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Qualcomm has filed several patent lawsuits in China against Apple demanding licensing fees for several mobile technologies that the chip producer claims are built into iPhones. The lawsuit asks China’s courts to ban iPhone sales in that nation as it pursues compensation from Apple for the alleged patent infringement.
The new lawsuits, the latest gambit in Qualcomm’s protracted legal battle with Apple, were reported in an Oct. 13 story by Bloomberg. They allege that Apple is infringing on three Qualcomm patents related to power management and the Force Touch touch-screen technologies used in the phones.
The Qualcomm lawsuits seek to “ban the sale and manufacture of iPhones” in China, which could have huge implications for Apple because most of the devices are manufactured there. A majority of Apple’s revenue comes from the global sales of its iconic iPhones.
Christine Trimble, a Qualcomm spokeswoman, told Bloomberg the company filed the lawsuits because “Apple employs technologies invented by Qualcomm without paying for them.” The lawsuits were filed Sept. 29 in a Chinese court but have not been made public, Bloomberg’s story reported.
Spokespeople from Apple and Qualcomm did not reply to email requests for comment from eWEEK.
The patented technologies allegedly being used improperly by Apple “are a few examples of the many Qualcomm technologies that Apple uses to improve its devices and increase its profits,” Trimble told Bloomberg. Both companies have been battling loudly and publicly over patents around the world since early in 2017.
In July, Qualcomm 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.
The complaint to the ITC came after Apple in January filed a $1 billion lawsuit against Qualcomm over its patent licensing practices, claiming that the chip maker is using its “monopoly” position in baseband chips—a key component in mobile phones and other wireless devices—to charge costly fees and royalties and practicing “exclusionary tactics” in the market.
Both companies have a lot at stake in this legal battle. Apple just launched its latest iPhone 8, iPhone 8 Plus and iPhone X models in mid-September and counts on iPhone revenue around the world for a huge percentage of its revenue.
For Qualcomm, the battles have been affecting its corporate earnings, which have been falling. The earnings drops came after Apple sued Qualcomm in January, while also cutting off $2 billion in annual licensing payments it had previously been making to the chipmaker.
Several IT analysts told eWEEK that the fight between the two companies is one to watch closely.
“This is a big deal,” Dan Olds, principal analyst at Gabriel Consulting Group, said. “This is a perfect storm for Apple—in a bad way,” because its newly launched iPhones are expected to bring in lots of holiday sales revenue for Apple and that expected revenue could now be seriously endangered by Qualcomm’s latest legal action.
“There’ a risk that Apple won’t be able to manufacture them” in Chinese plants that produce nearly all of Apple’s global supply, said Olds.
For Qualcomm, Apple’s move earlier this year to cut off its $2 billion in annual licensing payments cut that money right off of Qualcomm’s bottom line, dropping its earnings and hurting its position with investors and the marketplace, Olds added.
“Think about Apple in China—that’s been an uneasy relationship at best,” he said. “This is the real thing, this is blood sport now.”
So, can the two companies resolve their differences and work together again?
“They’re going to have to find a way one way or another if Apple wants to continue to sell iPhones, unless that can get around Qualcomm’s patents,” said Olds. “They’re going to have to license the technology or find a work around. The stuff that Qualcomm is licensing to them is not impossible to engineer around, but it would probably be pretty hard. Otherwise Apple would have already done it.”
Charles King, principal analyst with Pund-IT, said he sees the latest Qualcomm action as the company “trying to exert pressure for a settlement” in Apple’s most critical market. Though Apple may initially brush off the implications of the Qualcomm lawsuits, “if Qualcomm is successful in its petition, especially if a ruling comes quickly, Apple might find new flexibility” in its negotiation position said King.
“Suffering a sales ban in China just as its newest, latest and greatest iPhones are coming to market would be awkward at best for Apple and probably more financially injurious than settling with Qualcomm,” King said.
Lynette Luna, an analyst with GlobalData, agrees. “These types of actions are usually designed to get companies back to negotiating with them,” she said. “Apple will not risk losing any distribution in China. If it sees things going the wrong way for the company, it will certainly engage with Qualcomm.”
Rob Enderle, principal analyst at Enderle Group, said he sees Qualcomm’s new lawsuits as a signal the company is “taking the restrictions off [the continuing battle] and is willing to fight as long and hard as Apple is [willing to fight]. This dramatically improves the chance that Qualcomm will prevail, or at least force Apple to the table.”
Jan Dawson, chief analyst at Jackdaw Research, said the situation is complicated in China because the Chinese have “previously taken action against Qualcomm over antitrust issues, so it may not be inclined to side with it in this case,” even though the company has been working to improve its relationship with the government there. “Obviously, if Qualcomm were to succeed, this would be a big blow to Apple, but I’m skeptical that it will.”