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Qualcomm Says Apple To Stop Paying Royalties (reuters.com)

Posted by msmash on from the on-hold dept.

Apple has decided to withhold royalty payments to its contract manufacturers that are owed to Qualcomm, until a legal dispute between the companies is resolved, the chipmaker said on Friday. From a report: Qualcomm, the largest maker of chips used in smartphones, said it will not receive royalties from Apple's contract manufacturers for sales made during the quarter ended March 31. San Diego, California-based Qualcomm also slashed its profit and revenue forecasts for the current quarter, to account for the lost royalty revenue.

58 comments

  1. Courage by Anonymous Coward · · Score: 0, Funny

    I guess we are about to see if Apple have the 'courage' to remove wireless chips from their devices.

  2. spiritual bankruptcy proceedings ongoing by Anonymous Coward · · Score: 0

    cease fire stand down,, sing along.. https://www.youtube.com/results?q=wmd+weather .. hang on to our hemispheres... thanks again.. wat to go megasloth..

  3. Fair terms ? by Alain+Williams · · Score: 4, Insightful

    Apple also noted it had been trying to reach a licensing agreement with Qualcomm for more than five years, but said Qualcomm had refused to negotiate "fair terms".

    That is a really interesting view Apple — some people would not view some of what you do as 'fair terms', for instance stopping 3rd party repairs. So: why one rule for you and another for others ?

    1. Re:Fair terms ? by networkBoy · · Score: 0

      Sounds like my ex wife.
      Points at the Sep MOU when she wants something, totally ignores it otherwise.

      --
      whois gawk date unzip strip find touch finger mount join nice man top fsck grep eject more yes exit umount sleep dump
    2. Re: Fair terms ? by Anonymous Coward · · Score: 0

      Sep MOU? September Method of Unification?

    3. Re: Fair terms ? by Anonymous Coward · · Score: 0

      if must be hard to be so uneducated

    4. Re:Fair terms ? by Anonymous Coward · · Score: 0

      You misunderstand. Qualcomm is obligated to negotiate with Apple under FRAND ( https://en.wikipedia.org/wiki/Reasonable_and_non-discriminatory_licensing ) which requires that licensing for patented items follow established fair practice for setting the licensing fee. You can't charge company X one rate and company Y another rate unless there are reasons doing business with company Y is somehow substantially different than Company X. Apple alledges that Quallcomm was charging them 5 times the royalty they charge any other company.

      FTC was also suing them for the exact same thing in January as well ( https://www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-qualcomm-monopolizing-key-semiconductor-device-used )

      Apple is in the right here.

    5. Re:Fair terms ? by Anonymous Coward · · Score: 0

      Worse, it's one thing to decide that a contract is unfair and wanting to revisit it. But they did sign it, so stopping payments now is shitty reaction. Now they get to use Qualcomm's chips "for free"!?

      I think I'll stop paying my mortgage now because it is my own personal opinion that it is too high. I'm sure the bank and the judge will be OK with that...

    6. Re:Fair terms ? by Anonymous Coward · · Score: 0

      They are under specific regulations that they (Qualcom) must renegotiate ( F/RAND ) and are refusing. Apple stopping payment is the way to force them to either do so, or go to international court, where the court will then say "Why are you not following FRAND?"
      Apple is saying that they signed the contract in good faith that Qualcom would follow the law and be bound by FRAND.

    7. Re:Fair terms ? by Anonymous Coward · · Score: 0

      You misunderstand. Qualcomm is obligated to negotiate with Apple under FRAND ( https://en.wikipedia.org/wiki/Reasonable_and_non-discriminatory_licensing ) which requires that licensing for patented items follow established fair practice for setting the licensing fee. You can't charge company X one rate and company Y another rate unless there are reasons doing business with company Y is somehow substantially different than Company X. Apple alledges that Quallcomm was charging them 5 times the royalty they charge any other company.

