Apple and Qualcomm Settle Sweeping Patent Suits

Posted on April 16, 2019 by Paul Thurrott in Apple with 41 Comments

In a sudden and unexpected move, Apple and Qualcomm announced today that they have ended all ongoing litigation and have reached global patent license and chipset supply agreements.

“Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide,” an Apple announcement reads. (Qualcomm has posted the same announcement.) “The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.”

This is blockbuster news, folks, and an implicit agreement from Apple that it did, in fact, owe Qualcomm significant patent-based royalties. Furthermore, it shows how hamstrung Apple was without Qualcomm: Its agreement with Intel to supply mobile chipsets, especially for modems, has been a disaster.

Interestingly, I started writing an editorial on Monday called Apple and Qualcomm Need Each Other in which I would have argued that these companies shouldn’t be fighting but should instead be each other’s biggest partner.

Now, of course, they are.

I’m curious to see whether the details of this agreement are made public. But I’ve long felt that it was Apple that was at fault here. And the only issue facing Qualcomm now is that Apple is racing to produce its own chipsets, especially for 5G networking, to ensure it’s never held hostage to a third party like this again.

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Comments (41)

41 responses to “Apple and Qualcomm Settle Sweeping Patent Suits”

  1. martinusv2

    Must be about the 5G chip for sure. I wonder how Intel will be able to improve their modems without a firm contract from Apple.

  2. glenn8878

    Making modems is hard, really hard. Intel chokes. It's also pretty a much a fact that Qualcomm is winning patent battles around the globe has hampered Apple.

    Apple should buyout Intel's investment into modems and take it from there.

    • provision l-3

      In reply to glenn8878:

      Qualcomm lost most of patent lawsuits with Apple and even had a few patents invalidated. Trying to build the argument that Apple was a flagrant patent violator prior to going into this case was a reasonable strategy but in the end it didn't work out the way Qualcomm had hoped and really didn't provide them any leverage. That isn't to say their defense was going to be weak, Qualcomm has the resources required to hire top notch lawyers. It just means this part of their defense strategy didn't really pan out.

  3. Hawaiianteg

    Paul, you know darn well apple made it clear that they withheld royalty payments in the case. There as no denying apple owed it to them so its not a sign of a loss for apple. They owed what they owed originally. Both had a lot to lose and Apple wouldn’t have prepped Tim Cook for the stand if they thought they were gonna lose. Apple got what it wanted which is lower rates, Qualcomm got what it wanted which is apple back as a customer. Qualcomm had the bigger part to lose if apple won since it would have changed the way they charge for royalties. Apple would have just gone with a sub par modem and been ok until they could figure out their own thing. People constantly whine about the intel modems. There is no telecom wireless network in the United States that can reach its max capability that is actually being used by people and not just one phone so apple would have been ok.

  4. PeterC

    Well that’s a total let down. I was looking forward to some proper legal courtroom cut and thrust! Darn.....!

  5. dontbe evil

    Rotfl... Time to give up for apple

    • PeterC

      In reply to dontbe_evil:

      I think you’ll find Apple had no choice as INTEL have withdrawn from the 5g mobile chip manufacture business, once again this is a story about intel continuing to decline rapidly letting its hardware customers down.

  6. red.radar

    I suspect this is a long term play. Apple will still develop its own modems to keep Qualcomm honest. Qualcomm needs apple because Huawei and mediatek will eventually erode their international business

  7. wright_is

    Every time you write a cats and dogs living together in harmony article, a little while later it happens.

    Maybe you should write one about Republicans and Democrats needing each other, or how about the USA and the rest of the World? ;-)

    Keep up the clairvoyance.

  8. wocowboy

    I think before a final judgement as to who was to blame, if there really needs to be such a judgement in the first place, we will have to wait until all the other lawsuits around the world, filed by governments, the EU, and other device manufacturers play out. Don't forget that Qualcomm is under fire around the world for bad business practices and for not abiding by FRAND with regard to their patents, so Qualcomm cannot be automatically dismissed from any blame yet.

