Apple Inc. is taking a lead from the U.S. Federal Trade Commission, slapping mobile chip maker Qualcomm Inc. with a $1 billion lawsuit that alleges the company demanded excessive royalty fee payments for cell phone technology patents it holds.
The news comes after the FTC said last week it was charging Qualcomm for violating laws on fair competition. The FTC’s suit alleges Qualcomm operated an unofficial “no-license, no chips” policy that involved forcing smartphone manufacturers, including Apple, into agreeing to unfair licensing deals through the abuse of its patents. It also accused Qualcomm of bribing the iPhone maker with lower licensing costs in exchange for an exclusive deal to provide baseband chips for its smartphones over a five-year period.
Apple’s complaint, which was filed with the Southern California District Court on Friday, alleges that Qualcomm has been charging it over-the-odds patent licensing fees for years, as one of its conditions for allowing it to use its microprocessors in its iPhones and iPad devices.
“For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with,” Apple said in a statement. “Qualcomm built its business on older, legacy standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined.”
Apple also alleged that Qualcomm has withheld payments owed to it totaling almost $1 billion. The company said Qualcomm had withheld the money in retaliation for Apple’s decision to cooperate in an investigation by the Korean Fair Trade Commission into the chip maker’s alleged patent abuse. Qualcomm was later slapped with an $853 million fine by South Korean authorities, after being found guilty of similar charges.
“Apple believes deeply in innovation and we have always been willing to pay fair and reasonable rates for patents we use,” Apple said. “We are extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty, we have no choice left but to turn to the courts.”
Qualcomm quickly hit back at Apple’s claims and made it clear that it intends to fight both it and the FTC in court.
“While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless,” Don Rosenberg, executive vice president and general counsel at Qualcomm, said in a statement. “Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent [Korean] decision and FTC complaint, by misrepresenting facts and withholding information.”
Qualcomm saw its share price fall by 2.5 percent to $62.81 on Friday after news of Apple’s complaint emerged.