      FTC was also suing them for the exact same thing in January as well ( https://www.ftc.gov/news-events/press-releases/2017/01/ftc-charges-qualcomm-monopolizing-key-semiconductor-device-used )

      Apple is in the right here.

      Umm, says Apple.

      And fanbois. Never forget the fanbois.

    8. Re: Fair terms ? by Brockmire · · Score: 1

      Fuck you, I also have no fucking clue what he's talking about. Google doesn't, either.

    9. Re: Fair terms ? by slew · · Score: 1

      if must be hard to be so uneducated

      It must be hard to have a typing disability... ;^P

      Perhaps one should instead be thankful to be blissfully ignorant of what a Separation Memorandum of Understanding (aka a legal precursor to draft a separation settlement agreement which usually finalized in a divorce agreement). Sometimes life is less complicated when one is ignorant of such things...

    10. Re: Fair terms ? by Anonymous Coward · · Score: 0

      I had no idea either. I suspect it'd be obvious if you went through a divorce. I guessed, based on "ex wife", that Sep meant separation, which was enough for google to find the rest:
      Separation Memorandum of Understanding.

    11. Re: Fair terms ? by Anonymous Coward · · Score: 0

      Are these "frand" rules or the contract terms that say the deal must be renegotiated?

      Other companies have valuable patentâs they can use for cross licensing deals. Apple doesn't, so they must pay with money.

    12. Re:Fair terms ? by Anonymous Coward · · Score: 0

      Thats right and apple doesnt have to pay their taxes either.

    13. Re:Fair terms ? by Anubis+IV · · Score: 1

      why one rule for you and another for others ?

      Perhaps because Qualcomm (voluntarily) legally bound itself to provide licenses under FRAND terms as a condition for including their patents in the standard? Apple did no such thing.

      I'm not saying Apple is in the right here. It actually sounds like they're screwing their suppliers, since their suppliers are the ones who have the licenses from Qualcomm, and it's those suppliers who are withholding royalty payments to Qualcomm on account of Apple not paying the money owed to them to cover their licensing fees. That said, Qualcomm is currently being investigated and/or sued by regulatory agencies around the globe for failing to abide by the FRAND terms they agreed to, so it seems safe to suggest that everyone's in the wrong at this point: Qualcomm for not abiding by its legal obligations, and Apple for not abiding by its contractual obligations.

    14. Re:Fair terms ? by tlhIngan · · Score: 1

      Perhaps because Qualcomm (voluntarily) legally bound itself to provide licenses under FRAND terms as a condition for including their patents in the standard? Apple did no such thing.

      I'm not saying Apple is in the right here. It actually sounds like they're screwing their suppliers, since their suppliers are the ones who have the licenses from Qualcomm, and it's those suppliers who are withholding royalty payments to Qualcomm on account of Apple not paying the money owed to them to cover their licensing fees. That said, Qualcomm is currently being investigated and/or sued by regulatory agencies around the globe for failing to abide by the FRAND terms they agreed to, so it seems safe to suggest that everyone's in the wrong at this point: Qualcomm for not abiding by its legal obligations, and Apple for not abiding by its contractual obligations.

      Except in this case I think the reason is Apple is putting pressure on Qualcomm to settle.

      Remember, Qualcomm is suing Apple because they believe Apple has crippled their chips to make them look bad. (Partly true - Apple has speed- limited the Qualcomm based iPhones so they perform similar to the Intel based iPhones). Qualcomm wants Apple to end this because they want people to seek out and buy the Qualcomm iPhones and thus get more royalties.

      Apple countersued, saying that Qualcomm's royalty rates are out of line with industry standard, especially on the FRAND patents (and there are plenty of patents that Qualcomm will not license at all, much of which is related to why Qualcomm chipsets perform so much better than the competition).

