Qualcomm could consider “nuclear option” in ongoing royalty dispute with Apple

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Date: Friday, May 5th, 2017, 05:46
Category: Hardware, iPhone, News

Things are getting ugly between Apple and Qualcomm.

Qualcomm, which has been in a heated dispute with Apple over patent royalty payment, may exercise the nuclear option by asking the United States International Trade Commission (USITC) to block iPhone imports.

At the root of the dispute between Apple and Qualcomm are cellular communication technology patents that Apple and others license from Qualcomm for a hefty fee.

The tensions, which have been brewing for months, finally hit a new peak in January when the Federal Trade Commission accused Qualcomm of anti-trust practices. Essentially the deals it was making with companies like Apple were considered unfair. Part of the issue was that Qualcomm was charging Apple a licensing fee for every single iPhone, whether or not every device used Qualcomm’s cellular technologies. As of the iPhone 7, Apple started mixing in Intel baseband processors to the iPhone mix.

A few days later, Apple filed suit against Qualcomm for $1 billion. Qualcomm eventually filed its own countersuit.

The subject of the royalty suits surfaced during Apple’s Q2 2017 financial report call on Tuesday when an investor asked Apple CEO Tim Cook why Apple was still withholding royalty payments from Qualcomm, thereby risking Qualcomm withholding future cellular modem sales to Apple or Qualcomm “potentially even getting an injunction on iPhones in select geographies around the world.”

Cook stated that Qualcomm and companies like it must offer licenses to partners at fair, reasonable, and non-discriminatory (FRAND) terms. Qualcomm, according to Cook, has not done that. Cook also made it clear that Apple believes it owes Qualcomm something, just not the amount Qualcomm is charging.

It’s hard to say where this will go, but some industry watchers feel Qualcomm is dead serious in its threat.

“I firmly believe that Qualcomm will pursue an iPhone import block and they are doing it to get paid for the IP Apple is consuming for free,” said Moor Insights & Strategy President and Principal Analyst Patrick Moorhead. “Apple isn’t going to come back to the table and Qualcomm isn’t going to change their 3gpp ETSI-agreed licensing process unless a court requires it.”

Still, Qualcomm has yet to make such a move
“No complaint has been filed with the Commission at this time,” U.S. International Trade Commission Public Affairs Officer Peg O’Laughlin said via email.

The lack of paperwork doesn’t mean Qualcomm, which would not comment on this story, isn’t considering the move, but it makes it seem less like a dangerous action and more like something else.

“Yes, it is a negotiating tactic,” said Analyst and Creative Strategies President Tim Bajarin, adding, “[Qualcomm] would probably not be able to get an injunction but could use this move to force Apple to be more proactive in dealing with this problem.”

Should Qualcomm’s threats lead to a delay in the next-gen iPhone, this would be bad for both Apple and Qualcomm, but also lead to the vilification of Qualcomm among users and the media alike. This, in turn, would make it that much harder for Qualcomm to land deals with other device makers looking to incorporate their technology.

Qualcomm will also get paid nothing.

In effect, Qualcomm’s nuclear option could mortally wound Qualcomm. And when the dust clears, Apple would pick itself up, brush itself off, and eventually ship the next-gen iPhone with Intel’s cellular technology. Someone else would end up owning Qualcomm’s patents, probably a patent troll, but Apple would still have an easier time dealing with them.

Stay tuned for additional details as they become available.

Via Mashable

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