{"id":5808,"date":"2018-12-21T12:24:16","date_gmt":"2018-12-21T16:24:16","guid":{"rendered":"http:\/\/ncjolt.org\/?p=5808"},"modified":"2020-06-04T20:52:29","modified_gmt":"2020-06-04T20:52:29","slug":"an-amended-complaint-how-legal-sparring-between-california-based-tech-giants-became-an-all-out-global-war","status":"publish","type":"post","link":"https:\/\/journals.law.unc.edu\/ncjolt\/blogs\/an-amended-complaint-how-legal-sparring-between-california-based-tech-giants-became-an-all-out-global-war\/","title":{"rendered":"An Amended Complaint: How Legal Sparring between California-based Tech Giants became an All-Out Global War"},"content":{"rendered":"\n

Over the past couple of years, Apple has\nsued semiconductor manufacturer Qualcomm in three different countries<\/a>,\nwith its United States claim seeking approximately $1 billion in damages. In\nits complaint, Apple alleged that Qualcomm was \u201cwithholding<\/a>\u201d\nthat sum \u201cas retaliation for [Apple] responding truthfully to law enforcement\nagencies investigating [Qualcomm].\u201d <\/p>\n\n\n

In a major development in the litigation just last month, Qualcomm\namended its counterclaim against Apple<\/a> to include allegations that\nApple \u201cstole confidential data about [Qualcomm\u2019s] modem chips and gave it to\nIntel,\u201d a Qualcomm competitor. <\/p>\n\n\n

Apple did have access to Qualcomm\u2019s proprietary information\nby virtue of a master\nsoftware agreement from 2010<\/a>, which was obtained when Apple\n\u201cexercised its commercial leverage\u201d and \u201cpromised to keep the information\nclose.\u201d Qualcomm claims that, instead of protecting this information, Apple\u2019s\nengineers \u201cprovided\nto Intel engineers Qualcomm software and confidential information, including\nsource code, for the purpose of improving the performance of Intel\u2019s chipset\nsolutions<\/a>.\u201d The implication is that Apple is using Qualcomm\u2019s\npatented technologies to improve Intel\u2019s products so that Apple can switch\nsuppliers, thereby avoiding the very expensive\nlicensing fees charged by Qualcomm<\/a>.<\/p>\n\n\n

The 2010 agreement also gave Apple more favorable licensing terms compared to its competitors; while the typical manufacturer might have to pay $30 per phone in royalties to Qualcomm, Apple successfully negotiated a price of only $10 per phone<\/a>. As part of that deal, Apple agreed not to encourage regulators from \u201ccrack[ing] down on Qualcomm\u201d but did not prohibit Apple from answering truthfully answer \u201cquestions in any investigation already under way.<\/em>\u201d<\/a> <\/p>\n\n\n

Even for a company of its size, a ten-figure judgment in favor of Qualcomm would be crippling to Apple\u2019s financial health.<\/p><\/blockquote>\n\n\n

This past Friday, Qualcomm dropped another bombshell in\ncourt,  stating that Apple is currently\n$7 billion (with a \u201cB\u201d) behind\nin these patent royalty payments<\/a> to Qualcomm. Allegedly, the iPhone\nmanufacturer \u201cvirtually\nstopped making royalty payments to Qualcomm a year ago<\/a>.\u201d The company\ngoes as far to accuse Apple of aiming to \u201cdestroy\nQualcomm\u2019s business model.<\/a>\u201d While the latter may be nothing more\nthan alarmist rhetoric, the former suggests that Apple is getting serious about\nits fight with Qualcomm. Such a sum indicates that Apple is prepared to take\nthis fight to the bitter end; after all, $7 billion\nconstitutes roughly 15% of Apple\u2019s net income in 2017<\/a>. Even for a\ncompany of its size, a ten-figure judgment in favor of Qualcomm would be\ncrippling to Apple\u2019s financial health.<\/p>\n\n\n

There is no question that Qualcomm has exercised outsize\nauthority in the mobile phone industry through its aggressive patent strategy;\nbut should they be punished for doing so? After all, this is just the sort of\nprotection patents are aimed at providing, regardless of whether such\nprotections may ultimately stifle short-term competition in the market. Apple<\/a>\nand other\nsmartphone manufacturers<\/a> may find Qualcomm\u2019s practices extortionary\nand \u201cunfair,\u201d but there is little doubt that Qualcomm is acting beyond the\nprivileges granted by virtue of such patent protection. And we all know how\nunreliable an argument predicated on the concept of \u201cunfairness\u201d is in a\ncontract dispute between two sophisticated industry giants.<\/p>\n\n\n

The Constitution of the United States empowers Congress to\noffer patent protection as a means to promote innovation via \u201cprogress\nof science and useful arts<\/a>.\u201d Under current industry standards, it\nseems that Qualcomm has a firm grip on many technologies essential to\nconstructing modern mobile phones. In the short term, this is bad news for\nmanufacturers; but in the long run, these industry players are incentivized to produce\ndisruptive new technologies to avoid Qualcomm\u2019s patents and bring even greater\nvalue to consumers. <\/p>\n\n\n

While Apple and its competitors bemoan the unfairness of\nQualcomm\u2019s patent licensing strategy, it seems they ignore the potential\nunfairness of depriving Qualcomm of patent protection and the benefit of its\nlicensing agreements. Apple claims it \u201cbelieves\ndeeply in innovation<\/a>,\u201d yet seeking to devalue the bargained-for\nbenefits of another entity\u2019s innovative strategy suggests that Apple believes\nfar more in doing whatever it takes to bolster its bottom line. <\/p>\n","protected":false},"excerpt":{"rendered":"

Over the past couple of years, Apple has sued semiconductor manufacturer Qualcomm in three different countries, with its United States claim seeking approximately $1 billion in damages. In its complaint, Apple alleged that Qualcomm was \u201cwithholding\u201d that sum \u201cas retaliation for [Apple] responding truthfully to law enforcement agencies investigating [Qualcomm].\u201d In a major development in …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[51],"tags":[],"_links":{"self":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5808"}],"collection":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/comments?post=5808"}],"version-history":[{"count":1,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5808\/revisions"}],"predecessor-version":[{"id":6896,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5808\/revisions\/6896"}],"wp:attachment":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media?parent=5808"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/categories?post=5808"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/tags?post=5808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}