  9. Brett Barbier

    So, one possibility is that Apple knew Intel was going to give up on trying to make 5G modems for phones, so they decided to settle with Qualcomm before Intel made their decision publicly known. With Intel no longer a possible supplier, Apple would be in a worse negotiating position with Qualcomm.

    • BrianEricFord

      In reply to Brett_B:

      On the flip side, Qualcomm suddenly finds itself in a more precarious legal situation as the only real option for something that is a necessary component. Harder to play hardball while regulators are breathing down their neck.

  10. BrianEricFord

    This is a bad take.

    They settled because taking a case like this to a jury is basically a coin flip. If the coin doesn’t land your way, it’s a world of pain and years and years of costly appeals.

    Apple went into this wanting a better licensing deal.

    Now they have what they wanted and several years of breathing room to develop their way out of having to rely on someone else for chips.

    The only real loser here is Intel.

    (For the record: Everyone with pre-conceived notions about the evidence will assume a settlement means they were right all along, but this is a nonsense layperson take on what feeds into legal settlements.)

    • Stooks

      In reply to BrianEricFord:

      Good post.

      I personally do not think this was a huge deal that Paul makes it out to be. I bet not one of my non-tech friends even knows who Qualcomm is or what they make. They all know Apple for sure. I think they both got something out of the deal at the end of the day. Apple will make their own modems at some point and ditch Qualcomm in the end and a big part of that was Qualcomm pushing this so hard.

      Paul's take on this is SSDD. He does not like Apple, never has, and has constantly taken jabs at them whenever he can remotely bring them into the conversation.

    • skane2600

      In reply to BrianEricFord:

      Back before Apple sued Qualcomm, Apple could have just fulfilled the contract under the terms they agreed to originally and then reconsider/renegotiate it after it expired. Thus the lawsuit and the settlement was never a necessary component to be able to renegotiate at a later date.

      The danger for Apple was that their argument was most fundamentally that they shouldn't have to follow the terms they previously agreed to. Apple would have presented their justifications but whether those justifications were valid or not, it's unlikely that a jury would easily understand those arguments. On the other hand having to follow a contract one signs even if they don't like it later is well understood by almost all adults who have purchased a car, a house, or rented an apartment. A jury might very well have seen that as Apple asking for special privileges.

      • BrianEricFord

        In reply to skane2600:

        A jury might have, but a jury might also have decided Qualcomm was abusing its portfolio. Guess which outcome would have been worse from a long-term standpoint and, as I said, these sort of matters are often a coin flip.

        • skane2600

          In reply to BrianEricFord:

          Anything is possible but one can easily imagine a juror wondering "what does abusing a portfolio mean?" Perhaps if this were a little guy stuck with a contract mandated by a corporation a juror might give him a break out of sympathy regardless of the merits, but these are both powerful companies and if there's a "little guy" involved, it would be Qualcomm not Apple.

  11. bill_russell

    All the other phone makers seemed to have no problem paying for qualcom tech and they could have settled for Intel.

    Its amazing based on the profit margins of apple that they'd have any problem with whatever qualcomm wanted. Also, if I recall apple sure wanted a major portion of samsung's per handset just because of possibly copying some rounded corners and icons, nevermind advanced modem tech for which Intel simply couldn't do as good, that is so integral to a phone, not just a modem chip.

  12. cheetahdriver

    Intel has pretty much cratered on every try at mobile. Kind of makes you wonder about their I series processors. Adding cores is not tech advancement much beyond the stage of piling alphabet blocks on top of each other...

  13. provision l-3

    Apple never denied owing royalties it was the amount/royalty rate that was in dispute. So while I'd say this a big deal I'd also say anyone spinning it as win for either company sans understanding of the agreement is just telling the story they want to believe. What is interesting is that while they are dropping all lawsuits against each other, which were largely going nowhere anyway, this has no baring on Qualcomm antitrust trial in the U.S. Also, Apple's chip development is really irrelevant. If Apple makes its own chips, buys them from intel or anyone else they still have to pay the licensing fee to Qualcomm which is what this agreement is about.

    • skane2600

      In reply to provision l-3:

      "Apple never denied owing royalties it was the amount that they owed that was in dispute."

