Apple Terminates Royalties to Qualcomm as Legal Battle Intensifies

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Amidst the backdrop of a long, contentious, and ongoing legal battle between the iPhone-maker and its primary modem supplier, Qualcomm, Apple has allegedly decided that it will stop paying royalties to the San Diego, California-based modem-maker, altogether — at least until a court intervenes and the disputes between them are resolved.

The decision comes just weeks after the most recent in an evolving spat of lawsuits was fired off, which was essentially a countersuit from Qualcomm alleging that Apple lied to various government bodies and supply chain partners in an effort to smear the chip-maker’s image.

It all started out earlier this year, though, when Apple — backed by the U.S. Federal Trade Commission — filed a joint suit against Qualcomm’s supposed monopolistic business practices in the global supply chain. That lawsuit was closely followed by yet another, multi-million dollar lawsuit against Qualcomm in Beijing, China, allegedly over the same monopolistic tendencies.

Again, at the beginning of March, Apple filed another case against Qualcomm in the United Kingdom, allegedly related to the chip-maker’s “patents and designs,” however, rather than its quote-unquote “monopolistic business practices.” Unwilling to go down without a fight, Qualcomm then filed an exhaustive countersuit against Apple earlier this month, alleging that the Cupertino-company lied to a number of international government officials, while simultaneously spreading false narratives about the efficiency and quality of Qualcomm-manufactured chips — LTE-based modem chips, specifically, which are used in almost every smartphone/mobile device capable of connecting to the web.

Qualcomm has now issued a follow-up statement confirming that Apple no longer intends to pay out royalty payments at all, beginning Q1 2017, indicating that “Apple will continue this behavior until its dispute with Qualcomm is resolved.”

Furthermore, amid this ferocious, cat-and-mouse-style courtroom brawl, Qualcomm has updated its earnings guidance for the remainder of 2017 to reflect lost revenue as a result of Apple’s decision to stop paying royalties. Since Qualcomm’s business is largely reliant on the royalty payments from its various OEM manufacturing partners, the company is expected to see a loss of around $500 million through the fiscal 3rd quarter. As such, Qualcomm released a report in which it adjusted its financial guidance through the 3rd quarter of 2017, downgrading previous estimates of between $5.3 and $6.1 billion revenue, to a modestly lower range of $4.8 to $5.6 billion, according to Axios.

“Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees,” said Qualcomm’s Executive Vice President and General Counsel, Don Rosenberg, who added that “While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable.”

Apple, meanwhile, issued a statement in which it confirmed its intent to stop paying royalties to Qualcomm for those same reasons. “We’ve been trying to reach a licensing agreement with Qualcomm for more than five years but they have refused to negotiate fair terms,” an Apple spokesperson said, while adding that “Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court. As we’ve said before, Qualcomm’s demands are unreasonable and they have been charging higher rates based on our innovation, not their own.”

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