that focused in part on Apple and Qualcomm's licensing deals. According to the FTC, Qualcomm imposes "onerous and anticompetitive supply and licensing terms" on its smartphone partners by abusing its patent portfolio.

Qualcomm has said it has "grave concerns" about the lack of evidence supporting the FTC's allegations and has promised to defend itself in federal court.

Update 1/25: Apple has also filed two lawsuits against Qualcomm in Beijing. The first, which seeks 1 billion yuan ($145.32 million) in damages accuses Qualcomm of abusing its clout in the chip industry. The second claims Qualcomm has not fulfilled promises to license standard essential patents fairly.

Top Rated Comments

Kaibelf Avatar
62 months ago
Lol, Apple, hustling till it's last breath. Get a life
Get a life? Any person or company worth its salt should expect a contract to be honored. If the payments are due, then they should be paid, period. Maybe your word is mud, but to normal people a deal is a deal.
Score: 34 Votes (Like | Disagree)
samcraig Avatar
62 months ago
I hope these bullies get a comeuppance!
Both companies are bullies.
Score: 24 Votes (Like | Disagree)
Orlandoech Avatar
62 months ago
Good on Apple for taking a stand.
Funny how when Apple sues someone, people like you say "Good for Apple", then when people/companies sue Apple it's "frivolous case".
Score: 23 Votes (Like | Disagree)
cfunk Avatar
62 months ago
That's purposefully misleading.
Qualcomm is not charging Apple royalties for Apple's own technologies.
Well, they are to an extent. Qualcomm is getting royalties based on the selling price. The more non-Qualcomm tech they put into the iPhone, potentially driving up the price, the more Qualcomm receives, even though the cost of their components in the phone is likely decreasing.
Score: 19 Votes (Like | Disagree)
Headrush69 Avatar
62 months ago
That's purposefully misleading.
Qualcomm is not charging Apple royalties for Apple's own technologies.
If their royalties are based on a percentage of the phone, they actually are.

If I introduce a new phone and the only difference is has a bigger screen for example, why should any patent company get more $$$ for the exact same chip used?
Score: 16 Votes (Like | Disagree)
kdarling Avatar
62 months ago
RE: charging royalties by price of phone.

This is actually not unusual for patent royalties; they can be a percentage of a company's revenue. More to the point, it's EXTREMELY common for cellular SEPs (standard-essential patents).

This was done partly in order to encourage lower prices on phones, to get more phones into the hands of the public. (In essence, companies with bigger profits subsidize cheaper phones, where $2 profit on a $40 phone cannot possibly pay full royalties.) And it worked. In a fairly short period, billions on the planet had phones.

Guess who took advantage of that huge infrastructure and market that they had no part in creating? Yep, Apple, who has made many billions in profit even after paying royalties.

--

Besides the fact that percentage of price is the normal contract for these kind of FRAND patents, here are two important notes that people need to know:

1. Royalty as a percentage of sales was specifically allowed by the DOJ. I tracked down the original approval document back when this was originally questioned:



2. Just as with taxes, Apple cleverly avoided paying full royalties anyway, by lowering the "price of the phone". Insiders claim that Apple only pays Qualcomm a percentage of the price Apple pays for each iPhone AT THE FOXCONN FACTORY, which was around $250 last time I checked on this a few years ago.... NOT on what Apple themselves resell the phone for later on, which is of course hundreds of dollars higher.

So all that whining about poor Apple "paying extra for their technology" amounts to a few dimes per device... and is nothing compared to how much Apple gouges its own customers.

For instance, Apple charges its customers hundreds of dollars for extra storage which only costs Apple a few dollars. Yet Apple only pays Qualcomm a few cents more because the percentage is based on Apple's Foxconn cost, not their final customer profit.

