The ruling might seem a little odd because it really should be Apple who owes Qualcomm. It has not been paying for patents it has been using for some years. We wish we knew the technique for when a debt collector came calling.
“You owe us money!”
“No you owe me money.”
“Do you want to pay now or later?”
Judge Gonzalo Curiel of the US District Court for the Southern District of California ruled that Qualcomm, the world’s biggest supplier of mobile phone chips, was obligated to pay nearly $1 billion in rebate payments to Apple, which for years used Qualcomm’s modem chips to connect iPhones to wireless data networks.
The payments were part of a business cooperation agreement between the two companies amid the peculiar patent licensing practices of the consumer electronics industry.
In general, the contract factories that built Apple’s iPhones would pay Qualcomm billions of dollars per year for the use of Qualcomm’s patented technology in iPhones, a cost that Apple would reimburse the contract factories for. Separately, Qualcomm and Apple had a cooperation agreement under which Qualcomm would pay Apple a rebate on the iPhone patent payments if Apple agreed not to attack in court or with regulators.
In a lawsuit filed two years ago, Apple sued Qualcomm, alleging that the chip supplier had broken the cooperation agreement by not paying $1 billion in patent royalty rebates.
Qualcomm pointed out that it stopped paying the rebate payments because Apple had broken the agreement by urging other smartphone makers to complain to regulators and making “false and misleading” statements to the Korean Fair Trade Commission, which was investigating Qualcomm over antitrust allegations.
Judge Curiel sided with Apple, ruling that Qualcomm owed the missed rebate payments.
Don Rosenberg, executive vice president and general counsel of Qualcomm, told Reuters in a statement: “Although the Court today did not view Apple’s conduct as a breach of Apple’s promises to Qualcomm in the 2013 Business Cooperation and Patent Agreement, the exposure of Apple’s role in these events is a welcome development.”
The decision will not become final until after the trial in the case, which begins next month. And it is unlikely that Qualcomm will make a new payment to Apple.
Apple’s contract factories, which under normal circumstances would pay Qualcomm for patent royalties owed on iPhones, have already withheld the $1 billion in payments to Qualcomm. Qualcomm’s Rosenberg said those withheld iPhone payments have already been accounted for in Qualcomm’s existing financial statements.