Apple Sues Qualcomm Over $1 Billion Unpaid Royalty Rebates

Apple has filed a lawsuit against Qualcomm, alleging the chip manufacturer demanded "onerous, unreasonable and costly" terms for licensing its patents. Apple also accused Qualcomm of withholding $1 billion in rebates for keeping Qualcomm modems in products like the iPhone and iPad, according to CNBC.

Qualcomm, which manufacturers baseband processors for mobile phones, has been a chip supplier for Apple; Apple also pays the company licenses to use its wireless patents. However, Apple alleges that Qualcomm held $1 billion in rebates in retaliation for Apple cooperating with antitrust authorities in South Korea who were looking into the chip maker's licensing businesses.

"Apple believes deeply in innovation and we have always been willing to pay fair and reasonable rates for patents we use. We are 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," said Apple in a statement issued to CNBC.

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Qualcomm shares dipped more than 2.5 percent following the news.

"While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple’s claims are baseless," said Don Rosenberg, EVP and General Counsel at Qualcomm, in an email to CRN.

"Apple has intentionally mis-characterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program. Apple has been actively encouraging regulatory attacks on Qualcomm’s business in various jurisdictions around the world, as reflected in the recent KFTC [Korea Fair Trade Commission] decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these merit-less claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits," Rosenberg said.

Earlier in the week, the U.S. Federal Trade Commission filed a lawsuit against Qualcomm over unfair patent licensing practices.

Apple did not respond to a request for comment from CRN .

The lawsuit alleged that Qualcomm forced Apple to use its chips exclusively in exchange for lower licensing fees – ultimately excluding competitors and harming competition. Apple, for its part, said in its statement that Qualcomm had charged the company "at least five times" more in royalty payments than other patent licensors.

"Despite being just one of over a 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," said Apple in the statement.

Apple said in its complaint that it received quarterly rebates from Qualcomm as part of the companies' joint agreement – but Qualcomm began to withhold those payments last year.

"For many years Qualcomm has unfairly insisted on charging royalties for technologies they have nothing to do with. The more Apple innovates with unique features such as TouchID, advanced displays, and cameras, to name just a few, the more money Qualcomm collects for no reason and the more expensive it becomes for Apple to fund these innovations," said Apple.