Qualcomm can't get back the billions it paid Apple, judge rules
A California district court judge gives Apple a win ahead of a trial next month.
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Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Apple can keep the billions of dollars that Qualcomm paid it as part of their 2013 contract, a judge has ruled. And Qualcomm's still on the hook for payments it stopped making.
In a summary judgment published Thursday, US District Court Judge Gonzalo P. Curiel of the Southern District of California granted four of Apple's requests ahead of a trial that kicks off next month in San Diego. The ruling isn't final but gives Apple a win over Qualcomm before they face off in court.
As part of Apple and Qualcomm's 2013 Business Cooperation and Patent Agreement, Qualcomm made "sizeable quarterly payments" to Apple to offset its licensing fees. It only made the payments as long as Apple "did not initiate or induce certain types of litigation or investigations," as Thursday's order said.
Watch this: Apple vs. Qualcomm: Court battles explained
Qualcomm in September 2016 stopped making payments to Apple, alleging the company breached their contract by urging the US Federal Trade Commission, Korean Fair Trade Commission and other government bodies to investigate Qualcomm's business practices.
Apple, meanwhile, argued it followed the terms of their 2013 BPCA and didn't urge the FTC and other government bodies to investigate Qualcomm. It also said it didn't file its own lawsuit until the contract expired at the end of 2016. Apple hit Qualcomm with its suit in January 2017.
The judge on Thursday sided with Apple despite saying that Apple wanted the FTC to investigate Qualcomm. Curiel said Apple doesn't have to return the money Qualcomm paid it. He also ruled that Qualcomm has to pay the money owed during the length of the contract, which lasted until Dec. 31, 2016.
Qualcomm had stopped payments in September 2016 and wanted to be relieved from payments for the second, third and fourth quarters of that year. Apple in its January 2017 lawsuit against Qualcomm said it was owed $1 billion by Qualcomm for the quarter it had stopped paying its rebate.
"The Court concludes that Qualcomm has not carried its burden on this issue, and partial summary judgment should be entered in favor of Apple that Qualcomm cannot receive a refund of the BCPA payments as damages...for the breach of contract claim," Curiel wrote. He added that "Apple did not file a lawsuit during the BCPA. And Apple's filing of the lawsuit after the BCPA does not retroactively relieve Qualcomm of past payment obligations."
Qualcomm said in a statement that "Apple has made false and misleading statements to antitrust regulators aimed at instigating unjustified action against Qualcomm."
"Although the Court today did not view Apple's conduct as a breach of Apple's promises to Qualcomm in the 2013 Business Cooperation and Patent Agreement, the exposure of Apple's role in these events is a welcome development," Don Rosenberg, Qualcomm executive vice president and general counsel, said in a statement. "Apple has already offset the payment at issue under the agreement against royalties that were owed to Qualcomm, and the amount, without consideration of interest that may be awarded, was previously accrued in Qualcomm's financial statements."
Apple didn't immediately respond to a request for comment.
Qualcomm is the world's biggest provider of mobile chips, and it created technology that's essential for connecting phones to cellular networks. The company derives a significant portion of its revenue from licensing those inventions to hundreds of device makers, with the fee based on the value of the phone, not the components. But not all licensees want to pay as much as Qualcomm charges. That includes Apple.
Qualcomm argued that Apple's cooperation with the FTC and other regulatory bodies represented a breach of contract, and it stopped making payments in September 2016. It said that Apple made false statements to regulatory bodies and attempted to make the governments expand the scope of their investigations into Qualcomm. It asserted "breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and a declaratory judgment, all based on the BCPA."
But Curiel on Thursday sided with Apple, which had said its responses to agency inquiries cannot constitute "active inducement." Apple had also said there's no evidence to support Qualcomm's claim that Apple attempted to broaden federal agency investigations into Qualcomm. The company argued that Qualcomm shouldn't be able to recover BCPA payments.
Apple also wanted the court to dismiss Qualcomm's unjust enrichment claim, among other requests. The company said it didn't breach the BCPA during the contract's term.
Curiel agreed, but the ruling isn't yet final. Their case heads to court April 15.