Qualcomm files breach of contract complaint against Apple's manufacturers

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Qualcomm argued that the manufacturers acknowledge they have a contractual obligation to pay royalties to the chip makers, but they need to follow Apple's orders against paying.

According to the complaint, "by threatening to disrupt cell phone manufacturers' supply of baseband processors, Qualcomm obtains elevated royalties and other license terms for its standard-essential patents that manufacturers would otherwise reject".

Qualcomm in a statement said that the license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.

Wistron Corp. and Compal Electronics Inc, which together are responsible for the manufacture of all iPhones and iPads worldwide.

"We don't like suing our licensees", said Rosenberg, noting that in the past decade the company has brought just one patent infringement case against a smartphone maker.

"Specifically, Apple has withheld substantial payments from Defendants that it owes for Qualcomm royalties and has directed Defendants not to make corresponding royalty payments to Qualcomm".

Rosenberg declined to comment on why Qualcomm chose a lawsuit in San Diego Federal Court against Apple's contract manufacturers rather than going to the U.S. International Trade Commission to bar iPhone imports.


The filing claimed the companies have admitted that Apple instructed them to withhold the payments and agreed to indemnify them against any losses or damages incurred by their actions.

Despite a long history of consistently paying royalties under their license agreements with Qualcomm, the manufacturers now are refusing to pay royalties on the Apple products they produce. Apple reimburses Foxconn and the other contract manufacturers for patent royalties owed to Qualcomm.

Qualcomm's patent-licensing segment in fiscal 2016 contributed roughly 80% of its pretax profit.

"Pay for what you take and if you don't want to pay for it, don't take it", he said.

Qualcomm pioneered a good portion of 3G/4G cellular radio technology and holds thousands of patents on its inventions. The FTC and Apple accused it of abusing its power in the chip business.

The Cupertino, California, company isn't alone in its accusations against Qualcomm. A hearing is scheduled for June 15, and Koh has set a trial date of January 3, 2019.

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