Apple Gains Four Allies in Phone-Patent Fight -- WSJ
July 20 2017 - 2:02AM
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 (July 20, 2017).
A group of leading smartphone manufacturers joined 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. filed a
lawsuit against Qualcomm late Tuesday night in U.S. 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, broadly challenged 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 filed a separate motion Tuesday to
consolidate the manufacturers' countersuit and its own suit against
Qualcomm.
Qualcomm General Counsel Don Rosenberg said the counterclaim and
Apple's support of it demonstrated how the iPhone maker has been
"pulling the strings" for the contract manufacturers and hindering
them from paying the royalties owed Qualcomm under contract.
Separately, Qualcomm said Wednesday it filed lawsuits against
Apple in Germany alleging that the device maker infringes its
patents. Those suits aim to stop "Apple's sale and importation of
the latest iPhones in Germany," according to Mr. Rosenberg,
mirroring the chip maker's moves earlier this month to block
imports of some Apple devices into the U.S.
Apple pointed back to comments it made in June, when it said
Qualcomm's licensing practices were harming the smartphone
industry.
The 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 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, Colo., 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' countersuit was 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 a share, down from $1.16 a share a year earlier,
according to analysts surveyed by Thomson Reuters.
Qualcomm's patent-licensing business on cellular technology
accounted for roughly 80% of the company's 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 has 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 20, 2017 02:47 ET (06:47 GMT)
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