Report: Apple Bought Loads of Cheap Patents to Make Qualcomm Look Bad
As we reported last week, Apple and Qualcomm have buried the hatchet and signed an agreement to end their cases against each other. Some of the court documents that are now coming to light don’t paint Apple well at all. Even as Apple argued that Qualcomm’s patents were worthless, its executives described Qualcomm’s engineering in terms like “the best,” and declared that the company had “unique patent share” and “significant holdings.” Apple’s vice president of hardware, Johny Srouji, declared in 2015 that “engineering-wise, they have been the best.”
Apple began planning to sue Qualcomm in 2014, but wanted to delay until post-2016 to recoup billions of dollars in payments from the rival company. In a June 2016 document titled “Qualcomm Royalty Reduction,” Apple spelled out its purpose: “Goal: Reduce Apple’s net royalty to Qualcomm.” It planned to accomplish this, according to the Washington Post, by “hurting Qualcomm financially,” and working to “put Qualcomm’s licensing model at risk.”
As part of that process, Apple quoted licensing terms it had signed with companies like Ericsson and Huawei to show how much more expensive Qualcomm patent licensing was. And Qualcomm’s licensing did appear to be significantly higher than what Apple was paying — partly because Apple may have engineered that deliberately. Here’s WaPo:
In one internal document cited by Qualcomm’s lawyers, Apple said it sought to “create evidence” by scrupulously licensing other less expensive patents to make Qualcomm’s look expensive. According to the documents, Apple said it would “selectively filter” a group of patent licenses for “the most desirable deals,” using the patents as “evidence as a comparable in disputes with others.” Qualcomm lawyer Evan Chesler alleged the “others” referred to Qualcomm. Apple declined to comment on the documents and allegation.
Apple’s central argument throughout these cases and investigations has been that Qualcomm abused the FRAND (Fair, Reasonable, and Nondiscriminatory) standardization process that’s intended to both encourage companies to work together to standardize products while simultaneously ensuring that profits can be fairly earned.
We’ll never know how the trial would have ended, and we do know the settlement resulted in Apple paying Qualcomm a sum of money. But this isn’t the first time Apple has been smacked for its willingness to play profoundly dirty to harm a company operating in a market it wished to do business in. In 2015, the US Court of Appeals upheld a ruling in which Apple had to pay $450M for colluding with ebook sellers to fix ebook prices. The effort was part of an attempt to break Amazon’s market power — publishers didn’t like the fact that Amazon was using its own pricing model for ebooks and selling them for $9.99, even though it paid publishers whatever their list price was for the same book. If the publisher charged Amazon $15, Amazon sold the same ebook for $9.99 and ate the cost.
Publishers hated it. They wanted the authority to set their own pricing. Apple colluded with publishers to raise ebook prices (and, not incidentally, ideally drive customers to its own store). The company has a history of being willing to support legally dubious measures to improve its own bottom line.