Apple has stopped paying royalties to Qualcomm and says it won’t start paying again until their globe-spanning court battles are through.
This is the latest escalation in Apple’s multi-part lawsuit against Qualcomm, which it claims has been charging excessively high patent licensing fees for years.
“Apple has now unilaterally declared the contract terms unacceptable.”
The legal battle was sparked by the Federal Trade Commission, which began suing Qualcomm for anti-competitive licensing practices back in January. Apple filed suit in California just days later and has since added lawsuits in the UK and China.
Apple’s plan is to withhold royalty payments until the courts determine how much it actually owes. It’s an aggressive move that suggests Apple believes it’s going to come out on top.
"Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court," an Apple spokesperson told Reuters.
Qualcomm isn’t thrilled about the decision. In a release, Qualcomm general counsel Don Rosenberg says that Apple’s licensing agreements remain “valid and enforceable” and that the company is “improperly interfering” with its agreements.
Qualcomm had to adjust its revenue guidance
Apple technically doesn’t make these payments directly to Qualcomm. Instead, it pays royalties back to iPhone and iPad manufacturers, which then pass the fees on to Qualcomm. But since Apple won’t be providing that money, the manufacturers won’t be able to pay.
“Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade,” Rosenberg says.
As a result, Qualcomm has had to adjust its guidance for how much revenue it expects to make this quarter. Qualcomm initially expected to make between $5.3 billion and $6.1 billion in revenue; it’s now expecting between $4.8 billion and $5.6 billion — a dip of $500 million because of Apple.