Today, the beginning of a perceived five week long jury trial, Apple will try to convince a San Diego federal courtroom that Qualcomm has been engaging in unfair patent licensing practices for far too long. Apple argues that Qualcomm’s “no license, no chip” policy is essentially double-dipping, as the company is forcing manufacturers to both purchase a chipset with certain patent technologies, and in addition pay for the use of said patents. If a manufacturer chooses not to sign a licensing agreement, then Qualcomm refuses to sell them any of its modems, which are a necessity in this smartphone driven world.
For its part, Apple is looking for about $27 billion in damages for overcharged chip royalties. About $9 billion of that amount is what Apple believes is owed to itself, with the remaining $18 billion coming from royalties paid by companies like Foxconn and Pegatron, who footed the bill as the primary manufacturer of iPhones, which Apple then reimbursed.
Qualcomm, refusing to go down without a fight, is claiming that Apple convinced manufacturing companies like the aforementioned Foxconn and Pegatron to break their license agreements with Qualcomm, and is seeking $7 billion in unpaid royalties. The company is accusing Apple of trying to use the legal system to pay less for its technologies.
As the number one patent licenser by revenue worldwide with more than 130,000 patents, Qualcomm believes that it has sunk billions of dollars into R&D for these patents, and feels it is only just that they reap the rewards of all of that research.
Presently, most of Qualcomm’s income comes from licensing fees, and a win from Apple would mean a significant change to its business model, with 64% of the company’s total earnings before tax coming from licensing agreements last year. A win from Apple would also likely cause other manufacturers who use Qualcomm’s modems to come forward with the hope of getting their cost lowered as well. However, if things go the other way, with an Apple lost, Apple may not only have a hefty price to pay, but may have to delay its iPhone 5G. With the present legal battle leaving Apple to use Intel modems, Intel has yet to release a 5G chipset, and a Qualcomm victory may cause Apple to reluctantly come crawling back to Qualcomm in an effort to purchase 5G modems, license agreements included.
Read more here at CNBC.