Apple, Qualcomm Bury Hatchet in Worldwide Patent War

Visitors look at a display booth for Qualcomm at the Global Mobile Internet Conference in Beijing, April 27, 2017. On March 12, 2018, President Donald Trump blocked Singapore-based Broadcom’s takeover of U.S. chipmaker Qualcomm on national security grounds. (AP Photo/Mark Schiefelbein, File)

SAN DIEGO (CN) – Apple and Qualcomm settled their global patent war Tuesday, following opening arguments in what was pegged as a lightning-rod five-week trial with billions of dollars at stake.

U.S. District Judge Gonzalo Curiel announced Tuesday afternoon the parties had settled an antitrust case Apple brought against Qualcomm in 2017, accusing Qualcomm of engaging in anticompetitive behavior and commanding a monopoly on chipset technology used in virtually all smartphones.

But the companies not only settled the case in San Diego on Tuesday: They agreed to settle all outstanding litigation worldwide.

The tech giants have been involved in a protracted battle stemming from Apple’s lawsuit in 2017. A few months after the lawsuit was filed, Apple and the contract manufacturers which make its iPhones ceased making royalty payments for Qualcomm’s technology in the cellphones.

Qualcomm still shipped the chipsets to Apple’s contract manufacturers during the two-year litigation, even though they were not paying for the technology. 

Last year, Qualcomm attorney Evan Chesler with New York-based Cravath Swaine & Moore said Apple owed more than $7 billion in unpaid royalties.

As part of the settlement, Apple will make an undisclosed payment to Qualcomm. The companies have also reached a six-year license agreement where Apple will pay royalties to Qualcomm, effective as of April 1, 2019, that includes a two-year option to extend and a multiyear chipset supply agreement.

Information posted to Qualcomm’s investor relations website about the settlement said the deal with Apple “contributes to increased stability” for its licensing business and “reflects value and strength of Qualcomm’s intellectual property.”

Qualcomm said it expected a $2 increase in earnings per share. Its stocks closed up 23 percent Tuesday, to $70.45.

The resolution follows a trial last month also in San Diego in which a jury found Apple had infringed three of Qualcomm’s patents used in iPhones and awarded the San Diego-based company $31 million in damages.

It also follows a bench trial in Silicon Valley in an antitrust case brought against Qualcomm by the Federal Trade Commission. The judge has not yet decided that case.

Qualcomm has been dealt significant blows by government and industry regulators in recent years related to its business model, slapped with billions of dollars in fines by the European Commission, Taiwan, South Korea and China.

During opening arguments Tuesday morning, Apple attorney Ruffin Cordell with Fish & Richardson said “nobody else in the world does business” the way Qualcomm does, saying the company “double-dips” in charging its clients both for modem processor chipsets – the technology that allows cellphones to communicate with network providers – and royalties for its patent portfolio of 140,000 patents. Cordell said “every single premium smartphone” used the chips made by Qualcomm.

“Beyond question, Qualcomm has market power in the premium tier,” Cordell said.

Cordell said Qualcomm refused to license competitors and would make its purchasers sign “gag clauses” that they would not initiate government and industry regulator investigations into their business model.

But Qualcomm’s attorney Chesler said the litigation – and Apple and its contract manufacturers’ failure to pay royalties – caused the company’s stock to plummet and led to layoffs of employees and the shelving of new technology projects.

“Apple is the largest technology company in history; the idea Qualcomm can bully Apple is absolutely remarkable – it dwarfs us in size,” Chesler said.

Chesler pointed to internal Apple documents made available during the litigation – some dating to the 2014 – which showed the company was planning for at least two years to cease making royalty payments to Qualcomm.

“They laid out exactly what they were going to do,” Chesler said.

The settlement also applies to Apple’s contract manufacturers. 

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