Qualcomm-Apple royalties battle intensifies

Qualcomm said that Apple is now withholding payments to Apple’s contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm for sales during the quarter ended March 31, 2017.

The development is an escalation of the ongoing legal battle between Apple and Qualcomm, the largest maker of chips used in smartphones.

In January, Apple filed a lawsuit accusing Qualcomm of overcharging for chips and refusing to pay $1 billion in promised rebates.

“Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees,” said Don Rosenberg, general counsel of Qualcomm.

“These license agreements remain valid and enforceable.

“While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts.

“Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade.

“Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple’s global attack on Qualcomm.

“We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.”

Apple responded by saying it had been trying to reach a licensing agreement with Qualcomm for more than five years but Qualcomm had refused to negotiate fair terms.

“Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court,” an Apple spokesman told Reuters.

Qualcomm said that as a result of the developments, it updated its financial guidance for the third quarter of fiscal 2017 to exclude royalty revenues from Apple’s contract manufacturers.

“The contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant,” said Qualcomm.

“As a result of these actions, we are adjusting our financial guidance to assume that no payment is made, and therefore no revenues are recognized, in the quarter.

“This differs from our prior guidance, which considered a variety of payment scenarios (and related revenues) within the range, but did not include a scenario where no payment was made (and no revenues were recognized).”