      It's a nasty set of arguments, and Apple's pressuring Qualcomm to come to a settlement by withholding payments until a decision is reached. The money is being paid, but to a trust account so Apple's not saving a single dime, it's just that the money is not being given to Qualcomm.

      Eventually the case will have to be heard by the courts or Qualcomm and Apple kiss and make up and come to an agreement. In the meantime, Apple's not funding Qualcomm's lawyers against themselves.

    15. Re:Fair terms ? by Anonymous Coward · · Score: 0

      Maybe so, but they did accept the terms. And now they don't want to abide by those terms anymore. They can go to court to force Qualcomm to renegotiate sure, and they did. But in the mean time, the terms still apply. They still owe money until the court decides otherwise.

      Worse, Apple is not paying Qualcomm directly, they are paying suppliers who then pay Qualcomm. By refusing to pay, Apple is screwing their suppliers too, who have either to keep paying Qualcomm and thus lose a lot of money, or stop paying (which they did) and risk a law suit from Qualcomm.

      So regardless how unreasonable the royalties are now, and how Qualcomm is in the wrong, that doesn't excuse Apple's behavior.

    16. Re:Fair terms ? by Anonymous Coward · · Score: 0

      Except that Apple sued Qualcomm over royalties first (21 Jan 2017 - http://www.cnbc.com/2017/01/20...) then Qualcomm counter-sued Apple over chip performance (Apr 11, 2017 - http://www.theverge.com/2017/4...)

      Apple already withheld the $1billion dollars that Qualcomm allegedly owe them by not paying the royalties. Now we are learning that Apple has decided to keep withholding all royalties until the lawsuit is settled.

      That's the first time I hear about that trust account. Citation?

    17. Re: Fair terms ? by Anonymous Coward · · Score: 0

      Not only did you use a UTF-8 apostrophe on a site that is known for not supporting UTF-8, you used an apostrophe where one should not have been used. We're not talking about something a patent possesses, we're talking about a plurality of patents.

    18. Re:Fair terms ? by Anonymous Coward · · Score: 0

      Thats right and apple doesnt have to pay their taxes either.

      And yet they do.

  4. *ALL* royalties?!?! by Anonymous Coward · · Score: 0

    Wow. This is devolving into one nasty pissing contest.

  5. Apple gonna Apple by dstyle5 · · Score: 0

    Tim Cook: "We only have $246 billion in cash... what shall we do?"
    VP of Screwing Over Suppliers: "Well Lord Cook, we could try to strong arm one the IP/supply companies we have an written contact with, try to screw them over..." Tim Cook: "Bring out the Who to Screw Over dart board post haste!"

    http://money.cnn.com/2017/02/01/investing/apple-cash-overseas/

    1. Re:Apple gonna Apple by Anonymous Coward · · Score: 0

      Or it could be:

      Apple's got tons of cash, let's just charge them more, they probably won't even notice, even though we're already making buckets of cash from all the product they're buying from us.

    2. Re:Apple gonna Apple by dstyle5 · · Score: 1

      Yeah if what Apple says is true Qualcomm seems a bit sketchy, could be trying to milk some extra $ from Apple.

    3. Re:Apple gonna Apple by captaindomon · · Score: 1

      Having extra money doesn't mean you should give it to people because you have it. Do you give away your extra money because you can? Business policy and giving away money don't jive very well, and as stakeholders (many of us probably are due to retirement funds we are in, etc), we don't want business we have stake in randomly giving away money either.

      --
      Just because I can hook a shark from a boat, I do no offer to wrestle it in the water.
    4. Re:Apple gonna Apple by Midnight+Thunder · · Score: 1

      If this was government money or your open money you would want it spent wisely? Maybe this is the same sort of case? It could also be a question of not paying a license fee that is out of line with the rest if the industry?

      --
      Jumpstart the tartan drive.
    5. Re:Apple gonna Apple by Anonymous Coward · · Score: 0

      The rest of the industry have patents and invent technology though...
      Silly fanboi, at least you won't hurt yourself on sharp corners anymore since Apple invented round ones.

