Four Major iPhone Suppliers Join Apple in Countersuit Against Qualcomm

[MacRumors]

Compal, Hon Hai Precision/Foxconn, Pegatron, and Wistron have filed a countersuit against iPhone LTE modem supplier Qualcomm in an attempt to prevent Qualcomm from successfully forcing them to pay certain licensing fees related to the iPhone's assembly (via Bloomberg). The move is a response to a lawsuit from May when Qualcomm sued the four suppliers for "breaching their license agreements" by failing to pay royalties on the use of Qualcomm's technology in the assembly of Apple's devices.

Now, in a court filing today, the four companies have claimed that Qualcomm is asking for payments "massively in excess" of what it would normally receive. If the countersuit is successful, Apple said that it could cost Qualcomm billions in refunded fees and damages. For the manufacturers' part, the companies described the Qualcomm suit as "yet another...anticompetitive scheme" by Qualcomm.

According to The Wall Street Journal, Apple is said to be covering the legal fees associated with the four manufacturers' defense, and that it would soon file a separate motion to combine the new countersuit with its own suit against Qualcomm, creating one unified case.

Apple's key contention is that Qualcomm is asking the court to force the contract manufacturers to pay licensing fees due on iPhones above the level the chipmaker normally receives.

The manufacturers -- Compal, Hon Hai Precision and its Foxconn subsidiary, Pegatron Corp., and Wistron Corp. -- denied violating any payment agreements. They called the Qualcomm suit against them "yet another chapter of Qualcomm's anticompetitive scheme to dominate modem chip markets, extract supracompetitive royalties, and break its commitments to license its cellular technology on fair, reasonable and non-discriminatory terms."

Apple and its manufacturing partners have also responded to a separate Qualcomm court filing, in which the LTE modem supplier requested an injunction to force Apple's iPhone manufacturers to keep paying royalties during the legal battle. Apple, Compal, Foxconn, Pegatron, and Wistron have objected to the request, stating that "there's no harm to Qualcomm waiting to get paid" until the end of the case, when the court determines the correct amount.

Earlier this week, Qualcomm CEO Steve Mollenkopf said that an out of court settlement for the case could still happen, although he had no specific confirmation or update on the legal battle that suggested a settlement was coming between Qualcomm and Apple. The two companies have been embroiled in the court case since January, sparked by an FTC complaint about Qualcomm's anticompetitive patent licensing practices, and continued with Apple's own lawsuit against the supplier, and then Qualcomm's countersuit response.

If there is no settlement between Apple and Qualcomm, the case is expected to continue for the next few years.

Article Link: Four Major iPhone Suppliers Join Apple in Countersuit Against Qualcomm

 

[MH01]

They all suppliers for apple ?

 

[69Mustang]

Compal, Hon Hai Precision/Foxconn, Pegatron, and Wistron have filed a countersuit against iPhone LTE modem supplier Qualcomm in an attempt to prevent Qualcomm from successfully forcing them to pay certain licensing fees related to the iPhone's assembly

Pawns in a game.

 

[Cronowerx]

This will not end well for Qualcomm. They better settle out of court ASAP

One of the big advantages of having your partners dependent on you means that your enemies are their enemies.

 

[blcamp]

Game over, QCOM. Have a nice day.

 

[Michaelgtrusa]

Qualcomm is right! Noticed where they are from!

 

[morcutt11]

Lets not forget Samsung, Intel, and the US FTC have also filed suit earlier this year against Qualcomm. It seems universally agreed that Qualcomm has essentially been extorting technology manufactures and hampering innovation with anti-competitive practices. At this point it looks like Qualcomm v. The World. I don't predict Qualcomm to be a winner in that battle.

 

[rjohnstone]

They all suppliers for apple ?

Contract manufacturers.
Any competent judge will see through the case stacking with Apple footing the legal fees for all parties.

 

[Kaibelf]

Contract manufacturers.
Any competent judge will see through the case stacking with Apple footing the legal fees for all parties.

Doesn’t matter. Qualcomm opened the door to this very thing the minute they tried to sue the suppliers when Apple fought back. Now they will take it in the chin and likely end up paying a lot more in the end.

 

[morcutt11]

Contract manufacturers.
Any competent judge will see through the case stacking with Apple footing the legal fees for all parties.

Remember: these manufacturers are countersuing. They didn't just join in with Apple to help strengthen Apple's case. Qualcomm aims to financially punish these suppliers with their original lawsuit against them and almost any lawsuit will result in a countersuit.

 

[justperry]

Qualcomm is right! Noticed where they are from!

Huh
So, what you actually say is this: Qualcomm is an American company and therefor they are right.
(Against these Asian companies)

 

[MrX8503]

Time for Qualcomm to settle.

 

[Michaelgtrusa]

Is Qualcomm the real threat here? Everyone is attacking Qualcomm, but who copies and steals the most?!

 

[joelypolly]

Is Qualcomm the real threat here? Everyone is attacking Qualcomm, but who copies and steals the most?!

