Manufacturers’ retaliation threatens to draw other smartphone makers into legal mire; A group of Apple’s largest Asian suppliers is countersuing chipmaker Qualcomm, alleging anti-competitive behaviour and breaches of contract, opening yet another front in the legal battle between the tech companies. In a set of legal filings released late on Tuesday night in California, Apple said it would join Compal, Foxconn, Pegatron and Wistron in the litigation after Qualcomm sued the manufacturers, who had stopped paying the mobile chipmaker royalties related to iPhone production. The four contract manufacturers are collectively
seeking billions of dollars in damages. Qualcomm does not have a direct licensing deal with Apple relating and instead relies on contracts with the manufacturers to be paid the royalties it says it is owed for iPhone-related patents. Apple first sued Qualcomm in January, alleging it had been overcharged for intellectual property related to cellular wireless technologies. The iPhone maker subsequently stopped paying royalties to its suppliers, which would normally then have paid those licensing fees on to the chipmaker. In response, Qualcomm sued the four Taiwanese manufacturers of iPhones and iPads in May. The San Diego company has alleged that Apple is abusing its “enormous market power to coerce unfair and unreasonable licence terms”. It denies overcharging for technology that it argues is fundamental to the design and operation of all smartphones, including the iPhone. Now manufacturers are accusing Qualcomm of wrongdoing, a move that threatens to broaden the chipmaker’s legal woes out to other smartphone makers that rely on the same group to produce their devices. Foxconn, listed as Hon Hai Precision Industry, and its three peers say that Qualcomm’s anti-competitive behaviour has given it “billions of dollars in unearned profits from an illegal and monopolistic scheme”. The device makers say they have collectively purchased millions of modem chips from Qualcomm since 2013, incurring “excessive royalties”. Qualcomm’s lawsuit has, they add, caused them “significant harm”. “Qualcomm filed this retaliatory lawsuit to put the companies in the middle of Qualcomm’s dispute with Apple,” said Ted Boutrous of Gibson, Dunn & Crutcher, the law firm representing the four suppliers. “The companies are bringing their own claims and defences against Qualcomm . . . challenging this illegal Qualcomm business model that is aimed at thwarting competition.” Qualcomm recently turned to the US International Trade Commission to ask for an injunction against the import of certain iPhone models that it claims infringe some of its latest patents. This week, at a conference hosted by Fortune magazine, Steve Mollenkopf, Qualcomm’s chief executive, said he expected the litigation with Apple to be settled before it goes before a judge and jury. “Those things tend to get resolved out of court and there’s no reason why I wouldn’t expect that to be the case here,” he added.