Qualcomm Fights Back Against Apple, Intel, CCIA

The chip maker says critics of its proposed iPhone import ban are trying to misdirect regulators investigating patent claims in its legal dispute with Apple.

Qualcomm

Qualcomm’s legal battle with Apple over technology used in the iPhone continues to escalate, with more tech vendors jumping into the fray and the chip maker pushing back at the assertion that its efforts are targeted at rival Intel.

The chip maker ramped up the issue earlier this month when it asked the International Trade Commission (ITC) to ban imports of some Apple iPhones that officials said infringe on multiple Qualcomm patents that drive performance and battery life of the devices. That drew the ire of Intel as well as the Computer and Communications Industry Association (CCIA)—an industry group that represents the likes of Google, Facebook, Amazon, Microsoft, Intel and Samsung (though not Apple)—which filed comments with the ITC against Qualcomm’s proposed iPhone ban.

Both Intel and the CCIA accused Qualcomm of anti-competitive behavior. Apple for years had used only Qualcomm’s cellular modems in its popular iPhones, but had begun using Intel modems in some versions of the iPhone 7, which came out last year. The other versions used Qualcomm technology. The modems enable smartphones, tablets and other mobile devices to connect to wireless networks.

In their filing with the ITC, Intel officials noted that their company “is Qualcomm’s only remaining competitor in the merchant market for premium LTE baseband processor modems” and that the driving force behind Qualcomm’s actions was not patent infringement by Apple but “to stave off lawful competition from Qualcomm’s only remaining rival.”

“This twisted use of the Commission’s process is just the latest in a long line of anticompetitive strategies that Qualcomm has used to quash incipient and potential competitors and avoid competition on the merits,” the Intel officials wrote in the document filed last week. “And although those strategies have sometimes been subtle or complex, Qualcomm’s latest complaint could not be more blatant in its anticompetitive aims.”

The CCIA similarly requested the ITC to quash Qualcomm’s iPhone ban request, calling Qualcomm’s behavior “anti-competitive” and saying that approving the request would suppress competition and harm consumers by driving up device prices.

“What’s at stake here is certainly the availability of iPhones and other smartphones at better prices,” CCIA President and CEO Ed Black said in a statement. “But even more critical is the principle of open competition that has been historically important to U.S. economic success. The ITC has a choice whether to further reward anti-competitive behavior—or to reject this anti-free market, anti-consumer request.”

In their own filing with the ITC this week, Qualcomm officials fired back, claiming that the proposed iPhone import ban has nothing to do with quashing competition from Intel and everything to do with protecting the Qualcomm patents they claim are used in Intel’s modems. They claim competition wouldn’t be hurt because other component makers—such as Samsung, Marvell Technology Group and MediaTek—all make modems that don’t infringe on Qualcomm’s patents.

“Apple can purchase and utilize any LTE modem it chooses so long as it does not infringe on Qualcomm’s asserted patents,” Qualcomm stated in its filing.

The chip maker also accused Apple of turning device manufacturers like Foxconn against Qualcomm, and said the iPhone maker and other critics are trying to misdirect U.S. regulators.

A key issue is Qualcomm’s unique two-part business model. One business sells chips and drives much of the company’s revenues, while the other licenses patents and fuels much of Qualcomm’s profits. The business model has caused Qualcomm some legal headaches. In 2014, the company settled a lengthy antitrust investigation in China for $975 million, and the U.S. Federal Trade Commission (FTC) in January filed a lawsuit against Qualcomm for an antitrust issue connected to its licensing business.

Apple officials are now pushing back on Qualcomm, telling CNBC last week that they believe “deeply in the value of intellectual property but we shouldn't have to pay them for technology breakthroughs they have nothing to do with. We've always been willing to pay a fair rate for standard technology used in our products, and since they've refused to negotiate reasonable terms we're asking the courts for help.”

The ITC, which is currently seeking comments on Qualcomm’s proposal to ban iPhone imports, is expected to begin its investigation in August, with a possible trial coming next year.