As the legal dispute between Apple and Qualcomm continues, Qualcomm this week has requested an injunction to force Apple's iPhone manufacturers to keep paying royalties during the legal battle (via Axios). Last week, Qualcomm sued four of Apple's suppliers -- Foxconn, Pegatron, Wistron, and Compal -- for "breaching their license agreements" by failing to pay royalties on the use of Qualcomm's technology in the assembly of Apple's devices.

Now, Qualcomm is trying to force the suppliers to continue to make royalty payments amid the legal scuffle with Apple. According to Qualcomm's general counsel, Don Rosenberg, the company believes that "it is only fair and equitable" that the suppliers pay for Qualcomm's licensed technology.

qualcomm logo

"We are confident that our contracts will be found valid and enforceable but in the interim it is only fair and equitable that our licensees pay for the property they are using," Qualcomm general counsel Don Rosenberg said in a statement to Axios.

In April, Apple decided to stop making royalty payments to its manufacturers in relation to Qualcomm technology, and said it would continue doing so until the conflict was resolved. Now, in an amended section of its earlier lawsuit, Qualcomm claims Apple has promised to compensate its suppliers for any monetary loss potentially faced during the lawsuit.

According to Qualcomm, this is a tactic enacted by Apple "to make litigation unbearable" and to force a settlement, because Qualcomm claims that Apple knows it would not win if the case eventually made it to court.

By withholding billions of dollars in royalties so long as Qualcomm defends itself against Apple's claims, Apple is hoping to make litigation unbearable for Qualcomm and, thereby, to extract through a forced settlement what it knows it cannot obtain through judicial process—a below-market direct license. Apple's tactics are egregious.

The lawsuit began with an FTC complaint regarding Qualcomm's anticompetitive patent licensing practices, for which Apple sued Qualcomm, accusing the company of charging unfair royalties for "technologies they have nothing to do with." The argument died down for a few months until Apple ceased royalty payments to its suppliers in April, which particularly hurt Qualcomm because the company's licensing deals are directly with iPhone suppliers and not Apple itself.

Top Rated Comments

wedouglas Avatar
98 months ago
No, it's pretty clear that just about everyone in the industry hates Qualcomm. The US FTC is suing them, Apple is suing them, even Samsung filed an amicus brief in support of Apple/FTC. Qualcomm demands royalty payments for the entire price of any device using their chips; they charge more for a $1000 iPhone 7 than for a $600 one, even though they use the same parts...does this seem fair to you? And of course it's the consumer who ends up paying more for the ludicrous royalties.
There is nothing at all unfair about a contract stipulating a percentage of the selling price as a royalty. Have you ever actually dealt with royalties? Every McDonalds franchise out there pays a royalty to McDonalds that is a percentage of gross sales. It doesn't matter how much you sell, you owe x% to McDonalds for the right to use their IP etc.

McDonalds corporate sets the price, not the franchise, and you will pay the same amount for your burger regardless of whether the franchise is paying McDonalds $100K/year in royalties or $500K/year in royalties.

On the flip side, this can also be beneficial to small manufacturers and lower-end consumers who want to have access to valuable IP in a more affordable product. Now someone buying a $200 phone can have the same technology in some respects as someone buying a $900 phone. That's great for consumers because luxury manufacturers are far less likely to pass savings on to consumers than low-end producers are to pass on cost.

Apple absolutely would not pass those savings onto the consumer. However, Samsung or Motorola might pass a new expense on to consumers. It's much easier for Apple not to lower the price than it is for a low cost phone to keep the price from going up.

At the end of the day, don't sign contracts you don't like. If Apple wants to pay less, then just lower the cost of the phone. Apple is not entitled to make a certain profit on their phone any more than Samsung or Motorola is.

Qualcomm says, "sell more phone for less money instead of less phones for more money, benefiting consumers, and we'll charge you less per phone." Sounds like a great deal for consumers. Apple doesn't want to operate on the strategy, so tough luck for them.
Score: 11 Votes (Like | Disagree)
jarman92 Avatar
98 months ago
Correction, you don't like them. As for the the rest, yawn.
No, it's pretty clear that just about everyone in the industry hates Qualcomm. The US FTC is suing them, Apple is suing them, even Samsung filed an amicus brief in support of Apple/FTC. Qualcomm demands royalty payments for the entire price of any device using their chips; they charge more for a $1000 iPhone 7 than for a $600 one, even though they use the same parts...does this seem fair to you? And of course it's the consumer who ends up paying more for the ludicrous royalties.
Score: 11 Votes (Like | Disagree)
kdarling Avatar
98 months ago
Although I was wondering why they were making payments like that. It's all very weird. I wonder if the contracts are contingent on Apple providing the funds though?
Qualcomm has had contracts with some of the iPhone factories starting years before the iPhone even existed. I think some as far back as 2002, and Foxconn since about 2005, IIRC.

Basically part of the cost of a phone is paying the royalties to various patent holders. Then the factory sells the completed phone to the brand name wholesaler/retailer (e.g. Apple). In this case, the royalty is on the price the factory sells the phone to Apple for, which is a LOT less than the huge profit markup they make later on.