    6. Re:Apple gonna Apple by Anonymous Coward · · Score: 1

      You can be an ignorant SJW all you want but it just makes you look stupid.

      Yeah, well you're and idiot.

  6. Those intel mobile modems must be geting good by postmortem · · Score: 1

    They wouldn't do this until they secured alternative...

    1. Re: Those intel mobile modems must be geting good by Anonymous Coward · · Score: 1

      They can't. There's no alternative to Qualcomm if you're going to use CDMA, which is required for half the US carriers. At issue here is that Qualcomm wants royalty money for phones that have *no* Qualcomm parts or intellectual property in them, which is pretty audacious.

    2. Re: Those intel mobile modems must be geting good by hackel · · Score: 2

      CDMA is garbage and needs to die, along with any carrier that continues to use that terrible, proprietary architecture.

    3. Re: Those intel mobile modems must be geting good by gregarican · · Score: 1

      Don't know if that assertion is accurate. I've played around with several different chipsets for home projects. Both CDMA and GSM varieties. None of these were stamped as Qualcomm. Sure they are a huge player, but...

    4. Re: Those intel mobile modems must be geting good by Anonymous Coward · · Score: 0

      I'm pretty sure CDMA is not garbage. As far as I can tell it's the option that has the least overall drawbacks.

    5. Re: Those intel mobile modems must be geting good by slew · · Score: 1

      Don't know if that assertion is accurate. I've played around with several different chipsets for home projects. Both CDMA and GSM varieties. None of these were stamped as Qualcomm. Sure they are a huge player, but...

      What Apple is mainly objecting to is the Qualcomm royalty model for use of its patent portfolio. Qualcomm charges a royalty of approximately 3% to 5% based on the *entire wholesale price of the handset unit* (not just the price of the chip that Qualcomm may or maynot have made).

    6. Re: Those intel mobile modems must be geting good by gregarican · · Score: 1

      I agree in terms of Qualcomm turning the screws. That's ridiculous on their part. I was just saying that it's not like Apple has no other options in terms of looking for a chip manufacturer they can partner with. Although I am ignorant as to contractual obligations and admittedly didn't RTFA...

    7. Re: Those intel mobile modems must be geting good by clonehappy · · Score: 1

      Unless you happen to live in the United States, where the CDMA networks are by far and away the most universal and ubiquitous mode of wireless communication.

      You'll get your wish around 2020 when Verizon sunsets their CDMA2000 network, and we'll all be worse off because the LTE coverage won't match what we have today, just like when AMPS (another terrible, horrible proprietary technology) was turned down and the coverage never caught up with what we had originally.

    8. Re: Those intel mobile modems must be geting good by slew · · Score: 2

      I agree in terms of Qualcomm turning the screws. That's ridiculous on their part. I was just saying that it's not like Apple has no other options in terms of looking for a chip manufacturer they can partner with. Although I am ignorant as to contractual obligations and admittedly didn't RTFA...

      Well if you believe Qualcomm's position: you pay the same royalty rate *regardless* of who you buy your modem chip from.

      *If you buy a modem chip from Qualcomm, in addition to paying qualcomm for the chip, you need to pay royalties on the total wholesale price of your handset.
      *If instead you buy your modem chip from another vendor that does 3G/4G or CDMA (say intel), you need to pay Qualcomm the same royalties.

      So basically Qualcomm wants royalties based on the total wholesale price of the handset even if they didn't sell you a single chip in that handset because they believe you cannot implement device that interfaces to a 3G/4G or CDMA cell-tower without licencing their wireless patents. Although nobody likes this situation, only Apple has decided not to pay (other than a few chinese companies that use the proprietary chinese TD-CDMA scheme and only sell handsets to the internal chinese market).

