China Court Rules Apple Infringed on Qualcomm Patents
December 17, 2018
Courtesy of Appleinsider
Qualcomm announced on 12/10 that the Fuzhou Intermediate People’s Court in China granted its request for preliminary injunctions and ordered Apple to immediately cease infringement through the unlicensed imports and sales of the iPhone 6S, 6S Plus, 7, 7 Plus, 8, 8 Plus, and X models. This favorable ruling for Qualcomm is on two patents, and Qualcomm has additional patent cases ongoing in China covering roughly another 20 non-essential patents. Further, the Munich Court in Germany should rule next week regarding 13 Qualcomm patent complaints against Apple. Consistent with Qualcomm management comments, there are several ongoing legal and ITC cases reaching later stages in the coming months that could facilitate Apple and Qualcomm finally reaching a resolution. The Nov. 30 decision by a Chinese intellectual-property court is the first in the world’s largest smartphone market that seeks to curtail iPhone sales.
The positive Fuzhou court ruling is the first of several patent complaints filed against Apple in China. This ruling demonstrates the strength of Qualcomm’s patent portfolio, dealing with adjusting the size and appearance of photos along with managing applications on a touch-screen smartphone. These patents were non-essential to standards organization and thus not subject to FRAND licensing commitments, enabling Qualcomm to demonstrate strength of its patent beyond core wireless standards. With Qualcomm receiving a positive ruling for two of its patents combined with several other China cases moving forward on another 20 plus non-essential Qualcomm patents, the risk of additional injunctions on China iPhone sales could help Qualcomm expedite negotiations to potentially reach a long-term royalty licensing agreement. While the injunction currently does not include Apple’s three new iPhone models, it sets a precedent and could eventually extend to the iPhone XS, XS Max, and XR models.
The victory was over software patents that Apple was found to have violated in iOS 11, Apple commented, "Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world," Apple said in a statement. "All iPhone models remain available for our customers in China. We will pursue all our legal options through the courts.”
Apple isn't shipping phones with iOS 11, and the iPhone XR, iPhone XS, and iPhone XS Max weren't banned, so it isn't clear how much of Apple's sales is from older models in China, but assuming that it is a 50/50 split of the "banned" models versus the current-year flagships, Apple could be impacted going forward by about $15 billion a year. Qualcomm claims that Apple owes it around $8 billion in licensing fees above and beyond the fees it charges for the modem chips in the first place —which is the crux of the larger legal battle between the pair.Sources inside Apple, but not authorized to speak on behalf of the company said that the legal department believes that iOS 12 is the solution to any conceivable patent violation. The company wasn't present at the ruling as it was performed ex parte, has requested the Fuzhou court to reconsider the decision, and has filed a formal appeal. By the end of the week, Apple said it would push software updates to users in a bid to resolve potential issues and by “early next week we will deliver a software update for iPhone users in China addressing the minor functionality of the two patents at issue in the case.”
Qualcomm does not interpret it the same way that Apple does. The company protested iOS 11 with the court, and not iOS 12 in much the same way that it complained about the iPhone 6S through iPhone X. Reacting to the ruling in China, the U.S. International Trade Commission (ITC) said it would review the ruling that a ban on imports of some iPhones into the United States was not in the public interest, even if Apple infringed a Qualcomm patent.
Apple first filed a $1 billion lawsuit against Qualcomm in January 2017, arguing that the latter was withholding money as retaliation for cooperation with antitrust investigations. The battle quickly escalated, resulting in suits and countersuits around the world. In September, Qualcomm accused Apple of delivering trade secrets to Intel to improve the performance of modems.An August settlement over similar matters saw Qualcomm pay $93 million in fines to Taiwan and promise to invest $700 million in the country over five years. Other countries, including the United States, are putting pressure on Qualcomm to end the "double-dipping" as well.