Note that these contracts did not change when the factories started making iPhones. Nor does the contract change if any other modem is used. So no, Apple was not singled out for higher payments, nor were they prevented from using any modem they wished.

Then why aren't supplies paying QCOM directly? Why is Apple making the payments?
The factories are supposed to be paying QCOM directly. They always have. But Apple told the factories that they would no longer pay them for the QCOM part of the iPhone cost.

That leaves the factories in the lurch with millions of iPhones. They would rather give into Apple by selling them iPhones for less, and instead tell QCOM that they cannot pay the royalties.

The reality is that the factories should be suing Apple for breach of contract, but they're too scared to do so.

But this is a risky move for Apple...what's to stop Qualcomm from withholding their chips from Foxconn/Pegatron? Especially during the iPhone 8 ramp-up that would be devastating.
Apple is indeed lucky that most others do not play as nasty as they do.

Qualcomm demands royalty payments for the entire price of any device using their chips; they charge more for a $1000 iPhone 7 than for a $600 one, even though they use the same parts...does this seem fair to you? And of course it's the consumer who ends up paying more for the ludicrous royalties.
On the contrary, this pro-rated system is what allows for cheap phones which have led to more users, which leads to more network, which leads to more sales for the profit hungry high priced makers like Apple.

As for "fair", this is exactly how every other cellular patent license has worked for decades. Moreover, Apple itself loves charging by percentage of a sale:

Is it "fair" that every iPhone app developer pay Apple 30%, even though the cost of storing and serving each app is basically the same? Is it "fair" that Apple charge banks a percentage of every Apple Pay purchase, even though the same NFC hardware is used every time?
Score: 6 Votes (Like | Disagree)
jarman92 Avatar
98 months ago
There is nothing at all unfair about a contract stipulating a percentage of the selling price as a royalty. Have you ever actually dealt with royalties? Every McDonalds franchise out there pays a royalty to McDonalds that is a percentage of gross sales. It doesn't matter how much you sell, you owe x% to McDonalds for the right to use their IP etc.

McDonalds corporate sets the price, not the franchise, and you will pay the same amount for your burger regardless of whether the franchise is paying McDonalds $100K/year in royalties or $500K/year in royalties.

On the flip side, this can also be beneficial to small manufacturers and lower-end consumers who want to have access to valuable IP in a more affordable product. Now someone buying a $200 phone can have the same technology in some respects as someone buying a $900 phone. That's great for consumers because luxury manufacturers are far less likely to pass savings on to consumers than low-end producers are to pass on cost.

Apple absolutely would not pass those savings onto the consumer. However, Samsung or Motorola might pass a new expense on to consumers. It's much easier for Apple not to lower the price than it is for a low cost phone to keep the price from going up.

At the end of the day, don't sign contracts you don't like. If Apple wants to pay less, then just lower the cost of the phone. Apple is not entitled to make a certain profit on their phone any more than Samsung or Motorola is.

Qualcomm says, "sell more phone for less money instead of less phones for more money, benefiting consumers, and we'll charge you less per phone." Sounds like a great deal for consumers. Apple doesn't want to operate on the strategy, so tough luck for them.
Except that's not how the law works. Companies don't get to charge whatever they want and say "if you don't like it, don't sign it." That's why FRAND exists. Qualcomm gets priveleged status for its patents in exchange for fair royalties. Instead, they are literally extorting tech companies: if you don't pay Qualcomm exactly what they want, you get nothing and they'll sue you if you remotely infringe on their patents. Further, if you DO use Qualcomm chips you owe them royalties for those chips AND for competitors chips, as well as the screen, battery, cameras, housing, antennas, etc. that Qualcomm had nothing to do with. The fact that you're defending Qualcomm here is just ludicrous.

Also your McDonalds example is not at all relevant.
[doublepost=1495733892][/doublepost]
Qualcomm has had contracts with some of the iPhone factories starting years before the iPhone even existed. I think some as far back as 2002, and Foxconn since about 2005, IIRC.

Basically part of the cost of a phone is paying the royalties to various patent holders. Then the factory sells the completed phone to the brand name wholesaler/retailer (e.g. Apple). In this case, the royalty is on the price the factory sells the phone to Apple for, which is a LOT less than the huge profit markup they make later on.

Note that these contracts did not change when the factories started making iPhones. Nor does the contract change if any other modem is used. So no, Apple was not singled out for higher payments, nor were they prevented from using any modem they wished.



The factories are supposed to be paying QCOM directly. They always have. But Apple told the factories that they would no longer pay them for the QCOM part of the iPhone cost.

That leaves the factories in the lurch with millions of iPhones. They would rather give into Apple by selling them iPhones for less, and instead tell QCOM that they cannot pay the royalties.

The reality is that the factories should be suing Apple for breach of contract, but they're too scared to do so.



Apple is indeed lucky that most others do not play as nasty as they do.



On the contrary, this pro-rated system is what allows for cheap phones which have led to more users, which leads to more network, which leads to more sales for the profit hungry high priced makers like Apple.

