Qualcomm Sues iPhone Manufacturers Over Royalties -- Update
May 17 2017 - 10:21AM
Dow Jones News
By Ted Greenwald
Qualcomm Inc. sued the manufacturers that make iPhones for Apple
Inc. for failing to pay royalties on the chip maker's technology,
widening its legal battle with the world's most valuable
company.
Qualcomm's lawsuit, filed Wednesday in a federal district court
in San Diego, accuses Compal Electronics Inc., Foxconn Technology
Group, Pegatron Corp. and Wistron Corp. of breaching longstanding
patent-licensing agreements with Qualcomm by halting royalty
payments on Qualcomm technology used in iPhones and iPads. The suit
seeks royalties they have withheld as well as a court order that
the four Taiwanese companies continue to pay royalties according to
their previous agreements with Qualcomm.
Qualcomm said the contract manufacturers are withholding iPhone
royalties because Apple has refused to reimburse them, directed
them not to pay and agreed to indemnify them against any damages
they may incur by failing to pay royalties to Qualcomm. They have
continued to pay royalties for using Qualcomm's patents in
non-Apple products, the filing said.
Foxconn said the company was aware of the lawsuit between the
two companies. Foxconn said it hadn't received any formal
communications related to this lawsuit and didn't have any further
comments on the matter.
Compal, Pegatron and Wistron representatives didn't respond to
emails sent by The Wall Street Journal after working hours, nor did
they pick up calls by the Journal after office hours. Foxconn
couldn't immediately comment.
Apple said last month that it had suspended royalty payments
because it hadn't been able to work out a deal with the chip
company. "We've been trying to reach a licensing agreement with
Qualcomm for more than five years but they have refused to
negotiate fair terms," an Apple representative said.
The new lawsuit is the latest escalation in a dispute between
Qualcomm, whose patents on key cellular communications technology
enable it to collect royalties on nearly every smartphone made, and
Apple, the world's most profitable smartphone maker.
Apple doesn't have a patent license directly with Qualcomm,
relying instead on licenses held by the contract manufacturers,
whom Apple reimburses.
Qualcomm last month sharply cut its guidance for the current
quarter when it became clear that Apple would continue withholding
reimbursements from the contract manufacturers.
Qualcomm's patent-licensing segment in fiscal 2016 contributed
roughly 80% of its pretax profit. Apple-related royalties account
for about 12% of Qualcomm's total revenue and as much as 30% of its
per-share earnings, according to Srini Pajjuri, an analyst at
Macquarie Capital (USA) Inc.
Apple sued Qualcomm in January in the U.S. and later in China
and the U.K., claiming that Qualcomm abused its monopoly position
in cellular chips to impose "onerous, unreasonable and costly"
terms on customers and competitors. Apple's suit built upon a wave
of international resistance to Qualcomm's patent-licensing business
that has included investigations and fines in several
countries.
Qualcomm, in its counterclaims to Apple's suit, accused Apple of
unlawfully interfering with its agreements with contract
manufacturers and of encouraging international regulators to attack
it.
Liza Lin contributed to this article.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
May 17, 2017 10:06 ET (14:06 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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