Apple Sues Qualcomm For $1B Over Alleged Antitrust Violations

Days after federal regulators sued smartphone and device chip maker Qualcomm accusing it of antitrust violations, one of the company’s largest customers, Apple, is following suit, seeking $1 billion in damages. 

The Wall Street Journal reports that Apple filed the lawsuit Friday in a federal court in California, accusing Qualcomm of using its muscle to overcharge the tech company for use of its patents.

According to Apple, in order to use the patents, Qualcomm created terms that required Apple to pay a percentage of the average selling price of an iPhone to the company and required the smartphone manufacturer to exclusively use its chips for five years.

As part of the agreement, Apple was to receive quarterly rebates from Qualcomm.

However, Apple claims in the suit that Qualcomm withheld $1 billion worth of rebates as retaliation for Apple’s cooperation with South Korean antitrust regulators, who later fined Qualcomm $853 million.

To make matters worse, the WSJ reports that Apple claims Qualcomm attempted to force the tech giant into changing responses to the Korean regulators in order to receive the withheld funds.

Apple tells the WSJ that it is “extremely disappointed in the way Qualcomm is conducting its business with us and unfortunately after years of disagreement over what constitutes a fair and reasonable royalty we have no choice left but to turn to the courts.”

Apple’s lawsuit comes just three days after the Federal Trade Commission filed an antitrust lawsuit against Qualcomm, claiming the company used its position as a supplier of certain baseband processors to impose anticompetitive supply and licensing terms on cell phone manufacturers, including Apple, as a way to weaken competitors.

Qualcomm holds patents that it has declared essential to industry standards that enable cellular connectivity. In exchange for having their patented technologies included in the standards, participants like Qualcomm typically commit to license their patents on what are known as “fair, reasonable, and non-discriminatory” (or FRAND) terms.

Companies can then negotiate a license and royalties allowing other companies to use the technology.

Regulators claim that Qualcomm threatened to disrupt cell phone manufacturers’ supply of baseband processors in order to entice them into providing the company with more royalties and beneficial license terms for the patents it holds.