    9. Re: Those intel mobile modems must be geting good by hackel · · Score: 1

      > CDMA networks are by far and away the most universal and ubiquitous mode of wireless communication.

      Uh... What are you taking about? There's nothing remotely universal about Verizon and Sprint. AT&T and T-Mobile are at best just as big, if not larger. Not to mention the fact that GSM is compatible with the entire rest of the world.

      Also, Verizon is (finally) shutting their network down at the end of 2019. Global standards are more important than coverage out in the middle of nowhere, USA.

  7. Drive them into the sea! by hackel · · Score: 3, Insightful

    I despise Apple, but I hate Qualcomm even more. They should have stuck to email clients. Their "royalties" are complete bullshit. I wish that Apple, Samsung, and others would get together to push an open standard manufacturers could use without these ridiculous royalty payments that always get passed on to the consumer.

    1. Re:Drive them into the sea! by Anonymous Coward · · Score: 0

      Oh, so which of those patents are you going to come up with on an "open standard" that does LTE?

      IDIOT.

    2. Re:Drive them into the sea! by Anonymous Coward · · Score: 0

      This. It is ridiculous how the costs of the display, storage, and case are passed on to the consumer as well. Phones, like information, want to be free.

    3. Re:Drive them into the sea! by sl3xd · · Score: 3, Informative

      Qualcomm's patents are for CDMA, its competitor to the GSM standard. The two operate so differently it's hard to imagine Qualcomm owns any patent in the GSM pool.

      LTE is built upon the GSM standard, which appears to be free of Qualcomm's CMDA grip.

      Devices on the Verizon and Sprint networks fail back to CDMA when LTE isn't available... and that means Qualcomm can demand its licensing fees.

      GSM-only phones (like AT&T, T-Mobile, and most of the rest of planet Earth) don't need to worry about Qualcomm licenses.

      --
      -- Sometimes you have to turn the lights off in order to see.
    4. Re:Drive them into the sea! by clonehappy · · Score: 1

      While you're technically correct, LTE has approximately zero things in common with plain-jane 2G GSM from an air-interface perspective.

      3G GSM/UMTS uses a Wideband CDMA interface, and you'd better believe there are some Qualcomm patents involved there. 4G LTE is an OFDMA based technology, and Qualcomm definitely has some (albeit less) intellectual property involved there as well.

      In short, Qualcomm is going to have less weight to throw around going forward, but it's definitely a non-zero amount of influence.

      This explains it a little bit more in-depth

  8. The evolution of wireless technologies by realwhz · · Score: 1

    Telecommunications, especially wireless technologies, is no longer a hot topic in both academia and industry. Seriously, if not Qualcomm, who else will really push the development of wireless technologies, Huawei? Apple has very limited, if not nothing, contribution to the fundamental evolution in this area. Apple would just kill the industry.

  9. Not just Apple by Guspaz · · Score: 4, Insightful

    It seems like everybody is suing or has sued Qualcomm these days, directly or indirectly. Apple, Korean anti-trust regulators on behalf of Samsung, BlackBerry, the FTC (anti-trust violations), Meizu, Broadcom...

    Basically, Qualcomm managed to get a bunch of standard-essential patents, and then used those to build a near monopoly by refusing FRAND licensing like they're required to. There is a reason why Samsung phones use Samsung chips in most countries, but Qualcomm chips in North America, and that's Qualcomm's patent abuse.

    So, say what you will about Apple, but they're just the most visible victim.

    1. Re:Not just Apple by sl3xd · · Score: 1

      There is a reason why Samsung phones use Samsung chips in most countries, but Qualcomm chips in North America, and that's Qualcomm's patent abuse.

      The reason is that the United States is one of the very few countries that allows CDMA cell networks. Virtually every other country on the planet uses GSM exclusively. (Russia allegedly does use CDMA, but I doubt they care about Qualcomm and its American patent).

