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Qualcomm sues Apple manufacturers for non-payment of royalties

18 May 2017

In an escalation if its patent battle with Apple Inc, chipmaker Qualcomm Inc is suing Foxconn and three other Taiwanese manufacturers that supply iPhone and iPad components for not paying royalties.

In its lawsuit against Qualcomm in January, Apple accused the chipmaker of overcharging for chips and refusing to pay some $1 billion in rebates - a move that came days after the US government accused the chipmaker of using anti-competitive tactics to maintain a monopoly over key semiconductors in mobile phones.

Qualcomm had termed Apple's suit baseless and said the iPhone maker was encouraging regulatory attacks on its business.

Qualcomm yesterday said in its complaint that Apple had advised the four contract manufacturers to withhold royalty payments and agreed to indemnify them against any damages resulting from the breach of their agreements with Qualcomm.

Qualcomm did not disclose the sum of the alleged unpaid royalties in the complaint which filed in the United States District Court for the Southern District of California.

Qualcomm said its plaint, filed in the District Court for the Southern District of California, names FIH Mobile Ltd and Hon Hai Precision Industry Co, Ltd, (together known as Foxconn), Pegatron Corporation, Wistron Corporation, and Compal Electronics Inc, the four manufacturers of all Apple iPhones and iPads sold worldwide, "for breaching their license agreements and other commitments with Qualcomm and refusing to pay for use of Qualcomm's licensed technologies." 

A Qualcomm statement said, "Qualcomm seeks an order that would require the defendants to comply with their long-standing contractual obligations to Qualcomm, as well as declaratory relief and damages.

"Despite a long history of consistently paying royalties under their license agreements with Qualcomm, the manufacturers now are refusing to pay royalties on the Apple products they produce.

"While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay.

"The license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.  Further, the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products."

Qualcomm qalso said it has already filed a separate claim against Apple for its "unlawful interference" with the licence agreements between Qualcomm and these manufacturers.

''It is unfortunate that we must take this action against these long-time licensees to enforce our agreements, but we cannot allow these manufacturers and Apple to use our valuable intellectual property without paying the fair and reasonable royalties to which they have agreed,'' said Don Rosenberg, executive vice president and general counsel, Qualcomm.

''As Apple continues to collect billions of dollars from consumer sales of its Qualcomm-enabled products, it is using its market power as the wealthiest company in the world to try to coerce unfair and unreasonable license terms from Qualcomm in its global attack on the company.

"Our license agreements with Apple's manufacturers remain valid and enforceable. The manufacturers must continue to live up to their obligations under these agreements and Apple should immediately cease its tortious interference.''

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