Apple alleges that Qualcomm violated China's anti-monopoly law. A second lawsuit filed at the same time accuses Qualcomm of failing to live up to promises made to license "standard essential patents" broadly and inexpensively, reports Reuters.
"These filings by Apple’s Chinese subsidiary are just part of Apple’s efforts to find ways to pay less for Qualcomm's technology," said Don Rosenberg, executive vice-president at Qualcomm, in a statement. "Apple was offered terms consistent with terms accepted by more than one hundred other Chinese companies and refused to even consider them."
On Friday, Qualcomm, which is already the subject of an FTC case for unfair trade practices, found itself in deeper trouble after Apple filed a case against it for $1 billion in the Southern District of California court.
Apple says that Qualcomm withheld payments of more than $1 billion after it testified “truthfully” during investigations by South Korean authorities into the semiconductor company’s trade practices. South Korea’s antitrust regulators slapped an $853 million fine on Qualcomm. Per the business agreement between the two companies, Apple was required to pay a certain percentage of each iPhone sale to Qualcomm as patent royalty. The Cupertino company received quarterly payments from Qualcomm in return. (For more, see also: FTC Files Antitrust Charges Against Qualcomm.)
In a statement about the suit filed in the U.S., Apple said Qualcomm was “unfairly” charging the company for royalties for technologies “it had nothing to do with.” The company’s essential argument in its statement is that its internal innovations, such as TouchID and advanced cameras, contributed to increased iPhone sales and that Qualcomm unfairly benefited from increased royalties from such sales. “Qualcomm built its business on older, legacy, standards but reinforces its dominance through exclusionary tactics and excessive royalties,” the company stated. According to Apple’s statement, Qualcomm charges five times more royalty as compared to the total of all other cellular patent licensors that the company uses in its iPhone combined.
Apple’s case is expected to further tighten the screws around Qualcomm’s business practices. An increasing number of regulators around the world have taken aim at the San Diego-based company. It had already been fined $975 million by Chinese authorities in 2015.
Qualcomm is a pioneer in the semiconductor industry and its modem baseband processors are widely used in smartphones. The company earns 80% of its profits from royalties. A change in its business model or reduction in the royalty amount will have a significant impact on its bottom line. (For more, see also: Apple's Royalty Revenue Is At Risk.)