Apple Sues Qualcomm For $1 Billion

Apple sued Qualcomm in a San Diego federal court for $1 billion for allegedly charging unfair royalties for technologies used in the iPhone.

The suit came shortly after the Federal Trade Commission (FTC) filed a case accusing Qualcomm of monopolistic practices. According to the FTC, the manufacturer used the ubiquity of its products to extort smartphone-makers and prevent any potential competitors from threatening its business. Qualcomm said the FTC "still lacked basic information about the industry and was instead relying on inaccurate information and presumptions."

But now Apple has lent support to the FTC's claims. As the company said in a statement to CNBC:

Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined. [...] To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1B in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them.

At issue is the popularity of Qualcomm's baseband processors--components used to control any connections to wireless networks--in mobile phones. One estimate said in February 2016 that Qualcomm's components represented 65% of the LTE baseband market. None of its competitors even approach that level of prominence (Samsung is the only one that even reaches the double digits) and that puts Qualcomm in a position of considerable leverage.

Qualcomm executive vice president and general counsel Dan Rosenberg responded to Apple's claims:

While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple's claims are baseless. Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program. Apple has been actively encouraging regulatory attacks on Qualcomm's business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple's practices and a robust examination of the merits.

Apple did not respond to our request for comment. But it's clear that the company means business--filing a $1 billion suit in a federal court typically indicates some degree of seriousness--and so does the FTC. Once these cases head to court, it will be easier to tell if Qualcomm is a wrongly maligned company whose products happen to be popular or if it truly has negatively affected the smartphone market so it could line its own metaphorical pockets.