The Investigation of the Iitigation between Apple and Qualcomm

free essayApple is a prosperous company that began the legal battle with Qualcomm. The first process between the biggest hardware partners for $1 billion started in January. The second process was launched in April and lasts until today. Qualcomm is a chipmaker that is responsible for the vast majority of mobile processors such as Snapdragon silicon set in most Android phones. The accusation also concerns the usage of chips that are connected to cellular networks used in iPhones of Apple. Qualcomm rejected the accusations of Apple and wrote the 135 pages countersuit. The technical giant crippled the performance of cellular chips of Qualcomm to protect the other supplier, in particular Intel.

Case Summary

Apple has initiated the new battle with Qualcomm in April. In this case, Apple was represented as a plaintiff. The company sued Qualcomm in the court of the U.K. accusing the chipmaker of the violation of patents and design concept, the owner of which is Apple (Broussard). The main discord concerned the position of prominent chipmaker held by Qualcomm to hurt the competition in the mobile marketplace. Apple, which uses chips of Qualcomm for its wireless connectivity of iPhones, asserts that Qualcomm owes the debt of $1 billion. Apple intends to gain the lower amount of money than it pays to Qualcomm in licensing fees that will help it to return $1 billion (De Looper). The producer of iPhones insists that Qualcomm has to pay royalties basing on the value of its definite contribution but not the contributions from other patent holders. Today, the royalties of Qualcomm ground on the selling price of the phone, rather than on the portion of enabled technologies of the company.

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Moreover, another crucial aspect is that Apple strongly argues that Qualcomm is engaged in the monopolistic practices with the aim to prevent the organization from sourcing the most significant components from the competitors. When the court asked to comment on the issue, Apple provided the same arguments that were outlined during the January strialue, “Qualcomm builds its business on older, legacy standards but reinforces its dominance through exclusionary tactics and exclusive royalties” (Broussard). Nowadays, Apple states, “Despite being just one of the dozen companies who contributed to basic cellular standards, Qualcomm insists on charging Apple at least five times more in payments than all the other cellular patent licensors we have agreements with combined” (Broussard). The essential fact is that the accusation of Apple was supported by other corporations. For example, two years ago Qualcomm paid China approximately $1 billion to stop the 14-month antitrust research in that country. Eventually, South Korea fined Qualcomm with $850 million that caused the three-year-long investigation (De Looper). The South Korean Fair Trade Commission blamed the manufacturer of chipset for not keeping the business model and for the formation of the monopoly with its practices.

The Area of Law Dispute

The primary purpose behind the law is a dispute concerning the patent and royalties that restricts the rights of a plaintiff. Besides, Apple started to accuse Qualcomm of violation of China’s Anti-Monopoly law (De Looper). Tim Cook thoroughly regarded the legal battle and noticed that he saw legislation as a last resort and a lengthy conflict. The main area of law dispute is the statement of Apple that Qualcomm has charged royalties for the technologies that they have nothing to do with. Qualcomm in its turn held Apple accountable for breaking the contract and interfering with the regulations and agreements, which Qualcomm had with the contract manufacturers (De Looper). The organization noticed that Apple withheld the money owed to Qualcomm under the contract relating to the high-speed feature of Qualcomm’s chips (Broussard). It also outlined that Apple hurts Qualcomm by the deliberate representation of false statement to the government agencies concerning the chipset business and licensing of Qualcomm. The latter asked Apple not to make public comparison referring to the magnificent performance of Qualcomm’s power iPhones. Analyzing the litigation one may deduce that the goal of Apple is to leverage its immense power to force Qualcomm to accept the lower price than the fair value for the patented technologies that induced Apple to generate more than $760 billion from iPhone sales (Broussard).