Well considering everyone is sueing Qualcomm they do appear to be the problem here. Lets not confuse anticompetitive behavior with something completely unrelated.

 

[springsup]

Is Qualcomm the real threat here? Everyone is attacking Qualcomm, but who copies and steals the most?!

The law doesn’t work in terms of “biggest threat”.

For example, tobacco kills many more people each year than terrorism does. You don’t hear anyone saying “is terrorism the real threat here?”.

 

[morcutt11]

Is Qualcomm the real threat here? Everyone is attacking Qualcomm, but who copies and steals the most?!

Oh it's Qualcomm. Let's take a look at what they are doing:
1) They charge licensing fees for patented technology not only from people that make a competing chip (e.g. Intel), but also companies that use those chips (e.g. Apple) in devices.
2) The fee that they charge for someone using a chip (even competing chip) that uses Qualcomm's patented technology is based on the price the device sells for. So Apple pays pays $15/iPhone for the entry-level iPhone, but more for iPhones that sell at higher rates due to more RAM/storage. Remember, this is the case even if Apple isn't using Qualcomm chips.
3) Because of this licensing scheme, it makes it difficult for other chip manufacturers to compete against Qualcomm, hence the US FTC anti-trust lawsuit. The FTC has said that Qualcomm is effectively taxing every cell phone sold.
4) There is also issues with Qualcomm refusing to license its technology to other chip manufacturers, promoting an anti-competitive market.
5) Along the anti-competitive line, Qualcomm has also successfully prevented Apple from implementing technology like WiMAX because it competes with Qualcomm technology.

In the end it will be a court(s) deciding if Qualcomm's technology patents fall under the "fair, reasonable, and non-discriminatory" requirements, which other manufacturers are claiming they do as the patents reflect technology that is part of the standards of mobile carrier services.

 

[apolloa]

It's nothing but Apple attempting to get a cheaper price by force, proxy and the back door, considering its paying everyone to sue Qualcomm, yet Apple themselves do not receive a single penny from them! Very very very underhanded dirty tactics.

 

[canadianreader]

They opened the door to the wind now it’s time to harvest a hurricane

 

[rjohnstone]

In the end it will be a court(s) deciding if Qualcomm's technology patents fall under the "fair, reasonable, and non-discriminatory" requirements, which other manufacturers are claiming they do as the patents reflect technology that is part of the standards of mobile carrier services.

I'm not sure what you're getting at here since even Qualcomm is not denying these are SEP and fall under FRAND.
The suit is about the fee structure that Qualcomm uses.
FRAND doesn't set pricing. It simply means they cannot deny a license and that rates (formula) charged for SEP licenses is consistent across all licensees.
Qualcomm uses the same formula for all licensees.

The confusion some have here is there are two different licenses at play here.
Hardware licenses and software licenses.

Qualcomm typically only charges chip makers for the hardware licenses if the chip maker us using Qualcomm's design in the chip.
Some chip makers use their own design (MediaTek for example), but still require Qualcomm's software patents to function within the standard. That software fee is typically passed onto the company selling the device with the chip in it.

Apple wants a combined license and only wants royalties to be paid based on the component price.
Not an unreasonable request from a business perspective, but Qualcomm being the patent holder, has the right to set how they license their tech.
As long as they are consistent across all licensees, they are not in violation of FRAND guidelines.

 

[bstpierre]

Oh it's Qualcomm. Let's take a look at what they are doing:
1) They charge licensing fees for patented technology not only from people that make a competing chip (e.g. Intel), but also companies that use those chips (e.g. Apple) in devices.
2) The fee that they charge for someone using a chip (even competing chip) that uses Qualcomm's patented technology is based on the price the device sells for. So Apple pays pays $15/iPhone for the entry-level iPhone, but more for iPhones that sell at higher rates due to more RAM/storage. Remember, this is the case even if Apple isn't using Qualcomm chips.
3) Because of this licensing scheme, it makes it difficult for other chip manufacturers to compete against Qualcomm, hence the US FTC anti-trust lawsuit. The FTC has said that Qualcomm is effectively taxing every cell phone sold.
4) There is also issues with Qualcomm refusing to license its technology to other chip manufacturers, promoting an anti-competitive market.
5) Along the anti-competitive line, Qualcomm has also successfully prevented Apple from implementing technology like WiMAX because it competes with Qualcomm technology.

In the end it will be a court(s) deciding if Qualcomm's technology patents fall under the "fair, reasonable, and non-discriminatory" requirements, which other manufacturers are claiming they do as the patents reflect technology that is part of the standards of mobile carrier services.

I don't know the details but reading this story it sounds like every company that touches a device with Qualcomm technology in it has to pay a fee. That doesn't seem right. Qualcomm should receive one payment for each phone sold. They can decide if they want to get that from the chip maker, the assembler or the end seller and work out that agreement but they shouldn't be able to collect from everyone.

