Qualcomm today told a San Diego jury that it wants Apple to pay $31 million in damages for patent infringement violations, which is allegedly equivalent to $1.40 per infringing iPhone.
The new information comes from CNET, which has been covering the Qualcomm vs. Apple patent trial that's in court this week.
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$1.40 per iPhone and a total of $31 million in damages suggests that Qualcomm believes only 22 million iPhones are infringing on its technology. Qualcomm came up with that total with the help of economist Patrick Kennedy, who took the stand as an expert witness for Qualcomm today. Kennedy calculated the figure based on iPhones sold from July 2017 on that used chips by Intel. Apple started using a mix of chips from both Intel and Qualcomm in the iPhone 7, and later transitioned to all Intel chips due to the legal troubles with Qualcomm.
Qualcomm and Apple are fighting over three patents that Qualcomm says Apple infringed on with its iPhones. As CNET describes, one of the patents covers a method for allowing a smartphone to quickly connect to the internet once turned on, while another covers graphics processing and battery life. The third patent Apple is accused of violating allows apps to download data more easily by directing traffic between the apps processor and modem.
Apple just last quarter earned more than $20 billion in profit, so $31 million in damages wouldn't be a hit to the company's bottom line. If Qualcomm wins the trial, though, its claim that its technology is at the "heart of every iPhone" would be more credible.
Apple and Qualcomm have been fighting since January 2017, when Apple sued Qualcomm for $1 billion in unpaid royalty fees. Qualcomm countersued, and since then, the two companies have levied multiple lawsuits against one another. Two of Qualcomm's lawsuits have resulted in import bans in Germany and China, both of which Apple was able to skirt with hardware and software updates.
The current patent trial between Apple and Qualcomm will last through next week.
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But Qualcomm doesn't want to sue Intel either because, among other reasons, it wants to be able to collect royalties based on the value of end devices rather than, e.g., on the value of chips. A reasonable royalty rate applied to the value of chips would net Qualcomm far less than it's been forcing device makers to pay. It's desperately trying to cling to a model that no longer makes sense and which, likely, is already effectively lost.
Here's the long and short of the business model Qualcomm has been trying to hold onto. There was a time when it perhaps made sense to base cellular technology licensing on the value of the devices which used it. The cellular technology is what those devices were. There wasn't much else noteworthy to them. They were pieces of plastic with buttons, crude displays, microphones, speakers, etcetera - mostly basic stuff that had been around forever. Cell phones were, fundamentally, the cellular technology inside of them. There wasn't much else interesting or useful about them, and the other aspects of them were there to make use of the cellular technology.
That changed over time, but fairly quickly after - and in part due to - the iPhone. The smartphone consumed the cellular technology which it made use of. The cellular technology became just one aspect of what a modern phone was. There were now many other interesting - and technologically advanced - parts to a phone. Hoping to cash in on the increased value and role of smartphones, and seeking to prevent the loss of the revenue which had rightfully for a time come from the proliferation of basic cell phones, some industry participants - to include Qualcomm - tried hard to hold onto the device-level royalty base model which had made sense before but which now really didn't. Simply put, modems were now just parts of phones rather than, meaningfully, what phones were.
Those industry participants used a number of tactics to try to hold onto the outdated model. Things moved so quickly that existing contracts served the purpose to some extent. But Qualcomm at least did a number of other things (which have been discussed at length elsewhere) to force industry participants to continue to agree to the outdated model. At the same time, some industry participants likely went along happily. Those making inexpensive smartphones benefited from the model, as did the cellular licensors - at least those like Qualcomm with the leverage needed to impose higher (actual as opposed to published) royalty rates. But continuing with the outdated model wasn't the choice of some industry participants. They went along because they had to.
Being able to extend the model a little longer, Qualcomm could then point and say - look, this is industry standard practice (at least when it came to the royalty base aspect). It was industry standard not because it still made sense, but because it once made sense with a very different class of products which - rather than being displaced by - quickly evolved into a new class of products. And it was industry standard in part because Qualcomm was in a position - thanks in part to its improper tactics - to unilaterally impose it.
Anyway... Qualcomm is suing Apple rather than Intel because it still wants to hold onto device-level royalty bases.
[doublepost=1552223927][/doublepost]In this case, it was a matter of Qualcomm putting the screws to an entire industry - and using illegal and contract-violative tactics to do so. Apple isn't the only industry participant that believes Qualcomm's behavior has been improper. And, of course, a number of regulatory bodies have concluded the same.
It was Qualcomm which had the leverage, and it wielded that leverage, arguably illegally, to great effect. Qualcomm's leverage has, for a number of reasons, been greatly reduced though. Now it's, e.g., Apple which has the leverage. That's what this suit is about. It's Qualcomm desperately seeking any bit of leverage it can find in hopes of eventually being able to negotiate slightly better terms.
[doublepost=1552224067][/doublepost]To be clear, the FTC and other parties allege the reverse: That Qualcomm wouldn't sell someone chips - to include chips it effectively had a monopoly on - unless they agreed to Qualcomm's licensing terms (and not just with regard to the chips they bought from Qualcomm).
[doublepost=1552224393][/doublepost]It's unfortunate that, e.g., Intel was behind Qualcomm with regard to certain kinds of modems. But that was in part due to the illegal and/or contract-violative tactics Qualcomm had employed. Qualcomm was intentionally stifling competition. At some point, parties with the power to do so needed to step up and try to disrupt Qualcomm's stranglehold on the industry.
Apple, among others, did that. It meant taking some pain in the short-term. It was going to take a while to get certain Intel chips to be competitive with certain Qualcomm chips. But there was no way around that, other than to continue to let Qualcomm do what it had been doing - while the industry in general, and chip competition in particular, suffered. Going forward chip competition, and the industry in general, should benefit.
Also, as others have pointed out... Apple paying Qualcomm $31 million wouldn't resolve the broader dispute between Apple and Qualcomm. This case is just a bit of a sideshow. It was filed at the same time as an ITC action, and as part of Qualcomm's attempts to find some leverage against Apple when it comes to negotiating a resolution of the broader dispute. But of the two cases - this district court case and the ITC case - the ITC case was likely the more important. If Qualcomm could have somehow gotten an exclusion order from the ITC (which it could, in theory, still get), that might have mattered some. This district court case is more about getting a win that Qualcomm could publicly point to - see, Apple is infringing our patents. The money doesn't much matter.