New Article Delves Into Origins of Ongoing Legal Feud Between Apple and Qualcomm

A new in-depth story about the ongoing legal fight between Apple and Qualcomm has been posted online today by Bloomberg Businessweek, going behind the scenes of the accusations and rebuttals made by the two tech companies. The fight centers upon the "Qualcomm tax," or the amount of money that Qualcomm charges smartphone makers for the internal components of a device that allows it to connect to a cellular signal, also known as the smartphone's modem.

According to court documents seen by Bloomberg Businessweek, the true origin of the feud is described as starting two summers ago at the Allen & Co. conference in Sun Valley, Idaho. There, Apple CEO Tim Cook and Samsung Vice Chairman Jay Y. Lee are believed to have "shared a quiet word," where Cook told Lee to "pressure" South Korean antitrust regulators into intensifying a Qualcomm investigation that had been open for about a year at the time.


Apple wanted to get itself in front of investigators and spur more questions about the Qualcomm tax, which it could do because it was in an agreement with the modem supplier. That deal had lowered the tax from $30 to about $10 per iPhone, with Apple promising not to challenge any of Qualcomm's patents. However, it meant that Apple could truthfully answer any question in an investigation about the supplier that was already under way -- which Qualcomm claims was exactly Apple's intent at the Idaho conference.

Qualcomm claims that at the event—almost certainly the Allen & Co. conference in Sun Valley, which both Cook and Lee attended—the Apple executive urged Samsung to pressure South Korean antitrust regulators to intensify an investigation into Qualcomm that had been open since 2014. “Get aggressive,” the Apple executive said, according to Qualcomm's filing, adding that this would be the “best chance” to get Qualcomm to lower its prices.

Apple says nothing improper happened. “I don’t know what conversation they are talking about,” says Bruce Sewell, the company’s general counsel, in an interview at headquarters in Cupertino, Calif. “For Apple to have said to Samsung, ‘You guys are in Korea and you should be watching this case carefully,’ doesn’t seem to me to be anything beyond simply the kind of conversation two CEOs might have.”

The story then details a few other parts of Qualcomm's history, including its massive "Patent Wall" that greets visitors to its headquarters, displaying patents for Qualcomm's CDMA specification and others that the company claims to be for the first smartphone and app store. "I can't think of a keystroke that you can do on a phone that probably doesn't touch a Qualcomm invention," said CEO Steve Mollenkopf.

Apple was reliant on Qualcomm for this reason for many years, as it produced the highest quality modems in the supply chain and forced the Cupertino company to deal with the Qualcomm tax. That changed in 2015 when Intel began producing modems that would arrive in the iPhone 7. According to Apple general counsel Bruce Sewell, "What prompted us to bring the case now as opposed to five years ago is simple, it's the availability of a second source."

This introduction of a quality second source in the modem supply chain was met with another point by Apple: a smartphone modem is simply one of many components that make up an iPhone — and of "no special significance" as modern consumers rely less on the actual cellular features of the device. These two points encouraged Apple's decision to fight back against Qualcomm, ultimately leading to Apple's lawsuit earlier this year, a Qualcomm countersuit soon after, and more companies joining Apple in its fight.

“Cellular connectivity is important,” he says, “but it’s not as important as it used to be.” On another table behind Sewell, an Apple representative has laid out two versions of the iPhone 7: One model, which has 128 gigabytes of memory was sold by Apple for $750. The other, which has 256 GB, sold for $100 more. How is it fair, Apple asks, for Qualcomm to charge as much as $5 more for the technology in the more expensive phone, given that the two devices are otherwise identical?

In July, Qualcomm claimed that Apple infringed on six of its new patents concerning battery life and graphics processing in smartphones, and in August the U.S. International Trade Commission opened an investigation into Apple's alleged infringement with a decision date aimed around the time of the September 2018 iPhone launch. The patent infringement accusation is said to be designed to disrupt Apple's supply chain and "push the company to negotiate," with Qualcomm CEO Mollenkopf stating that all of the legal back-and-forth won't last forever, expecting Apple to settle soon.

That won't happen according to Sewell: "There's no way that this case settles, absent a complete reinvention of the licensing model that Qualcomm has adapted in the industry."

