Qualcomm Says Apple Suppliers are Underpaying Royalties Amid Legal Dispute

[MacRumors]

Qualcomm today reported earnings for the second fiscal quarter of 2017, and in its report, the company says Apple suppliers are withholding royalty payments amid Apple's ongoing legal dispute with Qualcomm. [PDF]

According to Qualcomm, Apple's contract manufacturers underpaid royalties in Q2 2017 in an amount equal to that which Qualcomm has not paid Apple. Qualcomm says this hasn't had a negative impact on revenue, but it could be an issue next quarter if manufacturers continue to underpay.

Apple's contract manufacturers reported, but underpaid, royalties in the second quarter of fiscal 2017. However, our revenues were not negatively impacted as the contract manufacturers acknowledged the amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple under our Cooperation Agreement that are currently in dispute. The Cooperation Agreement expired December 31, 2016.

It is not clear whether Apple's contract manufacturers will underpay royalties owed under their contracts with us in the third quarter of fiscal 2017, which could have a negative impact on our financial results. Our guidance range for fiscal third quarter EPS is wider than our typical practice primarily due to this uncertainty. We have considered a variety of scenarios within this range, but have not included a scenario where no payment is made by the contract manufacturers. We will update our guidance if we subsequently learn of any action that would take us outside of the announced guidance range.

Qualcomm and Apple are embroiled in an ongoing legal dispute that dates back to an FTC complaint alleging Qualcomm engaged in anticompetitive patent licensing practices. Shortly after the FTC filed its complaint, Apple levied a lawsuit against Qualcomm, accusing the company of charging unfair royalties for "technologies they have nothing to do with."

Apple claims that Qualcomm "reinforces its dominance" through exclusionary tactics and high patent licensing fees, charging Apple "at least five times more" in payments than other cellular patent licensors.

Qualcomm has separately refused to pay Apple quarterly rebates due to Apple's participation in an antitrust lawsuit against Qualcomm in South Korea, which has led Apple to seek $1 billion in rebate repayments. Qualcomm has called Apple's claims "baseless" and has accused Apple of "encouraging regulatory attacks."

Earlier this month, Qualcomm filed a countersuit against Apple, claiming Apple has breached its licensing agreements, made false statements, and encouraged regulatory attacks on Qualcomm's business in multiple countries. According to Qualcomm, Apple "could not have built the incredible iPhone franchise" without relying on Qualcomm's "fundamental cellular technologies."

Article Link: Qualcomm Says Apple Suppliers are Underpaying Royalties Amid Legal Dispute

 

[Tycho24]

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

 

[44267547]

Qualcomm will continue to push Apple around until this dispute ends on their terms. But Apple won't go lightly either.

 

[Tazadrt]

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

Yeah, Apple has gone down hill soo much since the glory days

 

[coolfactor]

If this is true:

Apple claims that Qualcomm "reinforces its dominance" through exclusionary tactics and high patent licensing fees, charging Apple "at least five times more" in payments than other cellular patent licensors.

then I stand by Apple.

But Apple is border-line on "friendly" pricing, I must say. $100 for a replacement laptop power adapter? Full price, $600, for a 3-year old Mac mini?

 

[macfacts]

...
Apple claims that Qualcomm "reinforces its dominance" through exclusionary tactics and high patent licensing fees, charging Apple "at least five times more" in payments than other cellular patent licensors.
...

Tim is a very bad negotiator if Apple is paying 5 times what others pay.

 

[konqerror]

Tim is a very bad negotiator if Apple is paying 5 times what others pay.

First, you misread. Apple is paying five times more to Qualcomm for their slice of the LTE patents than what they are paying to NTT DoCoMo, for example.

It's not a negotiation issue to begin with. When you negotiate with a company to buy a product, you can say, "give me a better deal or I'll go take my business elsewhere". With this Qualcomm dispute and these "Standards Essential Patents", by their very nature there is no elsewhere. Qualcomm says pay up or else you're getting sued. The only way around it is to sue for anti-trust, which is what Apple participated in Korea.

 

[macTW]

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

Yes. These guys, Qualcomm, have been strong arming Apple. Hence the lawsuit from Apple.

Once Apple moves more production in-house, Qualcomm can go under.

 

[slingshott]

There are two sides to every story. A company with Apple's leverage probably isn't acting like a bunch of philanthropists either.

 

[Tycho24]

Yes. These guys, Qualcomm, have been strong arming Apple. Hence the lawsuit from Apple.

