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Qualcomm sues four Apple contract manufacturers

18 May 2017

Qualcomm argued that the manufacturers acknowledge they have a contractual obligation to pay royalties to the chip makers, but they need to follow Apple's orders against paying.

Qualcomm filed a separate claim against Apple for interfering with the license agreements between Qualcomm and the manufacturers.

Qualcomm in a statement said that the license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.

Qualcomm Inc. has now filed suit against FIH Mobile Ltd. and Hon Hai Precision Industry Co., Pegatron Corp., Wistron Corp. and Compal Electronics Inc.

Asked for comment, the company referred to an earnings call earlier this month in which Apple Chief Executive Officer Tim Cook said that the company is taking a "principled stand" because Qualcomm's "really great work" is only "one small part of what an iPhone is", so doesn't merit a cut of the entire price of the handset.

An escalating battle between Apple and Qualcomm over money and patent rights is drawing in Taiwanese contractors that assemble Apple's iPhones.

The company licenses patents based on the price of the entire device, and it has agreed to provide certain patents under "fair, reasonable and non-discriminatory" terms because they are included in wireless industry standards. These royalties amount to a tax on the manufacturers' use of baseband processors manufactured by Qualcomm's competitors, a tax that excludes these competitors and harms competition.

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Qualcomm said Apple has agreed to cover the costs incurred by the contract manufacturers.

Qualcomm's shares were marginally lower at $55.66 in premarket trading.

Apple's manufacturers, like Foxconn, used to pay Qualcomm for the intellectual property rights to make chips that connect phones online.

Apple joined the assault shortly after the FTC and perhaps has been the most aggressive in maneuvers against Qualcomm, which believes that Apple is behind a "global attack on the company". Its technology is inside almost every smartphone.

The dispute started in January when Apple sued Qualcomm for $1bn, accusing it of abusing its monopoly position - accusations Qualcomm dismissed as "baseless".

"Pay for what you take and if you don't want to pay for it, don't take it", he said. A hearing on the dismissal motion is slated for mid-June.

Qualcomm sues four Apple contract manufacturers