Apple, Qualcomm spat intensifies, manufacturers drawn in

How Regulatory Issues Could Impact Qualcomm’s Fiscal 2017 Revenue

Qualcomm is suing Chinese iPhone and iPad contract makers it says have stopped paying it royalties at the behest of Apple.

Moreover, Qualcomm said the manufacturers continue to pay royalties for use of Qualcomm technology in non-Apple products, under the same contract agreements being disputed by Apple.

In a new move in the on-going dispute between Apple and Qualcomm, the chip supplier has sued four iPhone suppliers directly.

"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 company said. Qualcomm's lawsuit says those contractors are still paying royalties for non-Apple products. Apple has promised to indemnify the manufacturers for any damages resulting from breaching their agreements with Qualcomm.

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The other manufacturers listed by Qualcomm were Pegatron Corp 4938.TW , Wistron Corp 3231.TW and Compal Electronics Inc 2324.TW . The two companies have sued and countersued each other since January. Apple's suit built upon a wave of worldwide resistance to Qualcomm's patent-licensing business that has included investigations and fines in several countries.

Apple sued Qualcomm in January in the USA and later in China and the United Kingdom, claiming that Qualcomm abused its monopoly position in cellular chips to impose "onerous, unreasonable and costly" terms on customers and competitors.

In Wednesday's complaint, Qualcomm alleges that Apple "orchestrated" the actions of the contract manufacturers against it.

Qualcomm's shares were marginally lower at $55.66 in premarket trading. The companies make iPhones and iPads for Apple. "You are responsible for paying that".

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Qualcomm's patent-licensing segment in fiscal 2016 contributed roughly 80% of its pretax profit.

In addition to being one of the world's largest maker of chips for mobile devices, Qualcomm owns thousands of patents on fundamental technology that ensures all phones work. To deny the case would continue to impede the progression of the technology and drive up the cost of smartphones for consumers, it argued.

Apple and regulators claim Qualcomm abuses its market power to overcharge for "standard-essential patents" and block competition.

"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", said the US-based semiconductor company.

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