Once Apple moves more production in-house, Qualcomm can go under.

And not soon enough!
To be clear: I have NO problems w/ frand payments.
But the fr are the key letters there!!!!! (Fair & Reasonable)

With a company like Imagination... I kinda feel for them. I hope they successfully pivot; hell, I even hope they find a small piece of IP that Apple simply MUST use- so they can at least keep some meager (but steady!) income stream for a few more years until they can figure out their next move. They are a hard company to not respect- iOS devices have had cutting edge graphics (for the mobile space) for years- owed to their hard work & ingenuity.
Whereas, Qualcomm is a hard company TO respect.
Though they do design some capable chips... it seems their greater goal is squeezing every cent hostilely from their clients & destroying their ability to seek alternatives, by any means necessary.
They are the modern day equivalent of when Microsoft was after Netscape & bringing all their power to bear, to make that happen.
Although I believe MS is a far greater company today..... that blight still remains; their perennial "black eye".
This is the path Qualcomm has chosen.
They could've maintained their integrity & done business like the various other chip companies. They actively CHOSE this as their "business plan"; and now, I fear they'll get back what they've given.
Lol, I'm not usually one to post movie quotes on here... but I'm reminded of a part of Connor & Murphy's final courtroom speech from Boondocks Saints:
"We urge you lesser forms of filth not to push the bounds and cross over into true corruption, into our domain. But if you do you, one day you will look behind you and you will see we three, and on that day, you will reap it."
=P

 

[MrNomNoms]

I hope these guys go the way of BlackBerry!
HATE them.

Strong arming, sleazy scumbags.

They will eventually because once CDMA stops being remotely relevant then there will be very few reasons to keep using Qualcomm especially if the alternatives keep improving such as MediaTek, Samsung with its own SoC's along with Huawei as well.

 

[MH01]

Well well , I doubt either side are angels in this. Both use strong arm tactics and leverage. They got in bed with each other and it's about greed.... both will use PR spin to say they are the victims. Have pity for neither.

 

[Carnegie]

Tim is a very bad negotiator if Apple is paying 5 times what others pay.

Apple's point is that the terms of its licensing agreements with Qualcomm weren't negotiated so much as unilaterally imposed by Qualcomm. If Apple wanted to be able to build certain iPhones, it had little choice but to agree to what Qualcomm demanded. Qualcomm was the only supplier able to provide Apple with certain modems (and that was in part, it's suggested, because of improper practices that Qualcomm had engaged in which had created or extended its effective monopoly power when it came to those modems). Apple's claim is that Qualcomm used that leverage to force Apple to agree to licensing terms which weren't FRAND compliant and which, btw, related to modems other than those which Apple had to get from Qualcomm. So Qualcomm had Apple over a barrel: Either agree to our terms or you won't be able make certain iPhones.
[doublepost=1492687177][/doublepost]

First, you misread. Apple is paying five times more to Qualcomm for their slice of the LTE patents than what they are paying to NTT DoCoMo, for example.

It's not a negotiation issue to begin with. When you negotiate with a company to buy a product, you can say, "give me a better deal or I'll go take my business elsewhere". With this Qualcomm dispute and these "Standards Essential Patents", by their very nature there is no elsewhere. Qualcomm says pay up or else you're getting sued. The only way around it is to sue for anti-trust, which is what Apple participated in Korea.

You're correct when it comes to the actual statement from Apple which macfacts referred to. Apple was claiming that it pays at least 5 times more in royalties to Qualcomm than it does to all other licensors (i.e. others holding patents in cellular standards) combined.

But Apple has also claimed more or less what macfacts was suggesting - that it's had to pay multiples of what some other standards users have had to pay to license the same SEPs. That's because, according to Apple, it's been forced to pay royalties based on the value of end products rather than on the value of the modems or calculated in some other way.

Also, the issue - i.e., the important threat that was effectively coming from Qualcomm - wasn't that Qualcomm might sue Apple if the latter didn't agree to the former's terms. That wouldn't have been as worrisome. So long as Apple was acting in good faith in trying to negotiate licensing terms, Qualcomm shouldn't have been able to get Apple's use of components which used Qualcomm's SEPs halted. Eventually they'd agree to terms that Apple (and Qualcomm) thought were fair or an arbitrator or court would decide what was appropriate.

The issue was that Qualcomm might stop supplying Apple with certain modems which Apple needed for certain iPhones if Apple didn't agree to the licensing terms that Qualcomm demanded with regard to those modems and others. And Apple couldn't get those modems from anyone else.