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The Areas of Worry

Apple states that Qualcomm violates the competition laws and insists on charging its customers with expensive royalties when they do not use Qualcomm chips in their devices. In January, analytics noticed that Apple paid near $15 to Qualcomm in royalties for applying the patented wireless technology of the company (De Looper). Qualcomm not only rejected the accusations of Apple but also blamed it for breaking the contract and interfering with relationships and agreements that Qualcomm had with contact manufacturers. Apple is scared about the arguments of the defendant concerning withholding the money owed by Qualcomm under the contract related to the high-speed items of chips developed by the latter (Liedtke). Besides, Apple is worrying that in case it loses the process, the patent licensing practices will continue to throw sand in the wheels of commerce and cost much money for the consumers. In addition, Qualcomm asserts that Apple hurts customers by limiting the use of Qualcomm chips in iPhones 7 in order to make the operation more comparable to the chips from Intel. The main areas of worry consist in bringing the lawsuits by the Apple Inc. (Liedtke). The rival filed five complaints against it (Liedtke). Qualcomm insists that Apple deliberately does not take the advantage of the full potential of Qualcomm’s chips in iPhone 7 to prevent them from outperforming the modems of Intel. It is the first time when iPhone 7 does not require the Qualcomm chips. Furthermore, Apple does not utilize the definite high-performance features of the Qualcomm chipsets for iPhone 7 (Liedtke). Therefore, such a phenomenon proves that Apple intentionally impedes its consumers to enjoy the outperformed devices thus violating the rights of customers.

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Strong Sides of Apple in the Legal Battle

The strong statement of the analyzed procedure is comprised in the beneficial positions of Apple that in case of victory, it can change the most prevalent practices in Silicon Valley while wreaking the business model of not only Qualcomm but also Ericsson AB, Nokia Oyi, and other companies that rely on the patents for their profits. The first significant thing that makes Apple feel its strength in the battle is the obvious violation of the competition law by the opponent (Liedtke). Besides, this law is based on three elements that include practicing the restriction of free trading; presence of the anti-competitive practice reflected in the unfair pricing, refusal to deal and tying; transactions that can threaten using the facilities to enable other businesses continue competing. Infringement of the law can be proved by the fact that the more Apple innovated unique features such as advanced displays, Touch ID, cameras, the higher prices were set by Qualcomm (Liedtke). Consequently, such a phenomenon impedes the development of innovations because of the funding restriction.

How It Works


The crucial aspect is that in February 2015, significant standard organization, the Institute of Electronic and Electrical Engineers, made a number of critical policy changes that granted the great privilege to smartphone manufacturers (Kastrenakes). The investigation suggested that patent fees should no longer be paid as a percentage of the entire price of the phone but rather as a percentage of the constituent part used by technology. Therefore, such an approach can radically lower the fees that Apple is paying for Qualcomm (Kastrenakes). Besides, the former can always simply stop paying royalties for the patents of Qualcomm. There is completely no possibility that Qualcomm can obtain an injunction to stop sales of iPhones nor can it hinder Apple using the technology. Today, 5G is on the way and Qualcomm is quite likely to get standard applications for 5G patterns (Kastrenakes). Indeed, the organization has geared the future prospects to its ability to license 5G patterns and cell 5G chips. The Apple Inc. insists on receiving the new fee for arrangement in place before 5G becomes standard. In this case, the company will not be as beholden to Qualcomm as they were for 3G and 4G technology (Kastrenakes). If the latter agrees with the fact that it must ground its fee on the component rather than the entire smartphone, it will be a great victory, and it is time to emphasize this fact.

Conclusion

The analysis of the legal battle showed that Apple has a number of strong sides and benefits in this process. Besides, Apple is not the only company that requires the arrangement of fee. However, despite the financial issues the corporation highlighted the fact that Qualcomm is breaking the monopolistic law because of preventing the organizations from resourcing the most significant components from the competitors. The crucial fact is that Qualcomm constantly raises the price simultaneously with development of new technologies by Apple. Nevertheless, even in case of losing the process, Apple can continue its collaboration with Intel. Therefore, today the aim of Apple is to convince the court in the rationality to ground the fee on the component but not on the smartphone that will be a significant victory for the company.

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