Apple sues Qualcomm for $1 billion in unpaid rebates, alleges attempted perjury, extortion

By Joel Hruska

Apple sued Qualcomm today, alleging that the mobile chip giant owes it at least a billion dollars in unpaid rebates and agreements. Apple further states that Qualcomm “attempted to extort Apple into changing its responses and providing false information to the KFTC [Korean FTC] in exchange for Qualcomm’s release of those payments to Apple.”

That’s a bombshell accusation, if true. The Korean FTC recently fined Qualcomm $850 million, but an accusation that Qualcomm may have deliberately attempted to pay other corporations to lie on its behalf could open Qualcomm up to criminal lawsuits and accusations of perjury. China has also fined Qualcomm for its alleged monopolistic abuses and the FTC filed a lawsuit against QC earlier this week.

Apple provided Ars Technica with the following statement:

For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with. The more Apple innovates with unique features such as TouchID, advanced displays, and cameras, to name just a few, the more money Qualcomm collects for no reason and the more expensive it becomes for Apple to fund these innovations. Qualcomm built its business on older, legacy standards but reinforces its dominance through exclusionary tactics and excessive royalties. Despite being just one of over a dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined. To protect this business scheme Qualcomm has taken increasingly radical steps, most recently withholding nearly $1B in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them.

Apple believes deeply in innovation and we have always been willing to pay fair and reasonable rates for patents we use. We are extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty we have no choice left but to turn to the courts.

Among Apple’s complaints, are allegations that it is forced to effectively double-pay Qualcomm, since Qualcomm requires Apple’s manufacturing partners to take out a license to work with Snapdragon hardware, then charges Apple again for a separate license. According to Apple, Qualcomm sweetened the deal with rebates so long as Apple maintained exclusivity — which actually sounds a fair bit like the rebate practices Intel used to artificially deny and reduce AMD’s ability to win product designs from 2002 – 2006. In this case, however, it was Intel’s modem that allowed Apple to break Qualcomm’s lock on its LTE business. This also explains why Apple used Intel in the first place, given that Intel’s modem isn’t as good as Qualcomm’s according to objective analysis.

Apple’s suit alleges that Qualcomm breached its contracts, abused its monopoly power, and violated California contract law. It also claims Apple was overcharged and required to license nine separate patents that Apple does not believe it infringed upon. If this case is anything like the long-running Apple / Samsung litigation, it’ll be years before it goes to trial and years after that until a verdict and damages amount is settled — but throwing another lawsuit shines an unwelcome spotlight on its business practices and policies.