Qualcomm Loses Bid to Force Apple Manufacturers to Pay Royalties -- 2nd Update
September 08 2017 - 8:35PM
Dow Jones News
By Tripp Mickle and Ted Greenwald
A federal judge Friday denied Qualcomm Inc.'s motion for a
preliminary injunction in its lawsuit against Apple Inc.'s leading
manufacturers, allowing the manufacturers to continue withholding
royalty payments as the case continues.
The decision was a small but expected victory for Apple in what
is shaping up to be a multiyear battle with Qualcomm over royalty
prices for technology used in iPhones and iPads. For Qualcomm, it
was the latest setback to its profitable patent-licensing
business.
In January, Apple sued Qualcomm in the Southern District of
California over its licensing practices, alleging the leading
supplier of chips for smartphones demanded unfair terms for its
technology. Apple later filed suits in several overseas markets,
including the United Kingdom, China, Japan and Taiwan.
In addition to ruling against Qualcomm in the contract
manufacturers' case, Judge Gonzalo Curiel denied Qualcomm's motion
to unify Apple's overseas suits.
Apple said it was pleased with the decision, adding, "Qualcomm
must establish the fair value of its technology and defend its
business practices in court."
A Qualcomm spokeswoman said, "While we are disappointed by
today's rulings, we recognize that the motions involved high
procedural hurdles."
Qualcomm's preliminary injunction motion sought to force the
contract manufacturers to pay royalties as its legal dispute with
Apple continued. It had tried to convince the court it faced
irreparable harm if the manufacturers -- Taiwan-based Compal
Electronics Inc., Foxconn Technology Group, formally known as Hon
Hai Precision Industry Co., Pegatron Corp. and Wistron Corp. --
continued to withhold those payments.
Florian Mueller, an independent intellectual-property analyst,
said it was difficult for the company, which has a market
capitalization of $74.43 billion, to argue the business would
suffer long-term damage if payments were withheld while the case
continued.
"Any other decision than this one would have been a surprise,"
Mr. Mueller said.
Qualcomm collects a royalty on nearly every smartphone sold
world-wide. It owns patents deemed essential to implementing
cellular-communication standards, obligating the company to license
such technology fairly and widely. Qualcomm says its patents relate
to cellular devices as a whole, not just its chips, and thus
charges a percentage of the price of an entire device.
The company's licensees and rivals, though, say Qualcomm's
royalty rates are unreasonably high. Apple argues Qualcomm's
practice allows it to benefit from unrelated technologies added to
the iPhone, such as its Touch ID a fingerprint-verification
system.
Qualcomm was paid $10 an iPhone by Apple's manufacturers,
according to analysts' estimates, before the companies began
withholding all royalty payments earlier this year. The withheld
payments hit Qualcomm hard in its most recent quarter, triggering a
40% decline in profit from a year earlier.
In May, Qualcomm had sought to blunt potential losses by suing
the manufacturers for failing to pay royalties after Apple stopped
reimbursing the companies. The manufacturers, who make iPhones or
iPads, fired back in July with a countersuit.
Separately, Qualcomm had sought to block Apple's efforts to
bring similar lawsuits overseas. The judge's decision allows those
cases to continue, forcing Qualcomm to argue its royalty practices
are fair in at least four other countries.
Write to Tripp Mickle at Tripp.Mickle@wsj.com and Ted Greenwald
at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
September 08, 2017 20:20 ET (00:20 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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