The Apple-Qualcomm Legal Battle
Apple Inc. is the largest and the most profitable company in the entire world. However, of late, it has also found itself in the middle of several lawsuits. The company has been facing a legal battle with Spotify of late.
However, none of the legal battles even come close to the legal drama that is unfolding between Apple and Qualcomm. The two companies have been involved in a barrage of suits and countersuits across various countries.
Apple is suing Qualcomm for over $1 billion in the United States. The company has another lawsuit filed against Qualcomm in China for $145 million. Then there is yet another lawsuit which is in process. This one has been filed in the United Kingdom. At the same time, Qualcomm has also filed multiple lawsuits against Apple Inc. in Germany and in China.
In this article, we will have a closer look at the reason behind the legal battle between these two technology giants.
Why is Qualcomm Suing Apple?
Qualcomm is suing Apple for many reasons. One of them is the fact that according to Qualcomm, Apple agreed to use their patented technology in exchange for a percentage of the revenue derived from the sale of iPhones.
Qualcomm believes that Apple is trying to renege on the agreement and end up paying less than what was agreed upon. On the other hand, Apple believes that Qualcomm is trying to double charge the firm.
On the one hand, Qualcomm makes money when it sells the chips to Apple and then it also charges a royalty on the same. According to Apple, this is an illegal business model and is being viewed with suspicion by regulators worldwide.
Qualcomm has been able to enforce its position in some places. For instance, in Germany, the sale of iPhones was banned for sometime, thanks to the Qualcomm lawsuit. The German courts had cracked down on the high handedness shown by the largest corporation in the world.
There is some merit to Qualcomms case. This is the reason why the German courts decided to back it up. Similarly, a Chinese court had ordered Apple to stop the sale of the iPhone in China. However, Apple was able to circumvent the ban thanks to their legal team.
Qualcomm has tried to implement a similar ban in the United States as well. It has urged the courts to stop further imports of the iPhone. Qualcomm also wants to ban the sale of iPhones which have already been imported.
Hence, the writing on the wall is clear, Qualcomm has Apple on the backfoot at many places across the world.
Lastly, Qualcomm has also accused Apple of stealing its intellectual property and giving in to Intel. According to Qualcomm, Apple was tired of the pricing power that it had.
As a result, it tried to steal the intellectual property from Qualcomm and give it to Intel. This would result in increased competition between Qualcomm and Intel and also reduced profit for the two companies. Apple would be the direct beneficiary since it would have to pay a lower price.
Why Is Apple Countersuing Qualcomm?
Apple has also countersued Qualcomm for patent infringement. Apple believes that some of the chipsets which were manufactured by Qualcomm stole technology from Apple. This technology pertained to the improvement of battery life which is achieved by switching off parts of the processor when they are not required.
Apple has also sued Qualcomm for operating an illegal business practice. Apple has reportedly co-operated with Korean regulators to bring the incorrect trade practices being followed by Qualcomm to light.
The Economic Effects of These Lawsuits
These lawsuits are having a massive economic effect on both parties. Some of the effects have been listed below:
- Qualcomm Facing Action: Firstly, Qualcomm is facing action because of some illegal trade practices it was following in order to create a monopoly. For instance, between 2011 and 2016, the company was paying Apple to use its chipsets. These payments were structured in the form of a rebate. However, they were clearly a payment being made in order to create a monopoly.
Qualcomm reportedly punished Apple by not paying $1 billion in rebates after Apple decided to co-operate with Korean regulators. This fact is also being upheld against Qualcomm by regulators in the United States and many other countries.
- iPhone Sales Affected: Since Qualcomm is trying to block the sales of iPhones all across the world, iPhone sales are being affected. This is putting pressure on Apple to come up with newer and better products.
- Slower Device Speeds: Qualcomm chipsets are faster than Intel ones. However, Apple cannot allow the same phone to function differently. Hence, they have purposely slowed down Qualcomm chipsets so that their quality is the same as the Intel ones. Qualcomm believes that this is illegal and unethical. As a result, they are filing another lawsuit against Apple Inc.
- Profits Impacted: The profits of both Apple and Qualcomm are being negatively affected thanks to this legal battle. Qualcomm has written down a large portion of the royalty it was expecting to receive. On the other hand, sales of iPhones are also being negatively affected. Hence, both companies are losing a lot of money in this needless war.
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The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.
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