Qualcomm Says Apple, Others Owe Billions in Royalties

SAN DIEGO (CN) – An attorney for phone chipset maker Qualcomm claimed during a hearing Friday that Apple and other contract manufacturers owe more than $7 billion in royalties for using its technology in smartphones.

Qualcomm attorney Evan Chesler with New York-based Cravath Swaine & Moore invoked comments he made during 2017 hearing to highlight the urgency in resolving the ongoing dispute between the phone technology giants.

“They’re $7 billion behind in royalties,” Chesler said.

“The house was on fire, it’s been burning for two years and now there’s $7 billion in property damages,” he added, suggesting “we have to get to trial.”

Friday’s hearing before U.S. District Judge Gonzalo Curiel involved over a dozen attorneys for Qualcomm, Apple and contract manufacturers such as Compal Electronics – all gathered to debate Qualcomm’s motion to partially dismiss the antitrust case.

Last month, a judge in San Jose certified a federal class action in a similar case stemming from claims customers paid more for smartphones because Qualcomm jacked up the price of its chipsets used in the cellular communications.

Qualcomm has also been slapped with a $1.2 billion antitrust fine by the European Union and faces a lawsuit by the U.S. Federal Trade Commission.

Apple attorney Ruffin Cordell with Washington-based Fish & Richardson argued Friday “the gravamen of what Qualcomm is after is to avoid examination of their patents.”

“They were deathly afraid this court or any court will pass judgment on exhaustion of their patents,” Cordell added, noting if the court determines any of the nine patents at issue in the case are exhausted “it will have a profound impact on the relationship of the parties.”

Cordell said roughly 73 percent of Qualcomm’s portfolio – which includes 130,000 patents – is exhausted and Apple and others want to recover money they paid Qualcomm for patents that are invalid, were not infringed or are exhausted.

Chesler insisted the central issue of the case involves licensing agreements between the technology giants and not necessarily the patents individually. Qualcomm filed the motion to dismiss for lack of subject matter jurisdiction after U.S. Magistrate Judge Mitchell Dembin last month granted Apple and the contract manufacturers’ motion to strike portions of Qualcomm’s expert opinions on infringement related to the nine patents at issue.

Following Dembin’s order, Qualcomm executed an express covenant not to assert the nine patents, rendering the 56 claims related to non-infringement, invalidity and unenforceability of the patents moot, according to Chesler.

Curiel postured if he dismissed the claims as requested by Qualcomm after it agreed not to sue Apple and the others over the nine patents at issue in the suit, the parties should be granted leave to amend their complaint to potentially add additional patents to their case.

Chelser wholeheartedly rejected that scenario.

“We are not engaged in gamesmanship. We always thought this was a licensing dispute and not a patent dispute. It’s a dispute over the value of our portfolio and why they aren’t paying royalties. It’s too late to amend the complaint to include additional patents.”

Another hearing in the case is scheduled for Nov. 9.

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