      Verizon, Sprint, and a couple others using CDMA (most of which is heavily patented by Qualcomm), while AT&T & T-Mobile use GSM (which is a global FRAND standard).

      So if you make a device that uses CDMA, you have to pay Qualcomm license fees; since America is one of the only places that uses CDMA for cell phones, it makes it a uniquely American problem.

      --
      -- Sometimes you have to turn the lights off in order to see.
    2. Re:Not just Apple by clonehappy · · Score: 2

      since America is one of the only places that uses CDMA for cell phones, it makes it a uniquely American problem.

      Wrong. Qualcomm's patents definitely extend past their proprietary IS-95 and CDMA2000-based systems. 3G GSM using WCDMA and 4G LTE all depend to some extent on Qualcomm's intellectual propertly.

      Sure, to use the OP's example, Samsung pays a lot less to Qualcomm by developing their own 3G/4G modem chipsets rather than sourcing them directly, but it's not like Qualcomm was stupid enough to cut themselves out of the game completely. In short, they aren't going anywhere for a good long while even after CDMA2000 is a page in the history books.

    3. Re:Not just Apple by dacaldar · · Score: 1

      I'm non-partisan here, but didn't Qualcomm come up with a revolutionary invention that made far more efficient use of the available radio bandwidth, to allow cell phone use, and eventually data, to really explode? Aside from BlackBerry, I'd think Qualcomm was the most influential in terms of technical innovation that allowed the cell phone and ensuing smartphone boom to even happen.

      Apple wasn't very innovative at all except in the UI space - realizing what the majority of people (i.e. non-technical people) needed out of an interface,and of course good at marketing.

    4. Re:Not just Apple by Guspaz · · Score: 1

      Qualcomm was one of a bunch of companies that co-developed the technology behind LTE, but the question is, should companies who did that development work and own the patents on standards be allowed to hoard the standards-essential patents and refuse to licence them in a FRAND manner?

      Nobody is arguing that Qualcomm shouldn't reap the rewards of their hard work, only that they shouldn't use those patents to enforce monopolistic control of the market.

  10. Only the achievers are getting screwed by Anonymous Coward · · Score: 0

    As usual, the only party who actually invented and manufactured something is getting screwed by the company who bought more judges and who doesn't add one whit of originality to their "product". Apple's only skills are in bullshitting, whether it's their mindless followers, or the courts. The withhold funds that they know they are contracted to pay because they think they can get away with it. They hobble the Qualcomm parts so as not to embarrass Intel any more than they already have as just one more negotiating tactic to squeeze a few more bucks out of their clueless losers.

    1. Re: Only the achievers are getting screwed by Anonymous Coward · · Score: 0

      You really believe all the bullshit u spout? Cause to those of us based in reality you look like someone who lives in their mothers basement and hasn't left in the past 12 years except to Buy a new blowup doll every six months

  11. It's bitztream by Anonymous Coward · · Score: 0

    The autism-hating, custom EpiPen-hating, Musk-hating Slashdot troll!

  12. So, by BitztreamNotARealNam · · Score: 1

    How's life in the hypocrite lane?

  13. Apple is in the wrong. by thesupraman · · Score: 1

    Actually, shill, no they are not in the right.

    What Apple is demanding is better rights and lower prices than the rest of the industry.
    Basically they are used to suppliers bending over backwards to meet any price Apple demands just for the right to sell to Apple, but as Qualcomm is one of the free large enough to not need to do that, Apple are incensed.
    How dare Qualcomm have a backbone and tell Apple that it must fairly pay the same rates as others?
    To punish Qualcomm for stepping out of love, Apple violated contacts in several ways including lowering performance of Qualcomm chips artificially, and withholding payments.
    Then when even that didn't force Qualcomm to tug their forelock and been for forgiveness, Apple got some friends of theirs in the government to start an 'investigation' to try and force Qualcomm hand.
    All because Apple are being told to pay THE SAME AS EVERYONE ELSE.