Qualcomm Sues Apple Contractors

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

Four Asian contract manufacturers, including Foxconn and Pegatron, 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 and Compal.

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.

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

In a separate agreement, Qualcomm pays Apple under a deal that the iPhone maker has described as a sort of “rebate“ to lower the cost of royalties. Qualcomm said those payments are really part of a complex series of agreements meant to ensure peace between the two.

In Apple’s antitrust lawsuit against Qualcomm, the iPhone maker claimed $1 billion worth of those payments are being withheld as punishment for talking to regulators who were investigating Qualcomm, an allegation the San Diego-based company denies.

Apple has said it won’t give royalty payments to contract manufacturers until the dispute is resolved, according to Qualcomm. With the contractors in turn not paying Qualcomm, the chipmaker last month was forced to slash third-quarter forecasts because it’s unclear when the royalties will be paid.

Qualcomm, which gets the bulk of its profit from licensing revenue, has been under investigation worldwide by regulators over its negotiation tactics. Apple and other companies claim Qualcomm is charging unfairly high rates in violation of pledges to license inventions that are essential to comply with industry standards. Samsung and Intel, two competing chipmakers, are backing a U.S. Federal Trade Commission antitrust suit against Qualcomm.