Attachment Image
Score: 14 Votes (Like | Disagree)

Related Stories

General Apps Messages

Android iMessage Competitor Puts Pressure on Apple

Friday July 30, 2021 3:15 am PDT by
Google and the three major U.S. carriers, including Verizon, AT&T, and T-Mobile, will all support a new communications protocol on Android smartphones starting in 2022, a move that puts pressure on Apple to adopt a new cross-platform messaging standard and may present a challenge to iMessage. Verizon recently announced that it is planning to adopt Messages by Google as its default messaging...
iphone 13 teal with text

Apple Begins Preparation for iPhone 13 Production Ahead of Fall Launch

Monday June 28, 2021 3:29 am PDT by
We're just a few months away from when Apple is expected to reveal the 2021 iPhone, dubbed the "iPhone 13." In preparation for its launch, it has been pulling in shipments of different components needed to produce the new iPhones, according to a report from DigiTimes. In years past, Apple released its latest iPhone lineup, alongside a new Apple Watch, during a September event at Apple Park....
studio buds family

Beats Studio Buds Debuting Today With Active Noise Cancellation, Stemless Design, and More for $150

Monday June 14, 2021 8:00 am PDT by
We've seen a lot of teasers about the Beats Studio Buds over the past month since they first showed up in Apple's beta software updates, and today they're finally official. The Beats Studio Buds are available to order today in red, white, and black ahead of a June 24 ship date, and they're priced at $149.99. The Studio Buds are the first Beats-branded earbuds to truly compete with AirPods...
bluetti eb70 main

MacRumors Giveaway: Win a Bluetti EB70 Portable Power Station and 200W Solar Panel

Friday September 3, 2021 11:13 am PDT by
For this week's giveaway, we've teamed up with MAXOAK to offer MacRumors readers a chance to win a Bluetti portable power station and an accompanying solar panel. Bluetti makes a range of portable power station options that are useful for camping, emergencies, power outages, off-grid living, and similar situations. The Bluetti EB70 is a solid middle of the road option that offers 716Wh and...
apple privacy

Apple Publishes FAQ to Address Concerns About CSAM Detection and Messages Scanning

Monday August 9, 2021 1:50 am PDT by
Apple has published a FAQ titled "Expanded Protections for Children" which aims to allay users' privacy concerns about the new CSAM detection in iCloud Photos and communication safety for Messages features that the company announced last week. "Since we announced these features, many stakeholders including privacy organizations and child safety organizations have expressed their support of...
macos catalina legacy system extension alert

Apple Begins Warning Users That 'Legacy System Extensions' Won't Work With a Future Version of macOS

Wednesday March 25, 2020 9:53 am PDT by
Apple has shared a new support document that indicates kernel extensions — which it calls "legacy system extensions" — will not be compatible with a future version of macOS because they "aren't as secure or reliable as modern alternatives."System extensions are a category of software that works in the background to extend the functionality of your Mac. Some apps install kernel extensions, which...
General Spotify Feature

Spotify Pauses Plans to Add AirPlay 2 Support to iOS App [Update: Spotify Clarifies]

Friday August 6, 2021 9:07 am PDT by
See update at bottom of article Spotify this week confirmed that its plans to add AirPlay 2 support to its iOS app have been placed on indefinite hiatus. In an online discussion forum post, a Spotify representative said the streaming music service had been working on supporting AirPlay 2, but the company has paused the efforts "for now" due to "audio driver compatibility issues." The...
youtube apple tv

YouTube Discontinuing 3rd-Generation Apple TV App, AirPlay Still Available

Wednesday February 3, 2021 3:09 pm PST by
YouTube is planning to stop supporting its YouTube app on the third-generation Apple TV models, where YouTube has long been available as a channel option. A 9to5Mac reader received a message about the upcoming app discontinuation, which is set to take place in March.Starting early March, the YouTube app will no longer be available on Apple TV (3rd generation). You can still watch YouTube on...
os x mountain lion macs 16x9 2

Apple Makes OS X Lion and Mountain Lion Free to Download

Wednesday June 30, 2021 12:19 pm PDT by
Apple recently dropped the $19.99 fee for OS X Lion and Mountain Lion, making the older Mac updates free to download, reports Macworld. Apple has kept OS X 10.7 Lion and OS X 10.8 Mountain Lion available for customers who have machines limited to the older software, but until recently, Apple was charging $19.99 to get download codes for the updates. As of last week, these updates no...
Pixel Stand 23W 668x445

Google Pixel 6 Rumored to Support 23W Wireless Charging, Beating iPhone 12's MagSafe

Wednesday September 1, 2021 1:54 am PDT by
Google is rumored to be working on a new wireless charging stand that could deliver 23W of charging power to its upcoming Pixel 6 and Pixel 6 Pro phones, according to a leaked inventory image published by Android Police. Image via Android Police. If true, that would beat the iPhone 12's maximum 15W wireless charging speed (or 12W on ‌iPhone 12 mini‌) using Apple's MagSafe charger, and...