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In the end, Apple-Qualcomm settlement came down to 5G

Mike Freeman, The San Diego Union-Tribune on

Published in Business News

Just prior to opening statements in a San Diego federal trial between Apple and Qualcomm last week, lawyers for both companies huddled out of earshot of a nine-person jury.

The two tech heavyweights were deep into settlement negotiations to end their bitter, two-year fight over Qualcomm's patent licensing fees. The discussion centered on whether to ask for a delay in opening statements in hopes of finalizing a deal.

The decision was made to proceed with opening arguments. But if there was any toning down of rhetoric because of settlement talks, it was not apparent in the courtroom.

Lawyers for Apple and contract manufacturers that make iPhones lashed out at Qualcomm for breaking promises to the mobile industry. Qualcomm, they alleged, also used a "Bermuda triangle" of contracts to charge twice for the same technology, abused its dominant market share in cellular chips to strong-arm smartphone makers into paying too much for patents and sought payment on dubious inventions that device makers don't use, including wirelessly connected pants.

A Qualcomm lawyer fired back that Apple had been secretly plotting to attack the San Diego company since 2014, with internal documents laying out a scheme to cast doubt on the value of Qualcomm's 140,000 strong patent portfolio and to withhold billions in patent royalties to hamstring the company financially -- all with the goal of reducing an $11 to $15 patent fee on iPhones that often sell for more than $1,000.

As for the wireless patents, Qualcomm's attorney said that patent is part of a family of inventions that improve Global Positioning System technology, enabling connected clothing so parents know that their children are where they're supposed to be.

 

As opening statements wrapped up last Tuesday, the companies announced a sweeping settlement. It includes Apple signing a direct six-year patent license agreement with Qualcomm with an option to renew, a chip supply agreement, as well as one-time payment and other provisions.

The deal was a surprise. As the trial loomed, it didn't look like a settlement was in the offing. Both companies were entrenched.

But 5G changed the conversation.

"5G is clearly driving the agreement," said Ricardo Tavares, head of Techpolis, an industry research firm. "For two American companies -- in the environment that we are in -- to be in a fight that is so damaging to each other, this agreement brings a lot of value."

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