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
52 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
52 months ago

I hope these bullies get a comeuppance!

Both companies are bullies.
Score: 24 Votes (Like | Disagree)
Orlandoech Avatar
52 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
52 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
52 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
52 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)

Top Stories

Top Stories 44 Feature

Top Stories: 'Thinner and Lighter' MacBook Air, Smaller iPhone 13 Notch, iOS 14.4 Incoming

Saturday January 23, 2021 6:00 am PST by
We continued to hear a lot more about Apple's plans for its Mac lineup this week, including word of a high-end redesigned MacBook Air and the return of an SD card slot as part of the upcoming MacBook Pro redesign. It also sounds like Apple has been working on Face ID for Mac, but it won't be appearing in a redesigned iMac this year as originally planned. This week also saw rumors about the...
magsafecasedangle

Apple Elaborates on Potential for iPhone 12 and MagSafe Accessories to Interfere With Implantable Medical Devices

Saturday January 23, 2021 2:42 pm PST by
Since the launch of iPhone 12 models in October, Apple has acknowledged that the devices may cause electromagnetic interference with medical devices like pacemakers and defibrillators, but the company has now shared additional information. Apple added the following paragraph to a related support document today:Medical devices such as implanted pacemakers and defibrillators might contain...
Flat MacBook Air Feature

Bloomberg: Apple Working on 'Thinner and Lighter' High-End MacBook Air With MagSafe, Could Launch in Second Half of 2021

Friday January 22, 2021 3:34 am PST by
Apple is working on a "thinner and lighter" version of the MacBook Air that the company plans to release during the second half of this year at the earliest or in 2022, according to a new report by well-connected Bloomberg journalist Mark Gurman. It will include Apple's MagSafe charging technology and a next-generation version of the company's in-house Mac processors. Apple has discussed...
2021 mbp sd slot feature2

Bloomberg: Next MacBook Pro to Feature SD Card Reader

Friday January 22, 2021 7:50 am PST by
Last week, reputable analyst Ming-Chi Kuo outlined his expectations for new 14-inch and 16-inch MacBook Pro models later this year, including the return of the MagSafe charging connector, the removal of the Touch Bar, a new flat-edged design, and the return of more ports built into the notebooks for expanded connectivity. A concept of a modern MacBook Pro with an SD card reader Kuo did not...
airpods galaxy buds comparison

Samsung Galaxy Buds Pro vs. Apple AirPods Pro

Friday January 22, 2021 2:34 pm PST by
Samsung in January unveiled new flagship Galaxy S21 smartphones and alongside the new phones, introduced the $200 Galaxy Buds Pro, which are priced at $199 and offer Active Noise Cancellation. Subscribe to the MacRumors YouTube channel for more videos. These new Galaxy Buds Pro are clearly designed to compete with Apple's AirPods Pro, so we thought we'd compare the two sets of earbuds in our...
maxresdefault

Microsoft Touts Surface Pro 7 as 'The Better Choice' Over MacBook Pro in New Ad

Saturday January 23, 2021 11:02 am PST by
Microsoft yesterday shared a new ad on YouTube titled "Microsoft Surface Pro 7: The Better Choice," in which the company compares its tablet computer to Apple's 13-inch M1 MacBook Pro, as spotted by MSPoweruser. The ad highlights the Surface Pro 7's touchscreen and included stylus as opposed to only a "little bar" (the Touch Bar) on the MacBook Pro. Other advantages of the Surface Pro 7...
iOS 15 icon mock banner

iOS 15 Rumored to Drop Support for iPhone 6s and 2016 iPhone SE

Thursday January 21, 2021 11:58 am PST by
Apple's upcoming iOS 15 operating system, which we expect to see unveiled in June, is rumored to be dropping support for a few of Apple's older iPhones. According to French site iPhoneSoft, iOS 15 will not be able to be installed on the iPhone 6s, the iPhone 6s Plus, or the 2016 iPhone SE, all of which have an A9 chip. The iPhone 6s and 6s Plus were introduced in 2015 and are now more...
maxresdefault

Video Demos macOS Catalina Running on iPad Pro via x86 Emulation

Thursday January 21, 2021 11:36 am PST by
A video demonstrating macOS Catalina running on a current 2020 iPad Pro has been shared on YouTube, giving us a look at an interesting hack that has a Mac OS up and working on one of Apple's iPads. There's limited information about how the process of getting macOS Catalina on an iPad Pro works, but it uses x86 emulation and was done through the UTM software that allows virtual machines to...
iPhone 13 Notch Feature

iPhone 13 Rumored to Feature Smaller Notch, Pro Model Cameras to Use Larger Image Sensor

Thursday January 21, 2021 1:38 am PST by
Apple's iPhone 13 series will feature a redesigned Face ID system that will allow for a smaller notch at the top of the screen, according to a new report today. The rumor comes via hit-and-miss Taiwanese industry publication DigiTimes, whose supply chain sources also claim that the ultra wide-angle lens in Apple's next-generation iPhones is due for an upgrade. The next-generation iPhones'...
iOS 14

Apple Seeds iOS 14.4 and iPadOS 14.4 Release Candidate to Developers and Public Beta Testers

Thursday January 21, 2021 10:14 am PST by
Apple today seeded the RC version of upcoming iOS 14.4 and iPadOS 14.4 updates to developers for testing purposes, with the new betas coming a week after Apple released the second betas. iOS 14.4 and iPadOS 14.4 can be downloaded through the Apple Developer Center or over the air after the proper profile has been installed on an iPhone or iPad. Paired with the HomePod 14.4 beta that is...