      I don't think that's quite it. What you describe would be an accounting discrepancy between the two companies. Apple thought the royalty rate was unreasonable, not that the calculation of royalties was incorrect.

      • Stooks

        In reply to skane2600:

        Semantecs. Apple thought the cost per phone was too much. They did not want to pay that and they with held the payment. They are paying that (back pay) for sure and probably more.

        It would not surprise me if they got a better deal at the end of the day either. Less than what Qualcom orginally was asking but more than what Apple wanted to pay.

      • lvthunder

        In reply to skane2600:

        The rate is a key figure in calculating the amount owed.

      • provision l-3

        In reply to skane2600:

        The amount they owed is based on the licensing rate. Apple felt the listening rate was too high. Apple was disputing the amount they owed or they were disputing the licensing rate. For the purposes of the conversation I see it as a distinction without a difference but happy to edit my original post to make it clearer.

    • Stooks

      In reply to provision l-3:

      If Apple makes its own chips I doubt they would use any of Qualcom's patented tech. That is kind of the point is it not?

      • provision l-3

        In reply to Stooks:

        Qualcomm owns the patents for 2G, 3G, 4G LTE and 5G LTE. They handle licensing of the technology by allowing others to make modems based on their patents and not pay a royalty fee. So Intel, Samsung, that company that Paul is all excited about that offered Apple 5G chips can make modems without paying Qualcomm. Qualcomm does require the device maker that used a modem based on their technology to pay a royalty fee for its use. So in the case of Apple, they would by Intel modems and were then required to Qualcomm a fee for every product they were used in.

        In principal what Qualcomm is doing is good as it is intended to avoid anti-trust issues. By separating their patent licensing fees business from their hardware business everyone would pay the same licensing fee irrespective of where they got the modem from and Qualcomm's hardware would play on the same level playing field as hardware prices would be set separate from licensing fees. In this lawsuit and in the one brought by the federal government, the claim is that Qualcomm was in fact not keeping the businesses separate and they were colluding. I make no claims on if what Qualcomm is doing is actually anti-competitive. Apple also claimed the way the licensing fee was derived was wonky as it was a percentage of the cost of the device. The argument being Qualcomm is getting revenue for innovations and features that drive up the price of the unit (better screens, larger memory sizes, better cameras) that have nothing to do with Qualcomm or their patents.

        Anyway, that means that even if Apple develops its own modem it would likely save some money on the pricing of the hardware but would still have to pay the royalty per device they were used in.

  14. OldITPro2000

    I was waiting for this to happen. Can't beat Qualcomm for their wireless modems. The Intel ones aren't as good and Apple doesn't have their own yet.

  15. skane2600

    Sounds like Apple caved and probably for good reason.

  16. bart

    Good. Was running out of popcorn anyway....

  17. factoryoptimizr

    Bad news for Intel. Development of their 5G modems is reportedly lagging. Apple apparently decided the performance of Intel's 5G solution was uncertain enough that the best path forward was to fall on their sword with Qualcomm to restore them as a viable supplier. Probably also bad news for Huawei, since they've apparently been making overtures to Apple lately to provide 5G modems -- I guess that's not in the cards now. Maybe ultimately bad news for Qualcomm, too, though, as Apple has been pouring a lot of money into buying top cellular modem design talent. I suspect Apple will be ready with their own internally developed solution within 4-5 years...well within the window of the cross-licensing agreement with Qualcomm.

  18. lvthunder

    Must be nice to have effectively a monopoly on good modems.

    • wocowboy

      In reply to lvthunder:
      That's Qualcomm. A few other companies make modems for use in various devices, but they all are affected by Qualcomm's patents and have to pay some allegiance to them. Qualcomm owns pretty much every patent relating to cellular radios, that's just a fact of life now, and is partly the reason they are being sued around the world. Their settlement with Apple is just the beginning, a lot of other chips must fall before the dust completely settles with Qualcomm.

  19. Lordbaal

    Apple is the one who agreed to the price, and then signed the contract.

    You cannot agree to a price, sign a contract, and then complain later on.