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Qualcomm sues iPhone manufacturers as Apple battle escalates

Apple told its manufacturers to stop paying for Qualcomm's technology. The chipmaker wants its money.

Apple and Qualcomm have been batting over mobile technology.
James Martin/CNET

These chips ain't cheap.

Qualcomm filed a lawsuit Wednesday against Apple's iPhone manufacturers that alleges breach of contract. The suit, filed in US District Court in California, comes less than a month after Apple stopped paying patent royalties for Qualcomm technology that's essential for connecting phones to a wireless network.

Apple doesn't have a direct license with Qualcomm but pays the royalty fee to its manufacturers, like Foxconn, who then pay Qualcomm. Because Apple stopped paying its manufacturers, they stopped paying Qualcomm.

The legal battle between Apple and Qualcomm has been heating up as the two companies brawl over who has mobile technology licensing rights.

"Our license agreements with Apple's manufacturers remain valid and enforceable," Don Rosenberg, Qualcomm's general counsel, said in a statement. "The manufacturers must continue to live up to their obligations under these agreements and Apple should immediately cease its tortious interference."

Qualcomm argues that the manufacturers acknowledge they have a contractual obligation to pay royalties, but that they need to follow Apple's orders against paying. The two companies have sued and countersued each other since January.

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 maintains that no modern handset would have been possible -- including the iPhone -- "without relying upon Qualcomm's fundamental cellular technologies." In its response to Apple's 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 contract manufacturers.

Apple on Wednesday said that Qualcomm has "refused to negotiate fair terms" and that it decided to stop paying until a judge can determine how much it should cough up in royalties.

"Qualcomm's demands are unreasonable and they have been charging higher rates based on our innovation, not their own," an Apple spokesman said, reiterating an earlier comment.

First published May 17, 6:25 a.m. PT.
Update at 9:35 a.m. PT to add more background information and details about Qualcomm's technology.

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