Apple, Allies Seek Billions in US Trial Testing Qualcomm’s Business Model

Apple Inc and its allies on Monday will kick off a jury trial in opposition to chip provider Qualcomm Inc in San Diego, alleging that Qualcomm engaged in unlawful patent licensing practices and looking for as much as $27 billion in damages.

Qualcomm, for its half, alleges that Apple compelled its longtime enterprise companions to stop paying some royalties and is looking for as much as $15 billion (roughly  Rs. 1,04,000 crores).

Filed by Apple in early 2017, the lawsuit in federal courtroom revolves across the modem chips that join units just like the iPhone or Apple Watch to wi-fi knowledge networks. Qualcomm has spent the previous two years mounting a stress marketing campaign of smaller authorized skirmishes in opposition to Apple, looking for – and in some instances acquiring – iPhone gross sales bans for violating its patents.

The trial earlier than Judge Gonzalo Curiel will play out on Qualcomm’s house turf of San Diego, the place for many years the town’s National Football League group performed in Qualcomm Stadium and almost each enterprise district hosts the cell chip agency’s brand.

For Apple, the trial is concerning the freedom to find out its personal know-how path for blockbuster merchandise by shopping for chips with out having to pay what it calls a “tax” on its improvements within the type of patent licensing charges to Qualcomm that take a reduce of the promoting worth of its units.

For Qualcomm, the trial, together with related allegations from US regulators in a January courtroom listening to, will decide the destiny of its distinctive mix of promoting chips and licensing greater than 130,000 patents.

Licensing generates most of Qualcomm earnings. The mannequin propelled Qualcomm from a small contract analysis and improvement store when based in 1985 to a worldwide chip powerhouse essential sufficient to US nationwide safety that President Donald Trump personally intervened to forestall a hostile takeover of the corporate final 12 months.

“This is the day of reckoning that Qualcomm has been very fortunate to avoid for many years,” said Gaston Kroub, a patent attorney with Kroub, Silbersher & Kolmykov who is not involved in the case. “In Apple, they’ve finally come up against a potential licensee that has the resources and the will to put Qualcomm’s business model and licensing practices on trial.”

Qualcomm requires system makers to signal a license to its patents earlier than it’ll provide chips, which it views as a commonsense measure to make sure it doesn’t do enterprise with firms violating its patents. But Apple and different system makers all over the world have referred to as the “no license, no chips” coverage a type of “double dipping” – that’s, charging for a similar mental property as soon as throughout licensing discussions, after which once more within the worth of the chips the place the patents are embodied.

Apple and allies are asking for an finish to that follow and a refund of about $9 billion – an quantity that could possibly be tripled if a jury finds in Apple’s favour for antitrust allegations – for contract factories comparable to Hon Hai Precision Industry’s Foxconn, who paid the royalties and had been reimbursed by Apple. Apple alleges the practices stored rivals like Intel Corp out of the marketplace for years.

“Even very big companies like Intel have felt at a disadvantage,” mentioned Michael Salzman, an antitrust legal professional with Hughes Hubbard & Reed not concerned within the case.

Qualcomm will argue that it had been working efficiently with contract factories for years earlier than Apple launched its iPhone. But Apple used its heft within the business to get these factories to interrupt their longstanding contracts with Qualcomm, depriving it of at the least $7 billion in royalties it was due, the chip provider alleges.

The chip provider can even argue that its licensing practices have been constant for many years and solely got here underneath hearth when Apple, identified within the electronics business for pushing suppliers to comprise prices, took challenge with it. A victory would safe Qualcomm’s standing as a significant know-how supplier for 5G, the following technology of cell knowledge networks coming on-line this 12 months.

“I don’t think (a Qualcomm victory) would be great for Apple, but if it’s about money, they’ve got plenty of money,” mentioned Stacy Rasgon, an fairness analyst for Bernstein who follows Qualcomm. “For Qualcomm, it’s an existential attack on the meat of their business model.”

© Thomson Reuters 2019