Apple: Qualcomm's 'illegal practices' hurt entire industry

Apple is digging in for its legal battle against Qualcomm. 

On Tuesday, the Cupertino, California, tech giant filed an update to its complaint against Qualcomm, alleging that the chipmaker stifles innovation. Rather than focus only on itself, Apple is arguing that Qualcomm's impact is much broader.

"Qualcomm's illegal business practices are harming Apple and the entire industry," Apple said in a statement. 

It's the latest salvo in an escalating legal fight over the the value of intellectual property that plays a critical role in the iPhone. Apple argues that it should have to pay royalties only on the technology behind the radio chip Qualcomm supplies in the iPhone. Qualcomm says the royalties cover a far broader range of technologies that go beyond a single chip. 

"We believe deeply in the value of intellectual property, but we shouldn't have to pay them for technology breakthroughs they have nothing to do with," Apple said. 

In response to the filing, Qualcomm said it's confident it will prevail in the legal dispute.

"Qualcomm's innovations are at the heart of every iPhone and enable the most important uses and features of those devices,"  said Don Rosenberg, executive vice president and general counsel of Qualcomm, citing connectivity, high-speed data transmission and GPS navigation as examples. "It simply is untrue that Qualcomm is seeking to collect royalties for Apple innovations that have nothing to do with Qualcomm's technology."  

Patent battle

Qualcomm is the world's biggest provider of mobile chips, and it created some of the essential standards for connecting phones to cellular networks. The company derives a significant portion of its revenue from licensing that technology to hundreds of handset manufacturers and others. Because Qualcomm owns IP related to 3G and 4G phones, any handset maker building a device that connects to the newer networks has to pay it a licensing fee, even if they don't use Qualcomm's chips.

Apple in January filed suit against Qualcomm in the US, alleging the wireless chipmaker didn't give fair licensing terms for its technology. Apple also said Qualcomm sought to punish it for cooperating in a South Korean investigation into Qualcomm's licensing practices by withholding a $1 billion rebate. Apple wants a court to lower the amount it pays Qualcomm in licensing fees, as well as order the return of the $1 billion. The iPhone maker said in its suit that Qualcomm should be paid royalties based on the value of its particular contribution, not for contributions from other patent holders.

Qualcomm in April said no modern handset would have been possible -- including the iPhone -- "without relying upon Qualcomm's fundamental cellular technologies." In its response to Apple's initial filing, the company made some counterclaims of its own, including breach of contract. It also asked for an unspecified amount in damages and said Apple had interfered with its relationship with contact manufacturers.

Apple in April said it had stopped paying royalties to contract manufacturers for phone patents owned by Qualcomm, starting with devices sold during the March quarter. Those manufacturers, like Foxconn, then pay Qualcomm for the intellectual property that's essential for connecting phones to a wireless network.

Apple argued in its latest filing on Tuesday that Qualcomm is "effectively levying its own tax on Apple's innovation." It said that Qualcomm's licensing model, appropriate for flip phones, should be applied to today's smartphones. 

"Apple innovates, Qualcomm demands more," Apple said in its filing. 

First published June 20, 9:25 a.m. PT.
Update, 11:10 a.m. PT: With additional background. 
Update, 5:07 p.m. PT: Adds comment from Qualcomm.