Apple has long accused Qualcomm of charging excessive royalties for the licensed use of Qualcomm's technologies in iPhones, with Apple alleging that Qualcomm's licensing policies are monopolistic and allow it to force phone manufacturers into unfair agreements.
What was the suit about?
It's now clear Apple can choose Qualcomm, Samsung or MediaTek, but given Apple's penchant for doing business with more than one supplier, all three might be in the mix. As a result, the face of the cellular modem market is changing in an instant, as Apple's shift in allegiances will have repercussions throughout the industry.
Apple argued that the chip technology it licensed from Qualcomm was fundamental to how smartphone's work, and that its payments should therefore be at a "reasonable rate", under the law.
In particular, Apple claimed that Qualcomm had overcharged for chips and refused to pay some $US1 billion ($1.39 billion) in promised rebates. "I believe both Apple and Qualcomm got deeper into this than they wanted to - Apple was challenging Qualcomm's most profitable business model, licensing, and Qualcomm was accusing Apple of IP theft and lack of payment", said Patrick Moorhead, president and principal analyst at Moor Insights & Strrategy.
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In its suit, Apple claimed that the $7.50 royalty fee it paid per chip was unfair.
The news came as a San Diego court heard arguments in a case involving the two companies' patent dispute. Intel, a Qualcomm competitor, sharply dipped on the news before recovering.
Qualcomm alleged Apple breached its agreements "for the express goal of inflicting financial harm on Qualcomm and coercing Qualcomm to accept unfair compensation for its IP", according to Qualcomm's trial brief. While the judge has yet to rule, she has already said that Qualcomm would have to license its patents to other chipmakers-something it had previously declined to do. Either Qualcomm had evidence so strong that Apple didn't think it would win the case, or Apple needed something only Qualcomm could provide. Details about the settlement are scarce: the companies only said that Apple had agreed to pay Qualcomm as part of the agreement. In the end, Apple had to make a payment to Qualcomm to settle the dispute but it's unclear how much the amount was.
The news yesterday that the massive, multi-billion dollar legal fight between Apple and chip maker Qualcomm has come to an end has big-time ramifications for Apple - and for the rest of us who use smartphones every day (heck, nearly every minute of every day).
Shares of Qualcomm, which closed up 23 percent on Tuesday, rose another 10 percent in premarket trade on Wednesday after it signed a six-year patent license deal with Apple.