Qualcomm takes a bite out of Apple, files countersuit for chip manipulations

Qualcomm's response

Qualcomm responded to Apple's original suit, stating that its royalties were consistent with laws around the world, and denying that it blocked Apple's ability to use competitors' products. Finally, it said that Apple had interfered directly with its business relationships "with companies that manufacture the iPhone and other smartphones".

"Over the last 10 years, Apple has played a significant role in bringing the benefits of mobile technology to consumers with its popular products and services," Don Rosenberg, executive vice president and general counsel of Qualcomm, said in a statement. "But Apple could not have built the incredible iPhone franchise that has made it the most profitable company in the world, capturing over 90 percent of smartphone profits, without relying upon Qualcomm's fundamental cellular technologies."

The full details of the suit are contained in a 139-page document (also available here in PDF form). Essentially, Qualcomm claimed that Apple was "misrepresenting facts and making false statements".

Where did this all begin?

Apple filed a US $1 billion lawsuit against Qualcomm in the USA at the beginning of the year. It alleged that the chipmaker's licensing practices amounted to "extortion". Just after that, Apple filed two more lawsuits in Beijing's Intellectual Property Court over abusing its dominant position in the market, and patent licensing. The first of those lawsuits seeks 1 billion yuan ($145.35 million) in damages. The second points out that Qualcomm "didn't license standard-essential patents at a fair and reasonable rate".In recent times, Qualcomm has been taken to task in both China and South Korea. Two years ago in China, Qualcomm ended a 14-month-long antitrust investigation by paying US $1 billion. Last December, Qualcomm was hit with a $850 million fine in South Korea, following what was a three-year-long investigation. They were accused of having an "unfair business model". Finally, the US Federal Trade Commission has accused the company of dominating the cellular chip market illegally.

In recent times, Qualcomm has been taken to task in both China and South Korea. Two years ago in China, Qualcomm ended a 14-month-long antitrust investigation by paying US $1 billion. Last December, Qualcomm was hit with a $850 million fine in South Korea, following what was a three-year-long investigation. They were accused of having an "unfair business model". Finally, the US Federal Trade Commission has accused the company of dominating the cellular chip market illegally.

Back to the present

Some of Apple's iPhone 7s are loaded with Qualcomm chipsets and other are fitted with Intel chipsets. Here's what Qualcomm claimed: "Apple effectively chose to limit the performance of the Qualcomm-based iPhones by not taking advantage of the full potential speed of which Qualcomm's modems are capable. Apple's actions were intended to prevent consumers from realising that iPhones containing Qualcomm chipsets performed far better than iPhones containing chipsets supplied by Intel."

Qualcomm also claims that Apple's insinuation "that there was ‘no discernible difference’ between” the two variants is false.

Furthermore, the countersuit alleges that Apple prevented Qualcomm from publicly championing the "superior performance" of its products. "To try to prevent disclosure of the performance disparity between the Qualcomm chipset and the Intel chipset, Apple told Qualcomm that it would be 'unacceptable' for Qualcomm to make or sponsor any public comparisons between the Qualcomm-based iPhone and the Intel-based iPhone," it alleged.

Qualcomm said that Apple withheld money owed under a contract to Qualcomm. This contract related to a high-speed feature of Qualcomm's chips. The chipmaker also accused Apple of hurting Qualcomm by "deliberately making false statements to government agencies about Qualcomm's licensing practices and chipset business".

"Apple's goal is clear -- to leverage its immense power to force Qualcomm into accepting less than fair value for the patented technologies that have led innovation in cellular technology and helped Apple generate more than $760 billion in iPhone sales," Qualcomm said in its filing.

What does Apple want

Apple basically wants Qualcomm to lower the amount it has to pay for licensing fees. Also, it wants a grand total of US $1 billion back.

Currently, Qualcomm is paid royalties based on what the selling price of the phone is, instead of what portion Qualcomm's technology enabled. Apple wants the latter instead of the former.

Qualcomm plans to "vigorously defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry".