Smartphone Makers Join Apple's Battle Against Qualcomm
July 19 2017 - 3:29AM
Dow Jones News
By Tripp Mickle
A group of leading smartphone manufacturers are joining Apple
Inc. in a legal battle against Qualcomm Inc., claiming that the
chip maker charges excessive patent licenses and violates antitrust
laws.
Taiwan-based contract manufacturers Compal Electronics Inc.,
Foxconn Technology Group, Pegatron Corp., and Wistron Corp. planned
to file a lawsuit against Qualcomm late Tuesday night in federal
district court in San Diego, according to Theodore J. Boutrous, an
attorney at Gibson, Dunn & Crutcher LLP who is representing the
four.
The companies, which assemble iPhones and iPads for Apple and
other gadgets for other brands, are broadly challenging Qualcomm's
licensing practices with them as illegal, according to a draft copy
of their complaint.
Apple, which is covering legal fees associated with the
manufacturers' defense, said it would file a separate motion
Tuesday to consolidate the manufacturer's countersuit and its own
suit against Qualcomm.
The planned moves come after a series of escalating legal blows
between Apple and Qualcomm, which sells chips used in many
smartphones and licenses technology used in nearly all of them.
Apple sued Qualcomm in January in the U.S. claiming unfair
business practices, and the four contract manufacturers--which have
the direct licensing agreements with Qualcomm that cover iPhones
and iPads-- later stopped paying royalties on Apple's behalf.
Qualcomm sued the four in May over the nonpayment, setting up
their planned countersuit Tuesday. Qualcomm has said that its
licensing agreements with the contract manufacturers are
independent of Apple. Qualcomm also has asked federal trade
authorities to block imports of some iPhones and iPads as part of
the broader dispute.
Qualcomm says its licensing practices are fair, and that Apple
is merely trying to reduce its costs at a time of slowing iPhone
shipments. At a conference in Aspen Monday, Qualcomm Chief
Executive Steve Mollenkopf said he expects the dispute to be
settled out of court, just as Qualcomm settled a similar patent
dispute in 2008 with cellphone maker Nokia Corp.
The four companies' planned countersuit was to be filed just
ahead of Qualcomm's quarterly financial report Wednesday afternoon.
The legal battle forced Qualcomm in April to cut its profit
forecast because it no longer expected patent-licensing revenue
from the iPhone in the quarter. It is expected to report adjusted
earnings of 81 cents per share, down from $1.16 per share a year
ago, according to analysts surveyed by Thomson Reuters.
Qualcomm's patent licensing business on cellular technology
accounted for roughly 80% of its pretax profit in 2016.
Complaints against Qualcomm have focused on its licensing
practices for patents considered essential to cellular
communication. Standards organizations require such patents be
licensed widely at fair costs, but critics say Qualcomm has made
sales of its chips conditional on the purchase of a patent license
and refuses to make its essential technology available to rival
chip makers. It's also been accused of charging high royalty rates
unless smartphone makers agree to buy its chips.
Qualcomm has denied those allegations. It said it went out of
its way to offer Apple alternative licensing terms, which Apple
rejected.
Ted Greenwald
contributed to this article
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
July 19, 2017 03:14 ET (07:14 GMT)
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