Qualcomm Loses First Round in Apple Patent Fight at ITC
(Bloomberg) -- Apple Inc.’s iPhones shouldn’t be banned from the U.S. even though they infringe a patent owned by Qualcomm Inc., a U.S. International Trade Commission judge found Friday.
Judge Thomas Pender found that Apple infringed one of three Qualcomm patents in the case but declined to recommend the import ban sought by Qualcomm. The judge’s recommendation “makes no sense,” Qualcomm said.
The judge’s findings are subject to review by the full commission, which has the final say. If the commission goes along, it would eliminate a powerful bargaining chip Qualcomm could use to push Apple into agreeing to pay license fees.
“Qualcomm has continued to unfairly demand royalties for technologies they have nothing to do with to protect their monopoly,” Apple said in a statement. “We’re glad the ITC stopped Qualcomm’s attempt to damage competition and ultimately harm innovators and U.S. consumers.”
Qualcomm is seeking an import ban of Apple’s iPhones that have chips made by Intel Corp. This is the first of two cases brought by Qualcomm before the trade agency in Washington.
Goes Against Mandate
“We are pleased the ALJ found infringement of our patented technology, but it makes no sense to then allow infringement to continue by denying an import ban,” Qualcomm General Counsel Donald Rosenberg said in a statement, referring to the administrative law judge.
“That goes against the ITC mandate to protect American innovators by blocking the import of infringing products,” Rosenberg said. “There are many ways Apple could stop infringing our technology without affecting the public interest.”
Qualcomm will look to the full commission decision and will pursue more than 40 other patent-infringement cases brought against Apple globally, he said.
The trade agency doesn’t have the authority to force Apple to pay patent royalties. Qualcomm is seeking that in district court, and the judge’s infringement finding, if upheld by the commission, could help the chip-maker there.
“The leverage would be massive with the import ban, but the infringement still provides them with something,” said Matt Larson, an analyst with Bloomberg Intelligence. “It could create exposure for Apple down the road, which is helpful to Qualcomm in the current licensing discussion.”
During the trial, Apple argued it wouldn’t be in the public’s interest to have phones with Intel chips kept from the U.S. market. While the judge’s full findings won’t be public until both sides get a chance to redact confidential information, America’s role in developing the next generation of mobile communications was a key issue in the case.
The commission’s job is to protect U.S. markets from unfair trade practices and it has to balance patent rights with what’s best for the economy. It’s scheduled to make a final decision by January. A different trade judge is scheduled to release her findings in a second case that same month, and the public’s interest is a prime issue in that case as well.
Chips Phased Out
Apple has phased out its use of Qualcomm chips during the dispute and its latest phones don’t use any of the San Diego-based chip-maker’s products. In urging the agency not to block its phones with Intel chips, Apple contends that the competition between the two dominant chip-makers is crucial to propel development of the next generation of communications, known as 5G.
Qualcomm argued that Intel wouldn’t give up billions of dollars of work and get out of a global market just because it can’t import into the U.S. Instead, Qualcomm contends, Apple will be forced to ensure Qualcomm gets paid for the use of its inventions.
Intel said its track record in innovation counters Qualcomm’s accusations that its technology has only made its way into the mobile industry and Apple products via unfair means. The company was awarded more patents than Qualcomm by the U.S. Patent Office last year, Intel’s General Counsel Steven Rodgers said in a posting on its website.
“Qualcomm has had a lot to say publicly about its litigation campaign -- and about Intel,” Rodgers said. “It is easy to say things. But Intel’s track record is clear. Intel has been one of the world’s leading technology innovators for more than 50 years.”
Qualcomm is the dominant player in the development of ways mobile devices communicate. While many of its patents relate to industry standards, the three in this case do not. Still, Qualcomm contends that they are part of all iPhones since they involve ways to improve the use of battery power even as devices demand more energy.
Apple contends Qualcomm charges too much for its patents on fundamental telecommunications technology, and has directed its suppliers to stop paying royalties until a better deal can be reached. The unpaid fees could total $2.5 billion to $4.5 billion, according to an analysis by Larson.
Pender retired from the agency Aug. 31, and the case was temporarily assigned to a different judge. He instead decided to return to finish issuing his findings in this case.
In all, there are some 100 legal proceedings around the world between Apple and Qualcomm, including patent challenges at the U.S. Patent and Trademark Office and lawsuits in China and Germany. Qualcomm also is facing an antitrust lawsuit filed by the U.S. Federal Trade Commission.
A federal judge in California on Thursday ruled that consumers who also filed antitrust cases against Qualcomm could have their cases considered a class action, which could increase potential liability for the chip-maker.
Meanwhile, it’s been a good legal day for Apple. An appeals court on Friday threw out a patent-infringement verdict won by the University of Wisconsin-Madison’s licensing arm, eliminating a case that would have cost the iPhone maker more than $506 million.
The case is In the Matter of Certain Mobile Electronic Devices, 337-1065, U.S. International Trade Commission (Washington).
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