Patent fight could follow as Apple ditches supplier

A patent legal battle could follow the announcement by Imagination Technologies Group that its largest customer Apple will no longer use Imagination’s intellectual property in its new products “in 15 months’ to two years’ time.”

Shares of Imagination Technologies Group, in which Apple holds an 8% stake, fell more than 60% on the news.

Imagination said it believed it would be “extremely challenging” for Apple to design a brand new graphics processor units (GPU) architecture from basics without infringing Imagination’s intellectual property rights.

“Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination’s technology, without violating Imagination’s patents, intellectual property and confidential information,” said Imagination.

“This evidence has been requested by Imagination but Apple has declined to provide it.”

Apple declined to comment.

Imagination said Apple had used its technology and intellectual property for many years. 

Imagination said its technology and intellectual property “has formed the basis of graphics processor units (GPUs) in Apple’s phones, tablets, iPods, TVs and watches.”

It said Apple “has asserted that it has been working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination’s technology.”

According to Reuters data, Imagination’s shares fell 64% to 97p, giving the company a stock market value of £275 million — about £479 million less than it was worth on Friday.

Imagination added: “Apple’s notification has led Imagination to discuss with Apple potential alternative commercial arrangements for the current license and royalty agreement.”

Some analysts said the decision could be a bargaining move by Apple to reduce royalty payments and that there might yet be a compromise.

Apple license fees and royalties, as disclosed in Imagination’s annual report, represented revenue of £60.7 million for Imagination in the year ended April 30, 2016 and are expected to be £65 million for the year ending April 30, 2017.