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Apple Halts Qualcomm Royalty Payments During Legal Battle

Apple has taken its fight with Qualcomm out of the courts and into the balance sheets. Qualcomm said in a press release that Apple has withheld royalty payments from manufacturers, which means those manufacturers can't pay Qualcomm the licensing fees it's owed for the first quarter of 2017. This in turn means that Qualcomm is taking a hit to one of its primary sources of income while fighting a legal battle in courts around the world.

Qualcomm said Apple has "indicated it will continue this behavior until its dispute with Qualcomm is resolved." The dispute in question is Apple's claim that Qualcomm abuses the popularity of its products to force other companies into restrictive and expensive licensing agreements. Apple took those complaints to courts in California and Beijing in January; the Federal Trade Commission also accused Qualcomm of wrongdoing that same month.

The result is a global battle wherein Apple is seeking $1 billion and 1 billion yuan in damages. Apple CEO Tim Cook said in an earnings call that this was a last resort. "I don't like litigation," he said. "And so if there's another way, then that would be great, but at this point I don't see it. I fully expect at this point in time that it will take some time, but in the end I think common sense will prevail, and the courts will see it for what it is."

Now it seems that Apple has found that other way--holding onto its money instead of making royalty payments to manufacturers to cover Qualcomm's licensing fees. Here's what Qualcomm executive vice president and general counsel Dan Rosenberg said about Apple's decision:

These license agreements remain valid and enforceable. While Apple has acknowledged that payment is owed for the use of Qualcomm's valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade. Apple's continued interference with Qualcomm's agreements to which Apple is not a party is wrongful and the latest step in Apple's global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.

Qualcomm adjusted its earnings guidance for Q3 2017 as a result of Apple's decision. It seems the company expects to lose about $500 million because of the withheld royalty payments. It previously said it expected to have revenues between $5.3 billion and $6.1 billion; now it expects those figures to be between $4.8 billion and $5.6 billion. That's between a 7% and 21% decrease from the company's revenues in Q3 2016.

So it seems the Goliath vs. Goliath battle will continue. Qualcomm filed a counterclaim in April saying that Apple has used its "enormous market power to coerce unfair and unreasonable license terms from Qualcomm" in previous dealings. The company also suffered a loss in April when it was ordered to refund $815 million in royalty payments to BlackBerry. Things simply aren't coming up Qualcomm, at least in this stage.

  • Jake Hall
    * apple. I would be so happy to see them crash
    Reply
  • Brice McIntosh
    @Jake Hall.

    So if this is something to hate Apple for, you must hate the FTC which has filed charges against Qualcomm for monopolistic reasons. Whether you like Apple or not, they are not the only company that uses and suffers the effects of Qualcomm. Samsung, Intel and Mediatek would be the big ones and I'm sure that they will be following this very closely. And by closely, I would wager that they are on Apple's side with this lawsuit. Qualcomm has been accused of charging customers for licenses to patents that don't pertain to the products they are making as well as abusing their patents to prevent rival chipmakers from competing to be in these devices. Competition is good for everyone.
    Reply
  • ammaross
    "The dispute in question is Apple's claim that Qualcomm abuses the popularity of its products to force other companies into restrictive and expensive licensing agreements."

    Pot, meet kettle.
    Remember how much Apple wanted per Samsung phone?
    Reply
  • techy1966
    Yea considering Apple is known to be the worst company for doing things like this as well as abusing it's market power to say to another company they are doing or using the same type of practices seems a bit messed up to me.

    I do not care who is at fault here in this dispute I just think Apple has some pretty big brass nutz to accuse another company for doing something that they themselves do also and most of the time far worse than any other company out there.
    Reply
  • none12345
    Man for a compnay with such an absurd profit margin on this products, this seems like such a childish move.

    I hope qualcomm gives them some serious late fees on their bill. And they will likely have a reason to sue them if their stock price tanks as well.
    Reply
  • falchard
    The FTC based it's charge on poor data. How can you have a monopoly when you have competition? It's not like Qualcomm is the only one developing base-band technology. It's not even a large market share. I think it's something like 54%. It's quite a stretch to say Qualcomm is using monopolistic practices.
    Reply
  • DerekA_C
    They both suck birds of a feather flock together. But seriously * Qualcomm is over-ratted I'd rather have the option of Samsung putting chips in phones other then Samsung phones. They literally do monopolize the mobile market for chips. For Apple it is overpriced by a long shot with outdated hardware constantly and since they went Unix/Linux modified OS to charge an extra-premium for freeware software because it requires proprietary hardware is bad business and not the future of mankind open and standard saves money but more importantly RESOURCES AND TIME.
    Reply
  • USAFRet
    Let's watch the language, people.
    Thanks.
    Reply
  • mrmez
    19626304 said:
    The FTC based it's charge on poor data. How can you have a monopoly when you have competition? It's not like Qualcomm is the only one developing base-band technology. It's not even a large market share. I think it's something like 54%. It's quite a stretch to say Qualcomm is using monopolistic practices.

    54% market share is MASSIVE, no matter how small the market.
    A monopoly doesn't mean there is zero competition.

    To put it in perspective, compare smartphone market share. If you combine Apple, Samsung, Huawei and Oppo to form one company. The'll still have less market share than Qualcomm.

    Also, the fact they've had to pay BlackBerry nearly a billion dollars, is quite damning.
    Certainly a factor that accelerated BB's demise.
    Reply
  • therealduckofdeath
    I expect Apple to get a complete sales ban of all affected devices served to them pretty soon. Literally stealing another company's IP for profits the same time they brag about having a 200 billion bank account is unacceptable.
    If they get away with this, what stops us from stealing Apple products and sell them for pure profits on eBay?
    Reply