UPDATED 21:43 EDT / SEPTEMBER 25 2018

INFRA

Qualcomm accuses Apple of stealing its mobile chip designs, giving them to Intel

Qualcomm Inc.’s long-running legal battle with Apple Inc. has taken another twist, with the chipmaker accusing its rival of intellectual property theft on a grand scale.

Qualcomm said in an amended complaint Tuesday that Apple has been stealing its modem chip designs and providing them to Intel Corp. for several years. Intel, it’s alleged, then used those designs to make competing chips for Apple’s iPhones, which were sold at lower prices than Qualcomm’s processors.

Qualcomm’s claims are the latest bombshell in an almost two-year long legal struggle between it and Apple. The battle began back in January 2017, when Apple first accused Qualcomm of abusing its position as the dominant supplier of smartphone modems to demand unreasonably high royalties on its patents.

The latest complaint, filed in the California Superior Court for the County of San Diego, alleges that Apple breached a “master software agreement” it signed 10 years ago when it started buying Qualcomm’s processors and modem technology. Under that agreement, Apple was meant to ensure Qualcomm’s technology designs would be kept secret, but the chipmaker argues that’s not the case.

“Apple has engaged in a years-long campaign of false promises, stealth, and subterfuge designed to steal Qualcomm’s confidential information and trade secrets for the purpose of improving the performance and accelerating time to market of lower-quality modem chipsets, including those developed by Intel Corporation, competitor of Qualcomm, to render such chipsets useable in Apple iPhones and other devices, with the ultimate goal of diverting Qualcomm’s Apple-based business to Intel,” Qualcomm wrote in a proposed amended complaint.

Qualcomm’s original complaint from November 2017 accused Apple of violating a software agreement by refusing to let it audit Apple’s compliance with that agreement. Qualcomm suspected Apple of sharing trade secrets with Intel at the time but said the lack of an audit hampered its ability to investigate further.

The amended complaint says Qualcomm now has evidence of Apple’s breach of contract and trade-secret misappropriation, and is asking for damages covering “actual losses, unjust enrichment, lost profits, and/or imposition of a reasonable royalty.”

Apple began using Qualcomm’s modem chips in its iPhones and iPads in 2011, beginning with the launch of the iPhone 4, Qualcomm said. But in 2016 Apple started using chips from Intel as well in order to take advantage of its lower prices, even though Intel’s chips allegedly offered inferior performance.

Qualcomm said Intel’s chip improvements since that time were aided by Apple’s IP theft. Apple’s latest iPhone XS and XS Max models both use Intel’s modem chips.

Industry watchers said Qualcomm’s allegations could be designed to give it some leverage in its larger legal squabbles with Apple.

“It’s hard to believe that Apple would do that, and that Intel would take them [Qualcomm’s designs] no questions asked,” said Holger Mueller, principal analyst and vice president of Constellation Research Inc. “But then Qualcomm has good lawyers and they must have a good enough case. IP is precious in today’s knowledge economy and competitive advantages slim, so we will have to get used to these kind of litigations.”

Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, said the latest allegations all boil down to Qualcomm just wanting to get paid what it believes it’s owed.

“Qualcomm just wants Apple to pay it the license fees that it is owed and agreed to,” Moorhead said. “Apple thinks the license fee is too high, terms onerous, and is therefore withholding payment.”

But if Qualcomm’s latest allegations are proven to be true, they could have much more troubling implications for both Apple and Intel executives, another analyst said. Rob Enderle of the Enderle Group told SiliconANGLE that IP theft generally reflects very badly on the companies accused of it, and that if the allegations are true, that would compromise Intel’s modem chip IP and could even knock it out of the business altogether.

“I understand Qualcomm’s evidence is solid,” Enderle said. “On top of the malware coverups, the manufacturing problems, the CEO firing and the apparent inability to replace him, this makes it look like the Intel board is extremely negligent.”

Enderle also had words of warning for Apple, saying that its status as a trillion-dollar company could result in “epic” fines.

“Up until now Qualcomm has been very reserved but IP companies tend to get really upset about theft, and I expect they will take the gloves off now,” he added.

Intel so far hasn’t commented on Qualcomm’s latest allegations. As for Apple, a spokesperson told Ars Technica that Qualcomm has repeatedly made allegations against it without evidence, and that the latest claims are no different.

“In late August, Apple filed a Motion to Compel in this same case to get Qualcomm to show evidence for its allegations, since the company has continued to make claims without producing substantiation,” the spokesperson said.

Photo: Skeeze/Pixabay

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