Attorneys Spar in Apple-Qualcomm Antitrust Fracas

SAN DIEGO (CN) – At a nearly 3-hour hearing in San Diego federal court on Friday, attorneys for Apple and its contract manufacturers argued why Qualcomm should not be granted an injunction to effectively pause nearly a dozen lawsuits it faces in four countries filed within the last year.

The iPhone company sued chipset technology maker Qualcomm for $1 billion in January on claims it is effectively “double-dipping” in charging not only for its technology used in smartphones but for royalties on the technology as well.

The lawsuit followed international investigations against Qualcomm by the Korean Fair Trade Commission, which last year fined Qualcomm $853 million for unfair licensing practices, and a lawsuit by the Federal Trade Commission against Qualcomm over using its monopoly power to make Apple use its chipsets exclusively in exchange for billions in rebates. A federal court judge refused to dismiss the FTC action in June.

Multiple securities class actions have since been filed against Qualcomm by cellphone purchasers who claim they were harmed by inflated prices they paid for iPhones using Qualcomm’s chipset technology.

Qualcomm attorney Evan Chesler did not mince words when he told U.S. District Judge Gonzalo Curiel Friday that the San Diego-based tech giant is under “a worldwide assault by the biggest technology company in the world.” Chesler said Apple has an “agenda to force my client to fundamentally change its business model before it gets its day in court.”

Chelser asked Curiel to make a FRAND determination – fair, reasonable, and non-discriminatory terms – judgment to determine fair royalties for Apple and its phone manufacturers to pay for 18 patents related to Qualcomm’s chipset technology. He argued an order by the judge would be enforceable internationally.

“Why are we litigating these issues all over the world when it’s already being litigated here,” Chesler argued in seeking an injunction against lawsuits filed internationally. “We’re both California companies at the bottom and top of the state.”

But Apple attorney William Isaacson argued the nearly dozen lawsuits filed in the United States, Britain, Japan, China and Taiwan were not vexatious, but filed separately so the company could exercise its rights under foreign laws.

Isaacson suggested Qualcomm wants the worldwide legal actions shut down so it “can protect its business model.” He also argued a FRAND order by Curiel would not be enforceable across the globe.

“All of a sudden, this court becomes the worldwide patent court – which it’s not permitted to do and probably doesn’t want to do,” Isaacson said. “It would be a complete insult to those countries and their courts.”

Curiel also heard arguments in a similar case Qualcomm filed in May against Compal Electronics and four other manufacturers that Apple contracts with to make its phones. The contract manufacturers haven’t paid Qualcomm any of the chipset technology royalties, a bill Apple used to foot.

Chesler argued while the contract manufacturers are still paying for the chipsets themselves, Apple’s withholding of royalty payments to Qualcomm has caused the company to suffer a $16 billion decrease in capitalization. He said the company will not be able to compete among other global tech giants since it will have to reduce its annual $5 billion research-and-development budget to pay litigation costs related to the antitrust cases.

“As they said in the neighborhood I grew up in the Bronx: It ain’t fair,” Chesler said.

Qualcomm’s attorney said since the Apple lawsuit has been filed, another client – one of the largest handset manufacturers in the world – has also decided not to pay royalties. Chesler did not identify the company.

“We are what make the smartphones smart, and they’re not paying us a dime,” Chesler said.

But Nick Hanna, attorney for the contract manufacturers, disputed Qualcomm had suffered irreparable harm under a “contagion” phenomenon where other licensees would also refuse to pay royalties because Apple had.

He pointed to a July earnings call in which Qualcomm’s CEO told investors the long-term licensing outlook for the company was strong and that it did not expect other licensees to stop making royalty payments.

“The notion there is a ‘monkey see, monkey do’ phenomenon doesn’t really hold water and ignores all the enforcement action going on around the world,” Hanna said.

Curiel took the matters in both cases under submission and said he’d likely have an order within the next couple of weeks. He also indicated it “makes sense” to consolidate the cases.

 

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