Check out the fully story by Bloomberg Businessweek right here.

Top Rated Comments

(View all)
Avatar
37 months ago
How is it fair for Qualcomm to charge $5 more? How is it fair for #fuglyaapl to charge it's customers $100 more for additional storage that costs them $7?
Score: 16 Votes (Like | Disagree)
Avatar
37 months ago

“The other, which has 256 GB, sold for $100 more. How is it fair, Apple asks, for Qualcomm to charge as much as $5 more for the technology in the more expensive phone, given that the two devices are otherwise identical?”

This is a joke right? Apple trying to argue about fairness by giving an example in which Apple itself is unfair to customers by charging exorbitant $100 fee to ugrade the SSD when in reality it’s far cheaper? Almost 10 years of unfair 16gb iPhones. And no, there is no R&D costs for Apple to buy more SSD from its supliers.

Unbelievable.

When Apple charges you for more storage, they are charging you for the extra value the device has by having more storage. You can say they charge too much, but that's their prerogative.

Qualcomm isn't providing any extra value when Apple makes a phone with more storage. They're selling Apple the same exact modem.
Score: 16 Votes (Like | Disagree)
Avatar
37 months ago
“The other, which has 256 GB, sold for $100 more. How is it fair, Apple asks, for Qualcomm to charge as much as $5 more for the technology in the more expensive phone, given that the two devices are otherwise identical?”

This is a joke right? Apple trying to argue about fairness by giving an example in which Apple itself is unfair to customers by charging exorbitant $100 fee to ugrade the SSD when in reality it’s far cheaper? Almost 10 years of unfair 16gb iPhones. And no, there is no R&D costs for Apple to buy more SSD from its supliers.

Unbelievable.
Score: 13 Votes (Like | Disagree)
Avatar
37 months ago
It's interesting when an Apple patent is disputed, Apple will start a thermonuclear war between companies ...but when it comes to respecting other company's patents ... oh how they love to play the victim.
Score: 10 Votes (Like | Disagree)
Avatar
37 months ago

Qualcomm does not provide Apple with SSDs in other words Qualcomm is asking Apple to pay when they do a profit on storage, I don't find those demands legitimate.

Apple does not provide anything extra for hosting higher priced apps in its App Store, nor does it cost them more to store and deliver them (beyond a few percent for credit card fees perhaps).

Yet they still charge developers 30% of the app price, no matter what.

Why? Partly because in this way, higher priced apps subsidize lower priced apps.

In a similar way, cellular patents have been charged by phone price for decades. In this way, higher priced (and profit) phones subsidize phones which have as little as $2 profit. Those phones could not possibly pay a $10 royalty fee, but phones making hundreds of dollars in profit certainly can.

Moreover, just as with apps, the higher priced/profit phones would not have had much of a market without all the lower priced phones, as it is the latter which led to the construction of the global cellular network. Lower priced apps/phones constantly prime the pump for the higher profit makers to make billions.
Score: 10 Votes (Like | Disagree)
Avatar
37 months ago

Apple wanted to get itself in front of investigators and spur more questions about the Qualcomm tax,

But the Apple tax on consumers is okay, Tim?

Apple was reliant on Qualcomm for this reason for many years, as it produced the highest quality modems in the supply chain and forced the Cupertino company to deal with the Qualcomm tax.

I thought Apple was all about high prices in return for quality. Moreover, Apple wanted Samsung to pay a lot of money for a few questionable patents, but aren't willing to pay Qualcomm for using hundreds of patents that Qualcomm spent billions developing. What's good for the goose is good for the gander.
Score: 10 Votes (Like | Disagree)

Top Stories

Apple Takes Legal Action Against Small Company With Pear Logo

Saturday August 8, 2020 11:09 am PDT by
Apple is taking legal action against the developers of the app "Prepear" due to its logo, according to iPhone in Canada. Prepear is an app that helps users discover recipes, plan meals, make lists, and arrange grocery deliveries. The app is a spinoff of "Super Healthy Kids," and the founders claim that they are facing litigation from Apple. Apple reportedly takes issue with Prepear's logo, ...

