Apple files $1B suit against Qualcomm

The Cupertino company says Qualcomm withheld payments it owed as a means of retaliation for Apple's cooperation with South Korean investigators.
Written by Stephanie Condon, Senior Writer

Apple on Friday filed a suit against Qualcomm, accusing the chipmaker of withholding contractual payments it owed in retaliation for Apple's cooperation with South Korean regulatory investigators. The suit also charges Qualcomm "attempting to extort" the Cupertino company into obstructing the investigation.

From the suit, filed in federal district court in the Southern District of California:

Among Apple's damages are nearly $1 billion that Qualcomm owes to Apple under an agreement between the two companies. Qualcomm claims that Apple has forfeited those amounts by responding to requests in the course of an investigation by the Korea Fair Trade Commission ("KFTC"), which recently levied the largest fine in its history against Qualcomm. Qualcomm has withheld the required contractual payments from Apple even though the agreement clearly permits Apple to respond to the KFTC's lawful investigation and requests for information. If that were not enough, Qualcomm then attempted to extort Apple into changing its responses and providing false information to the KFTC in exchange for Qualcomm's release of those payments to Apple. Apple refused.

On top of that, the suit claims that Qualcomm's monopoly power and "abusive licensing model" enable the company to demand excessive royalties.

"What this means in the case of the iPhone is that when Apple engineers create a revolutionary new security feature such as touch ID, which enables breakthrough technologies like Apple Pay, Qualcomm insists on royalties for these and other innovations it had nothing to do with and royalty payments go up," the complaint says.

Following the KFTC investigation cited by Apple, South Korean regulators last month fined Qualcomm $890 million for monopolistic practices. Then earlier this week, the Federal Trade Commission alleged in a complaint that Qualcomm used anti-competitive tactics to maintain a monopoly over semiconductor supply. Taiwanese officials have begun to snoop around as well.

Don Rosenberg, Qualcomm EVP and General Counsel, said in a statement to ZDNet that Qualcomm is still reviewing the complaint, but it's clear Apple's claims are "baseless."

"Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program," he said. "Apple has been actively encouraging regulatory attacks on Qualcomm's business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple's practices and a robust examination of the merits."

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