As for "fair", this is exactly how every other cellular patent license has worked for decades. Moreover, Apple itself loves charging by percentage of a sale:

Is it "fair" that every iPhone app developer pay Apple 30%, even though the cost of storing and serving each app is basically the same? Is it "fair" that Apple charge banks a percentage of every Apple Pay purchase, even though the same NFC hardware is used every time?
Yeah, it makes total sense that the company with a stranglehold on standards-essential wireless communication patents demanding exorbitant royalties from companies like Apple and Samsung leads to "cheap phones." Try to square that circle for all of us here and at the FTC as well, since they seem (correctly) to see Qualcomm's terms as extortion.
Score: 6 Votes (Like | Disagree)
Mr. Skeleton Avatar
98 months ago
LOL! Qualcomm, who has quite an extensive portfolio of patents that are USED in Apple products and others, are evil. Meanwhile, Apple tries to get out of paying anything to everyone they can but this is OK? Typical thinking.
Qualcomm uses anti-competitive practices to force high prices and compliance. It's not to fuel costs for innovation, it's because they're evil. Nobody likes them. They need to go.
Score: 5 Votes (Like | Disagree)
Mr. Skeleton Avatar
98 months ago
Correction, you don't like them. As for the the rest, yawn.
Correction, you yawn, as for the rest - just look at any tech community android or Apple. Qualcomm sucks.
Score: 3 Votes (Like | Disagree)

Popular Stories

AirPods Pro Firmware Feature

Apple Releases Firmware Updates for AirPods Pro 2 and AirPods 4

Monday November 11, 2024 11:28 am PST by
Apple today released firmware updates for both AirPods 4 models (version number 7B20) and the AirPods Pro 2 with both Lightning and USB-C charging cases (version number 7B21). All of these AirPods models were previously on firmware version 7B19. It is not immediately clear what new features or changes are included in firmware versions 7B20 and 7B21, but we will update this story if we find...
New Things Your iPhone Can Do in iOS 18

18 New Things Your iPhone Can Do in iOS 18.2

Wednesday November 13, 2024 2:09 am PST by
Apple is set to release iOS 18.2 next month, bringing the second round of Apple Intelligence features to iPhone 15 Pro and iPhone 16 models. This update brings several major advancements to Apple's AI integration, including completely new image generation tools and a range of Visual Intelligence-based enhancements. There are a handful of new non-AI related feature controls incoming as well....
iPhone SE 4 Thumb 1

iPhone SE 4 Camera Modules to Enter Mass Production Next Month

Tuesday November 12, 2024 2:56 am PST by
Apple's camera module supplier for the upcoming iPhone SE 4 is set to begin mass production of the components in December, according to a new report coming out of Korea. Economic newspaper Ajunews reports that LG Innotek will supply the front camera module for the budget-friendly fourth-generation device. Final tests are now said to be underway, with mass production of the module following...
iphone 6 thickness

iPhone 17 'Air' May Not Be Much Thinner Than iPhone 6

Monday November 11, 2024 5:18 am PST by
Next year's iPhone 17 "Air" model may not be as thin as Apple planned, according to a rumor originating in Korea. According to the news aggregator account "yeux1122" on Naver, citing industry sources, Apple has run into problems making the new iPhone 17 model sufficiently thin. The device's reduced thickness is apparently dependent on manufacturing a battery with a thinner substrate, but...
new mac holiday

The Best Early Black Friday Mac Deals

Monday November 11, 2024 7:45 am PST by
Black Friday is getting closer, and prices on MacBook Pro, MacBook Air, iMac, and Mac mini computers have started to drop as the shopping holiday nears. These deals include the latest models of the M4 MacBook Pro and iMac. Note: MacRumors is an affiliate partner with some of these vendors. When you click a link and make a purchase, we may receive a small payment, which helps us keep the site...
iOS 18

Here's Everything New in iOS 18.2 Beta 3

Monday November 11, 2024 4:53 pm PST by
Apple seeded the third betas of iOS 18.2 and iPadOS 18.2 to developers for testing today. While the third betas of each update are minor relative to the first two betas, there are still a handful of changes across the Photos app, TV app, and more. A corresponding iOS 18.2 public beta with these changes will likely be released later this week, and Apple previously confirmed that the software...
General Final Cut Pro Feature

Apple Likely to Announce Final Cut Pro Update This Week With These New Features

Sunday November 10, 2024 12:13 pm PST by
In its announcement video for the new Mac mini last month, Apple teased an "upcoming" version of Final Cut Pro for the Mac. Apple will likely announce the update during the annual Final Cut Pro Creative Summit, which begins this Wednesday. The conference is held in association with Apple, and attendees will be visiting Apple Park on the first day. Apple already teased four new features...
iPad iOS 16 WP Display Feature eric edit

Apple to Launch AI-Powered Home 'Command Center' as Soon as March 2025

Tuesday November 12, 2024 1:09 pm PST by
Apple is planning to launch an AI-powered smart home display as soon as March 2025, according to Bloomberg's Mark Gurman. The display will measure in at approximately six inches, and while it is similar to an iPad, it is square rather than rectangular and it has thick bezels around the edges. There is a camera at the top front so that it can be used for FaceTime, plus there are internal speakers...