Qualcomm Defeats Apple in U.S. Court

Article By : Dylan McGrath

A U.S. federal court found that several iPhone models infringe on patents held by Qualcomm, a major setback for Apple in the patent fight between the two companies.

A jury in U.S. District Court in San Diego found that Apple’s iPhone 7, 7 Plus, 8, 8 Plus, and X infringe patents held by Qualcomm. The jury awarded Qualcomm $31 million for damages covering July 6, 2017 — the date the lawsuit was originally filed — through the end of the trial.

The $31 million in damages may seem like an insignificant sum for Apple, particularly because it came less than one day after a pretrial ruling in a separate case that found Qualcomm liable for nearly $1 billion in missed royalty payments to Apple. But the finding of patent infringement is potentially more significant because it may force Apple to license the technology involved from Qualcomm going forward.

Apple is likely to appeal the decision and could delay a permanent resolution of the issues by years.

Other preliminary rulings in patent infringement cases brought by Qualcomm against Apple in China and Germany have also gone in favor of Qualcomm. A trial in an antitrust case brought by the U.S. Fair Trade Commission (FTC) against Qualcomm concluded in late January, and both sides are currently awaiting a decision.

"It would be in Apple's best interest to settle now, but they seem determined not to settle without a favorable agreement," said Jim McGreggor, a principal analyst at Tirias Research.

“We are gratified that courts all over the world are rejecting Apple’s strategy of refusing to pay for the use of our IP,” said Don Rosenberg, executive vice president and general counsel for Qualcomm, in a press statement.

Kevin Krewell, a principal analyst for Tirias Research, agreed that the jury's verdict would ratchet up the pressure on Apple to settle the patent infringement cases with Qualcomm.

"Based on their public statement, it appears Apple is still holding out for a result in the FTC v. Qualcomm case. If Qualcomm prevails in that case, then Apple will have few other options," Krewell said.

Krewell added that Apple's stance versus Qualcomm appears likely to backfire. "It was an ill-advised decision from the beginning," he said. "Without Qualcomm as a supplier, Apple will likely not be able to deliver a 5G iPhone this year and will be behind every other major smartphone supplier on 5G."

The three patents that the iPhones were found to infringe include one for flashless booting of the iPhone, another for managing data retrieval between the applications processor and the modem, and a third for increasing the longevity of a smartphone’s battery life while using high-performance graphics.

The earlier ruling finding Qualcomm liable for nearly $1 billion in missed royalty payments to Apple pertains to a lawsuit filed by Apple against Qualcomm two years ago, alleging that Qualcomm violated the terms of an unusual cooperation agreement between the two companies. Qualcomm’s failure to make these payments at the time prompted Apple to direct Taiwanese suppliers to withhold royalty payments to Qualcomm as a result, which is what initially brought the dispute between the two longtime partners to a head.

U.S. District Court Judge Gonzalo Curiel ruled on March 14 that Qualcomm had violated the cooperation agreement and was liable for the nearly $1 billion. Qualcomm noted that Apple has already offset the payment under the agreement against royalties that were owed Qualcomm and said that the amount — without consideration of any interest that may be awarded — has already been accounted for in Qualcomm’s financial statements. The trial in this case is set to begin next month, also in San Diego.

Qualcomm has argued that Apple’s “false and misleading statements to antitrust regulators aimed at instigating unjustified action against Qualcomm” constituted a breach of the cooperation agreement between the two companies. Curiel rejected that argument.

In a separate statement, Rosenberg said that although the court did not view Apple’s conduct as a breach of the agreement, “the exposure of Apple’s role in these events is a welcome development.”

In another highly significant legal ruling last week, the Japan Fair Trade Commission (JFTC) reversed a 9-year-old cease-and-desist order affecting Qualcomm licensing in Japan. The JFTC concluded that Qualcomm’s cross-licensing provisions and non-assertion covenants that were the subject of the cease-and-desist order did not violate Japanese antimonopoly law.

The JFTC decision, which was the result of a process that included 37 separate hearings, rejected an initial finding related to cross-license agreements between Qualcomm and Japanese manufacturers, Qualcomm said.

The JFTC is now the second antitrust agency after the Taiwan Fair Trade Commission to have revoked its ruling against Qualcomm, Rosenberg said.

The decision “affirms our confidence that once Qualcomm was afforded a full hearing and actual evidence was considered, the JFTC would find that our cross-licensing program was completely lawful and the product of arms-length, good-faith negotiations with our Japanese licensees,” Rosenberg said.

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