Apple, Qualcomm at each other's throats
For Qualcomm, the legal battle will decide on “the future of their business”, but it could also weaken Apple’s “bargaining power”Valentina Spiridonova
Apple and Qualcomm have spent almost two years locked in an intense legal fight, suing one another across the globe, claiming monopolistic practices, patent infringement, and even theft. And while the Federal Trade Commission trial in January was just a dress rehearsal, on Monday the real showdown for the two companies started.
The two technology giants met on 15 April in a San Diego courtroom to kick off a five-week, $30bn trial that'll determine whether Qualcomm operates a smartphone modem chip monopoly and charges too much in licensing fees after Apple has accused the chipmaker of anticompetitive practices that've raised chip prices, restricted competition and hurt customer choice. Now. for the first time, a federal jury will have the word into whether Qualcomm’s business model really is legal and whether Apple had the right to stop paying royalties for the technology.
An out-and-out victory for either side could force the loser into concessions to settle the conflict that has spawned dozens of lawsuits on three continents. Apple's manufacturing partners want a refund of $9bn for allegedly overpaying royalties since 2013. Under antitrust law, that amount could be tripled. Meanwhile, the chipmaker will try to convince the jury that the Asian manufacturers are liable for breach of contract and that Apple is liable for maliciously interfering with their contracts. That could entitle Qualcomm to punitive damages on top of billions of dollars in compensation for unpaid royalties, although it hasn't detailed the amount.
But while Apple, with roughly $245bn in cash, might easily deal with any damages awarded, Qualcomm’s fight is somewhat more existential. In 2016, while its licensing deal with Apple was still ongoing, three-quarters of Qualcomm’s profits came from its licensing division. Apple alone delivered roughly $1.7bn in revenue during the first six months of 2017. If the jury agrees with Apple's stand, then Qualcomm could be forced to reduce the price of its patents, that has allowed it to grab as much as 5 percent of the net selling price of every smartphone sold, potentially cutting its strongest source of profits.
In the bigger picture, the outcome of this case can help future rulings about exercising the limits of patent rights for a healthy competition, and the government’s legal extent on handling tech giants. For consumers, the ongoing battle is also significant as it could result in iPhone connectivity speeds that can't match up to those of Android devices. Apple's current modem supplier, Intel, doesn't yet have a 5G chip ready so Qualcomm is the only option for handset makers who want to tap into the ultrafast wireless network this year. This means that no 5G iPhone until 2020 or even 2021is in sight,which will cost the iPhone maker billions of losses. And Apple and Qualcomm’s quarrel has already affected the iPhone production since Apple had to double up their orders from Intel to meet the supplies.
Thus, it is no surprise that even Apple Chief Executive Officer Tim Cook is expected to be called to defend the company’s business strategy and explain its relationship with Qualcomm, in what would be his first public appearance in a courtroom to discuss the issues underlying the fight.