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Apple Under Pressure to Pay for Using IP

by Chris Taylor | Jan 04, 2019

As of January 4, 2019, Apple’s stock price had plunged 40 percent from its 52 week high a few months before, and had dropped 18 percent over the past three weeks on news that the company would not meet guidance and would have lower quarterly revenues.

Apple claimed slow growth in China and developing countries has meant softer demand for iPhones.  On top of this, two recent wins by Qualcomm in their big legal battle with Apple reset the expectations of investors, leading to lower stock prices:
  • On December 10, authorities in China said they would ban the importation of older iPhone models for infringing on Qualcomm patents. The patents in question have to do with resizing photos and navigation using touchscreens.
  • On December 20, Germany banned the importation of iPhone 7 and iPhone 8 models.

The ban in Germany involves infringement of one or more of Qualcomm’s envelope tracking patents as implemented in the baseband processor from Intel and envelope tracking chip from Qorvo.  The Intel processor presumably handles digital predistortion (DPD) functions as well as software, working in tandem with the Qorvo ET chip to maintain maximum PA efficiency.  Qualcomm, since acquiring Nujira, holds a massive patent portfolio in ET, and this assuredly makes ET fertile grounds for infringement claims by Qualcomm.

The stock prices of Apple’s chip suppliers including Skyworks, Qorvo and Broadcom took hits with the news of lower sales from Apple, but these firms do not generally have to fear direct legal challenge from Qualcomm for patent infringement.

Under SEPP (standards essential patent portfolio) practices, the norm in the cellular industry, Qualcomm charges a licensing fee covering all of its patents to the phone OEM, and not to individual IC makers that may make use of Qualcomm IP.  This means that Intel, Qorvo and others are free to use any of Qualcomm’s IP in chips supplied to Apple as long as Apple pays Qualcomm for the use of the IP.  Apple of course objects to this practice, and SEPPs are at the heart of the legal battle between Apple and Qualcomm.

When Apple and Qualcomm will settle their fight is anyone’s guess, but the recent legal wins by Qualcomm increase the pressure on Apple to reach an amicable settlement.  With 5G smartphones due to ship in 2019 and no viable alternatives to Qualcomm’s X50 likely until 2020, the pressure on Apple will only increase.

For more details on the Qualcomm-Apple legal dispute and what it could mean for innovation and cellular chip suppliers, subscribers can read a report here.

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