Apple Told To Halt Some Sales In China -- WSJ
December 11 2018 - 3:02AM
Dow Jones News
By Tripp Mickle
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 11, 2018).
A Chinese court ordered Apple Inc. to stop selling older iPhone
models after finding the company infringed on two patents held by
Qualcomm Inc., the chip maker said, casting uncertainty over
Apple's business in a critical market amid thorny trade relations
between the U.S. and China.
The Nov. 30 decision by a Chinese court, which doesn't apply to
new iPhone models launched this year, is the first in the world's
largest smartphone market that seeks to curtail iPhone sales in the
country.
Apple said its full portfolio of iPhones in China remain on
sale, and that it plans to appeal the court's decision. The company
filed a request to the court to reconsider its decision on
Monday.
Qualcomm said the Fuzhou Intermediate People's Court in China
found Apple had infringed on two patents: one related to photo
editing and another to swiping on a touch-screen device.
The court order barring import and sales covers the iPhone X, 8,
7 and 6 models. It didn't include Apple's newest devices -- the XS,
XS Max and XR -- because those models weren't on the market when
the patent case was filed.
It wasn't immediately clear when any such ban might take effect.
Apple already has phased out selling some iPhone models globally,
including the 6s, 6s Plus and X. As of Monday, Apple's China
website was still selling the iPhone 7 and 8 family of phones, as
well as the newest releases.
When Micron Technology Inc. received a similar injunction in
July from the same Chinese court in a patent case, Micron complied
with the decision by ending sales of some memory products in China
while requesting the court reconsider its ruling. The injunction
ruling came in patent infringement cases brought by United
Microelectronics Corp. and Fujian Jinhua Integrated Circuit Co., a
Taiwanese chip company and a Chinese chip company that Micron sued
in the U.S. for intellectual-property theft.
The preliminary injunction is the latest turn in a long-running
legal dispute between Apple and Qualcomm. The San Diego chip
company has brought more than a dozen cases against Apple over
patent infringement in China over the past two years.
Apple has built a sizable business in China, relying on the
country for about a fifth of its annual revenue. The iPhone maker
doesn't break down sales by models, and analysts' estimates vary.
RBC Capital Markets on Monday estimated older models account for
about 40% of sales in China, and that the ban could have an impact
on about $12 billion in sales.
The ruling comes as China and the U.S. have been locked in a
monthslong trade battle. The U.S. has imposed tariffs on more than
$200 billion in Chinese goods, alleging unfair trade practices and
intellectual-property theft. China has retaliated with tariffs of
its own on U.S. goods.
A new rift between the countries opened this month after Huawei
Technologies Co.'s finance chief was arrested in Canada on behalf
of U.S. authorities. She is accused of lying to banks about
Huawei's ties to a company that did business in Iran, in violation
of U.S. sanctions.
The companies both said they were informed of the Chinese
court's decision last week. Qualcomm said the decision was dated
Nov. 30, which would be a day before the arrest of the Huawei
executive.
Timothy Arcuri, an analyst with the investment bank UBS, said
the timing of the decision raises the possibility that it is
related to the broader U.S.-China trade dispute. He said Qualcomm
has been in the process of validating some 23 patents in China for
about a year, but this is the first court decision in Qualcomm's
favor on those patents.
"The timing seems suspect to say the least," Mr. Arcuri said.
"This was a very convenient way to bring Apple into the fray in the
same way the U.S. government did with Huawei."
Apple and Qualcomm have been engaged in a wide-ranging legal
battle for nearly two years. The dispute began in January 2017,
when Apple filed a lawsuit over Qualcomm's practice of collecting
royalties on the entire sales price of an iPhone up to $400.
Qualcomm says it charges a percentage of an entire device
because its patents, essential to implementing
cellular-communication standards, relate to cellular devices as a
whole, not just its chips.
During the dispute, Apple has withheld billions in royalty
payments from Qualcomm. The chip maker has responded by suing Apple
for infringing on Qualcomm patents in the U.S., China and Germany.
It is seeking an injunction on iPhone sales in those markets, which
analysts say is a part of a strategy to pressure Apple to negotiate
a resolution to the licensing dispute.
Qualcomm Chief Executive Steve Mollenkopf said during an
appearance on CNBC in November that the companies are "on the
doorstep" of a resolution. However, Apple's attorneys have said in
court proceedings in San Diego that the parties aren't engaged in
settlement discussions.
Write to Tripp Mickle at Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
December 11, 2018 02:47 ET (07:47 GMT)
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