Qualcomm Says Its Innovations Are At the Heart of Every iPhone as Battle With Apple Intensifies

Apple this week expanded its lawsuit against Qualcomm, accusing the wireless chipmaker of "double-dipping" by allegedly refusing to sell chips to manufacturers unless they also pay separate royalties and enter licensing agreements at unreasonable rates, according to court documents filed electronically.

qualcomm iphone 7
Qualcomm has since responded to the amended complaint, claiming that Apple is "trying to distract" from the fact that it has made alleged "misleading statements" about the comparative performance of its Snapdragon X12 modem, used in select iPhone 7 models to enable Wi-Fi and cellular connectivity.

Apple dual sources wireless chips from Qualcomm and Intel for the iPhone 7 and iPhone 7 Plus. Qualcomm's Snapdragon X12 modem is used in CDMA models, such as those sold by Verizon and Sprint, while Intel's XMM7360 modem is used in GSM models, such as those sold by AT&T and T-Mobile.

New York-based Cellular Insights last year found Qualcomm's modem to significantly outperform Intel's modem in the iPhone 7 Plus, based on simulated testing of LTE performance at different distances from a cellular tower.

Apple, however, publicly stated there is "no discernible difference" in performance between the Qualcomm and Intel modems in any of the models. Apple also threatened Qualcomm not to disclose the truth, according to Don Rosenberg, executive vice president and general counsel of Qualcomm.

Rosenberg said Apple's bigger misconception is that Qualcomm's innovations are limited to technology implemented in the cellular modem, when in fact its patented inventions are supposedly "at the heart of every iPhone" and "enable the most important uses and features" of those devices.

An excerpt from Qualcomm's statement obtained by MacRumors:

Apple says Qualcomm's innovations are limited to technology implemented in the cellular modem, when Apple knows well that Qualcomm has been the de facto R&D arm of the industry.

Qualcomm's patented inventions make possible not only connectivity and high-speed data transmission across mobile networks, but also high-precision GPS navigation, app store operations, power management and battery efficiency, mobile video including advanced compression, graphics, camera imaging and facial-recognition technology, audio quality and audio file compression, and much, much more.

Qualcomm's innovations are at the heart of every iPhone and enable the most important uses and features of those devices. It simply is untrue that Qualcomm is seeking to collect royalties for Apple innovations that have nothing to do with Qualcomm's technology.

Rosenberg added that Apple is "rarely first to market with any new technology, which shows it is relying heavily on the R&D investments in the most revolutionary technologies by companies like Qualcomm."

Apple argued that Qualcomm has been unfairly "levying its own tax" on the iPhone's innovations by charging royalties on a percentage of the entire smartphone's value, despite supplying just a single component of the device.

An excerpt from Apple's amended complaint:

As Apple innovates, Qualcomm demands more. Qualcomm had nothing to do with creating the revolutionary Touch ID, the world’s most popular camera, or the Retina display Apple’s customers love, yet Qualcomm wants to be paid as if these (and future) breakthroughs belong to it.

Qualcomm said the per-device royalty that it charges Apple's contract manufacturers for the right to use its licensed technologies in the iPhone is "less than what Apple charges for a single wall plug." The only first-party wall plug that Apple sells is a 5W USB Power Adapter for $19 in the United States.

Apple sued Qualcomm in January for $1 billion in alleged unpaid royalty rebates. Qualcomm countersued Apple for breach of contract, encouraging regulatory attacks on its business, and failing to engage in "good faith negotiations" for a license to its wireless patents on fair, reasonable, and non-discriminatory terms.

Qualcomm was the exclusive supplier of 3G and LTE modems for iPhones until last year, when Apple began dual sourcing from Intel.

Top Rated Comments

Flytrap21 Avatar
69 months ago

Qualcomm Says Its Innovations Are At the Heart of Every iPhone as Battle With Apple Intensifies
Article Link: Qualcomm Says Its Innovations Are At the Heart of Every iPhone as Battle With Apple Intensifies ('https://www.macrumors.com/2017/06/21/qualcomm-innovations-heart-of-every-iphone/')
I think that Qualcomm is missing the point... nobody - not even Apple - is saying that they should not be fairly compensated for their intellectual property. Apple is a big proponent of the protection of proprietary intellectual property rights, they would never advocate that Qualcomm should be made to forgo fair compensation for licensing their technology.

