Qualcomm sues Apple’s suppliers for withholding $1B in royalties

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Qualcomm Inc. announced today that it has filed a breach of contract complaint against some of Apple Inc.’s top suppliers, which have withheld $1 billion in royalties that Qualcomm says it is owed.

The suppliers include Foxconn Technology, Pegatron Corp., Wistron Corp. and Compal Electronics Inc, which together are responsible for the manufacture of all iPhones and iPads worldwide.

The suppliers withheld the royalties at the direction of Apple, which filed a lawsuit against Qualcomm in January for the same amount. Apple claims in its suit that Qualcomm, which is the world’s largest supplier of smartphone chips, has “unfairly insisted on charging royalties for technologies they have nothing to do with.” Apple’s lawsuit is still ongoing, and the iPhone maker advised its suppliers to withhold the disputed amount until the suit has been resolved.

In April, Qualcomm said in its second-fiscal quarter earnings results that its reported revenue had not been affected by the withheld royalties, as the suppliers continued to report the royalties and acknowledged that the money was still owed. During Qualcomm’s earnings call with investors, company President Derek Aberle also dismissed the claims made in Apple’s lawsuit, saying that they contain “numerous misstatements and mischaracterizations of our agreements, negotiations and contributions to the industry.”

Now it seems that Qualcomm has run out of patience for the missing royalties and has fired back with its own lawsuit.

“It is unfortunate that we must take this action against these long-time licensees to enforce our agreements, but we cannot allow these manufacturers and Apple to use our valuable intellectual property without paying the fair and reasonable royalties to which they have agreed,” said Don Rosenberg, executive vice president and general counsel of Qualcomm.

“As Apple continues to collect billions of dollars from consumer sales of its Qualcomm-enabled products, it is using its market power as the wealthiest company in the world to try to coerce unfair and unreasonable license terms from Qualcomm in its global attack on the company,” he added in a statement. “Our license agreements with Apple’s manufacturers remain valid and enforceable. The manufacturers must continue to live up to their obligations under these agreements and Apple should immediately cease its tortious interference.”

Qualcomm noted in its statement that the suppliers have still not disputed their contractual obligations to pay the royalties, which could give the company some ammunition in its lawsuit. Qualcomm also said that the suppliers have continued to pay royalties for non-Apple products under the same agreements that apply to Apple.

Photo: Apple