Business & Tech

Qualcomm sues Apple contractors over patent royalties

Qualcomm Inc.’s battle with Apple Inc. is heating up as the chip company hauls assemblers of the iPhone into a US court on claims they are failing to pay patent royalties.

Four Asian contract manufacturers, including Foxconn Technology Group and Pegatron Corp., aren’t complying with obligations to pay for the use of patented technology, according to a complaint Qualcomm said it filed in federal court in San Diego. The other two companies sued are Wistron Corp. and Compal Electronics Inc.

Unlike other smartphone companies, Apple doesn’t have a direct license with Qualcomm and instead pays contractors to make its devices, parts of which are used to cover royalties such as those owed under agreements struck before the first iPhone appeared. The chipmaker blamed Apple for dragging its contract manufacturers into the dispute, saying the decision not to give them money for royalties had stopped them from paying Qualcomm, according to the complaint.

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“Their gripe, their issue, appears to be with Apple,” said Qualcomm general counsel Don Rosenberg. “We’re suing to make the point that others shouldn’t be used by Apple to advance this agenda they have of attacking us.”

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Qualcomm said Apple has agreed to cover costs incurred by the contract manufacturers.

Asked for comment, the company referred to an earnings call earlier this month in which Apple chief executive officer Tim Cook said the company is taking a “principled stand” because Qualcomm’s “really great work” is only “one small part of what an iPhone is,” so doesn’t merit a cut of the entire price of the handset.

“We’ve been trying to reach a licensing agreement with Qualcomm for more than five years but they have refused to negotiate fair terms,” Apple said in the statement. “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.”