Bloomberg reports that Apple confirms having "suspended [license fee] payments [via its contract manufacturers in China to Qualcomm] until the correct [fair, reasonable and non-discriminatory = FRAND] amount can be determined by the court" and that Qualcomm therefore has reduced its revenue forecast for the quarter ending June by $500 million. Given that the spring quarter is not the strongest one for mobile phones (the closest the next iPhone model is, the more customers wait until they buy), this indicates more than a $2 billion impact on Qualcomm's annual revenue and profit.
Just like the analyst quoted by Bloomberg, I've previously described patent disputes as an "all-out war," but I try to use the term sparingly. I'm not saying that's not what it is. I just want to wait and see how the dispute unfolds. There can be no doubt, however, that the stakes are high.
The $500 million figure for a quarter that is not the strongest one of the year is not really inconsistent with what I recently estimated to be Qualcomm's royalty demands.
It's worth noting that it was Qualcomm, not Apple, who withheld payments first. There is some kind of "rebate" (as Apple calls it) agreement in place between the two, under which Qualcomm pays back to Apple some of the royalties it collects from its contract manufacturers, and Qualcomm stopped its payments to Apple under that contract, alleging (most recently in its answer to Apple's complaint) that Apple breached that agreement by, for example, talking to regulatory agencies. A recent filing by Qualcomm in a procedural context shows that Qualcomm is none too pleased with what's going on antitrustwise in Korea, the European Union and elsewhere.
Apple's position, according to the Bloomberg report, is that Qualcomm will get paid again once a FRAND rate has been determined by the courts. This reminds me of an issue that a lot of industry players (including, but by far not limited to, Apple) were profoundly concerned about years ago when standard-essential patent (SEP) holders sued them in Germany and the courts here applied the Orange Book ruling by the Federal Court of Justice in such a way that defendants had to make totally outsized deposits in order to avoid injunctive relief. I remember Claudia Tapia, then a BlackBerry IP policy executive (now at Ericsson), saying at a 2012 FRAND conference in Amsterdam that a company could be driven out of business by having to make X number of deposits of 2% to 5%, if not more, of its sales receipts during the course of a multi-year litigation. And if my memory doesn't fail me, I think she said that Apple might be able to afford it but others might not.
Since my campaign against software patents in 2004-2005, I've consistently opposed anything that comes down to "might makes right." My favorite ancient quote (after nine years of Latin and three years of Ancient Greek in school) is from line 880 of Sophocles' Oedipus at Colonus: "In a just cause, the weak will overcome the strong [alternative translations of "mégas": the mighty/great/large]." ("Τοῖς τοι δικαίοις χὠ βραχὺς νικᾷ μέγαν.")
Against that background, I want the dispute between Apple and Qualcomm to be decided by the merits, not by leverage or by who's the bigger bully. I want an outcome that will improve the situation for the industry at large, including the little guys who couldn't afford or take the risk of picking this kind of fight with Qualcomm. While I can easily understand that Apple, after Qualcomm was first to withhold payments, doesn't want to meet royalty demands it considers completely unreasonable, there could be different circumstances under which I would consider it unfair. Also, I still haven't forgotten that Apple once collected roughly half a billion dollars from Samsung on procedurally proper but, in my personal view, unfair grounds in 2015 (I was the lone voice criticizing Apple for it). Here, Qualcomm's strangehold on the entire industry (as it leverages its two mutually-reinforcing monopolies) probably necessitates that someone says "enough is enough" and puts pressure on Qualcomm to change its ways. But again, the outcome should be positive for everyone in the industry, not just one company, and, by extension, it should bring prices down for consumers.
What just makes no sense to me is Qualcomm's claim that "the same terms [that Apple is contesting now in court] have applied to iPhones and cellular-enabled iPads for a decade." This, again, is a might-makes-right kind of approach. If Qualcomm was able to command certain terms because of its leverage, that doesn't make the amount a FRAND rate. That's just circular logic. It's symptomatic of Qualcomm's might-makes-right vicious circle.
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