For instance, if the chip maker is paying a license fee it should give them the right to make a sellable chip using that technology. If the assembler and/or seller of the end product has to pay a fee to use that chip then the chip maker did not really get to produce a sellable chip with their licensing fee.

I guess I should be thankful I don't have to cut them a check for using their technology.

 

[lederermc]

Is Qualcomm the real threat here? Everyone is attacking Qualcomm, but who copies and steals the most?!

Microsoft.

 

[Razeus]

Apple doesn't even pay Qualcomm, yet can turn around and sue? WTF?

 

[morcutt11]

Apple doesn't even pay Qualcomm, yet can turn around and sue? WTF?

Apple has been paying Qualcomm for years. They are now making the payments to an escrow, based on the claims in their lawsuit. If Qualcomm wins, they get the $ in the escrow, plus whatever other damages.
[doublepost=1500488818][/doublepost]

I'm not sure what you're getting at here since even Qualcomm is not denying these are SEP and fall under FRAND.
The suit is about the fee structure that Qualcomm uses.
FRAND doesn't set pricing. It simply means they cannot deny a license and that rates (formula) charged for SEP licenses is consistent across all licensees.
Qualcomm uses the same formula for all licensees.

The confusion some have here is there are two different licenses at play here.
Hardware licenses and software licenses.

Qualcomm typically only charges chip makers for the hardware licenses if the chip maker us using Qualcomm's design in the chip.
Some chip makers use their own design (MediaTek for example), but still require Qualcomm's software patents to function within the standard. That software fee is typically passed onto the company selling the device with the chip in it.

Apple wants a combined license and only wants royalties to be paid based on the component price.
Not an unreasonable request from a business perspective, but Qualcomm being the patent holder, has the right to set how they license their tech.
As long as they are consistent across all licensees, they are not in violation of FRAND guidelines.

Apple and the FTC are alleging that Qualcomm has a monopoly on the CDMA and LTE technology necessary for accessing cellular carriers and the pricing isn't consistent. Part of the complaints is that Qualcomm is selectively refusing to license SEPs to competitors - sometimes it is an outright refusal - other times not on FRAND terms.

I agree that it isn't cut-n-dry as the FTC seems to inconsistently apply guidance on SEP under the antitrust laws.

 

[kdarling]

Oh it's Qualcomm. Let's take a look at what they are doing:
1) They charge licensing fees for patented technology not only from people that make a competing chip (e.g. Intel), but also companies that use those chips (e.g. Apple) in devices.

Nope, they only charge once for the related IP.

2) The fee that they charge for someone using a chip (even competing chip) that uses Qualcomm's patented technology is based on the price the device sells for. So Apple pays pays $15/iPhone for the entry-level iPhone, but more for iPhones that sell at higher rates due to more RAM/storage. Remember, this is the case even if Apple isn't using Qualcomm chips.

This is a not uncommon way of charging for patent licenses, and is the way most cellular ones are done.

Ericssson, Nokia, Motorola... they all charge that way. Same as the way governments tax income, or restaurant franchises charge by profit, or Apple charges developers to sell their apps.

It's also more fair, as then phone makers who sell their wares for $40 to developing countries pay far less than the richer companies who make hundreds of dollars of profit selling phones that work on the very networks which would not exist without all the cheaper phones being used.

3) Because of this licensing scheme, it makes it difficult for other chip manufacturers to compete against Qualcomm, hence the US FTC anti-trust lawsuit.

How so, if it's the phone makers paying, not the chip makers? Such claims make no sense. Because the phone maker pays, chip companies are free to compete on features and price.

Heck, because of their lower price, MediaTek is already the second-largest maker of LTE modems, according to research firm Strategy Analytics.

5) Along the anti-competitive line, Qualcomm has also successfully prevented Apple from implementing technology like WiMAX because it competes with Qualcomm technology.

Two sides to every story. Qualcomm says that Apple held them for ransom, threatening to get behind WiMax if Qualcomm didn't pay them a "rebate" fee.

I don't know the details but reading this story it sounds like every company that touches a device with Qualcomm technology in it has to pay a fee.

Nope. The phone maker pays Qualcomm, because they're the ones who know what their net sales price is for each phone. Chipmakers have no such knowledge.

Apple has been paying Qualcomm for years.

Apple has no license. Foxconn and the others have been paying, with Apple paying them back when buying the phone from each factory. This little scheme has saved Apple billions for the past ten years, as the factory prices are much lower than Apple's net selling price.

refusing to license SEPs to competitors - sometimes it is an outright refusal - other times not on FRAND terms.

They don't license the code to run CDMA to ANY chipmaker, only to phone makers. And the phrase "not on FRAND terms" is quite simply Apple's usual way for the past ten years of describing any royalty that they think is too high

 

[Cloudkicker]

I'd like to see Qualcomm get so ticked off w/ Apple that they w/hold chips for 1 iPhone cycle. Then we'll see WHO makes WHO. That will declare the winner in a battle in the ring.

I would guess a non-Qualcomm iPhone in 2020 would see very unhappy customers.