However, there are two things at stake here:
[LIST=1]
* The first is whether Qualcomm, which receives a license fee for the incorporation of its intellectual property and technology into the components manufactured by independent component manufacturers such as Foxconn, should be allowed to demand a second license fee for the same intellectual property and technology from the downstream users of those components when they incorporate the components into their products.
* The second is whether the value of Qualcomm's intellectual property and technology should be linked to the gross value of the final product within which the intellectual property or technology is being used or the value of the radio component into which it has ben incorporated. Linking it to the final product value creates a discriminatory (non-FRAND) licensing regimen, as Apple ends up paying more to Qualcomm for the same license than its competitors simply because the gross price the iPhone is higher than that of its competitors, regardless of the margins.


The current Qualcomm licensing regimen would mean that if Apple made a connected car that relied on a radio component incorporating Qualcomm's intellectual property or technology, the licensing costs would be prohibitively high as the fee would be a factor of the gross value of the connected car and not the radio components within that car. It also means that nobody would even make a connected car if the entire profit margin would have to be paid to Qualcomm, for the car to work - give how thin the margins are in the motor industry, unless Qualcomm gave the car industry favourable terms. This, in turn, would be discriminatory to a potential competitor such as Apple that is trying to break into the car industry from another industry that does not enjoy those favourable terms.

As you can see, Qualcomm has been abusing its ownership of the intellectual property and technology that is key to the standards that underpin much of our modern interconnected world. Nobody says that they should give their property away for free... but they seem to have lost sight of their commitment to license their intellectual property and technology on a Fair, Reasonable And Non-Discriminatory basis, when they submitted their intellectual property and technology to be incorporated into the standards.
Score: 17 Votes (Like | Disagree)
Kaibelf Avatar
69 months ago
So, Qualcomm thinks that FRAND doesn't apply to them because they contributed a lot or? I'm not sure exactly what their position is here, but it sounds like they want to have it both ways.
Score: 16 Votes (Like | Disagree)
elvisimprsntr Avatar
69 months ago
Apple likely sat on this while QCOM has been the sole source for cellular modems. Now that AAPL sources modems from INTC, it has some leverage. The question is if this is an indication AAPL will sole source modems from INTC for future products, including CDMA modems. Even if the QCOM modems have 1% better LTE performance, who give a **** since the INTC modems are capable of 1 Gbps and the carriers can't support it yet anyway.

The 7560 supports LTE, GSM, CDMA, and TD-SCDMA (China) in one package. This allows AAPL to have a single SKU world wide, including China. This coupled with eSIM would significantly reduce manufacturing, distribution, and inventory complexity.

https://www.intel.com/content/www/us/en/wireless-products/mobile-communications/xmm-7560-brief.html




Time to short QCOM and buy INTC!

Attachment Image
Score: 12 Votes (Like | Disagree)
navier Avatar
69 months ago
"Qualcomm Says Its Innovations Are At the Heart of Every iPhone as Battle With Apple Intensifies"

So are screws, and last time I checked there was zero innovation
Score: 6 Votes (Like | Disagree)
techwhiz Avatar
69 months ago
So basically they made a processor and are taking the praise for Apple's software running on it.

I suppose we'd better thank Intel for all the amazing things Final Cut Pro and XCode can do..
Wrong. Without the algorithms running in and on the Qualcomm chips you couldn't even connect to a cell tower, let alone to hand off between them. Let's see Apple build a phone and do all their own innovation. No outside chips....
I'll wait the 20 or so years while they spend a couple of hundred billion on R&D and develop new ways around the existing patents.

The argument you make is specious at best.
Here is an article https://www.greyb.com/starpatents-in-qualcomm-patent-portfolio/ about Qualcomm and it's patens and why they are valuable.

Apple wants to claim that Qualcomm has trivial patents and argues some are even worthless.
Hardware engineers know better and this is the bean counters and lawyers.
Veterbi was brilliant and made cell phone technology possible.

BTW - I'm not an Apple hater. I own and have owned Apple stock for almost two decades.
I'm a hardware engineer and know the value of technology.
Score: 6 Votes (Like | Disagree)
Glideslope Avatar
69 months ago
So, Qualcomm thinks that FRAND doesn't apply to them because they contributed a lot or? I'm not sure exactly what their position is here, but it sounds like they want to have it both ways.
It's the FRAND issues that will bring them back down to reality. They have their own interpretation. Apple will just keep pushing this along until Intel Has their Modems up to speed in 2018. Then cut off QC entirely. It's personal now. :apple:
Score: 5 Votes (Like | Disagree)

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