Kuo: Global iPhone Shipments Could Decline Up to 30% If Apple Forced to Remove WeChat From App Store [Updated x2]

Sunday August 9, 2020 10:17 pm PDT by
In a worst-case scenario, Apple's annual global iPhone shipments could decline by 25–30% if it is forced to remove WeChat from its App Stores around the world, according to a new research note from analyst Ming-Chi Kuo viewed by MacRumors. The removal could occur due to a recent executive order aiming to ban U.S. transactions with WeChat and its parent company Tencent. Kuo lays out...

Google Maps Debuts New Apple Watch App and CarPlay Features

Monday August 10, 2020 9:16 am PDT by
Google today announced the launch of several features for Google Maps on Apple products, including new CarPlay functionality and a new Google Maps app that works on Apple Watch. The new Google Maps app for Apple Watch works similarly to the iOS app, allowing Apple Watch owners to get directions for a car, bike, public transit, or on foot. The app supports estimated arrival times and...

Foxconn Reportedly Begins Seasonal Hiring Spree for iPhone 12 Production

Monday August 10, 2020 7:03 am PDT by
Apple's largest manufacturing partner Foxconn has begun its seasonal hiring spree to assist with iPhone 12 production, offering employees who recruit qualified applicants up to a 9,000 yuan bonus, according to Chinese media reports. As usual, Foxconn needs as many hands on deck as possible at its factory in Zhengzhou, China to assist with mass production of the upcoming iPhones. Apple is...

Apple May Release 4G-Only iPhone 12 in Early 2021

Tuesday August 11, 2020 5:28 am PDT by
In a research note shared by Business Insider, Wedbush Securities analysts said that Apple may release a cheaper iPhone 12 in early 2021 with no 5G connectivity. Wedbush initially believed Apple would launch a mix of 4G and 5G iPhone 12 models this fall. Following re-examination of Asian supply chains, analysts Daniel Ives, Strecker Backe, and Ahmad Khalil revised the predictions,...

2020 iMac Teardown Reveals Internal Changes and Similarities

Saturday August 8, 2020 12:44 pm PDT by
A teardown video, shared by OWC, reveals the internal changes in the new 2020 27-inch iMac. The 2020 27-inch iMac was announced earlier this week with 10th-generation Intel Core processors, AMD Radeon Pro 5000 series graphics, up to 128GB of RAM, up to 8TB of storage, a 1080p front-facing FaceTime camera, a True Tone display with a nano-texture glass option, higher fidelity speakers, and...

Apple Believes This German Cycling Path Logo Infringes on Its Own Logo

Wednesday May 1, 2019 9:51 am PDT by
Apple recently objected to the logo of a new German cycling path in an appeal filed with the German Patent and Trademark Office, according to German outlets General-Anzeiger Bonn and Westdeutscher Rundfunk. Apple reportedly takes issue with the logo's green leaf and supposed "bitten" right side, attributes the company believes are too similar to its own logo. The logo, registered with the ...

Apple Seeds First Public Beta of watchOS 7 to Public Beta Testers

Monday August 10, 2020 10:33 am PDT by
Apple today seeded the first public beta of an upcoming watchOS 7 update to public beta testers, one week after seeding the fourth beta to developers and a month and a half after the Worldwide Developers Conference. The update can be downloaded after installing the proper profile from Apple's Public Beta website. watchOS 7 should not be installed on a primary device as it is still an early...

Apple Watch Likely to Adopt MicroLED Display Technology in 3-4 Years

Monday August 10, 2020 2:55 am PDT by
This year's Apple Watch Series 6 is expected to feature an OLED screen like previous models, but a future model is likely to be the first Apple product to adopt MicroLED display technology, albeit not for another three to four years. That's the main takeaway reading between the lines of comments made by the chairman of Epistar, Taiwan's top LED producer, which is reportedly working on a...

Apple Seeds iOS 14 and iPadOS 14 Public Beta 4 to Testers

Thursday August 6, 2020 10:05 am PDT by
Apple today seeded new public betas of upcoming iOS 14 and iPadOS 14 updates to its public beta testing group. Today's software releases, which Apple labels as fourth betas to keep them in line with developer betas, are actually the third betas that Apple has provided and they come two weeks after the prior beta releases. Public beta testers who have signed up for Apple's beta testing...