A fresh legal filing by Qualcomm is applying significant additional pressure on Apple in the two companies’ continued legal and business disputes around the globe.
QualcommQCOM, -1.14%is accusing the Cupertino giant of stealing Qualcomm trade secrets and intellectual property to aid in the development of competing modem solutions used in the iPhone, a significant expansion of a long-running patent dispute.
If Qualcomm’s claims are proven to be true, it brings about some significant questions not just on Apple
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Apple used Qualcomm modems since the introduction of the Verizon iPhone 4 in 2011. With the launch of iPhone XS and XS Max this month, Apple has completely migrated away from Qualcomm modems and replaced them with IntelINTC, -2.13% products.
The new legal filing is amended to an existing dispute opened in late 2017 in which Qualcomm demanded the ability to audit Apple’s compliance with its MSA (Master Software Agreement). The MSA set the rules for Apple to access proprietary source code for Qualcomm modems as well as toolsets used for development and optimization.
Apple refused to give Qualcomm that access, but court rulings have forced it to hand over part of the documentation. That, together with information from third parties, led Qualcomm to claim that Apple has been engaging in a deliberate conspiracy to use Qualcomm intellectual property and tools to accelerate and improve the development of non-Qualcomm modems, in this case the Intel solutions.
The new filing cites the rapid acceleration of capability and performance of the Intel modem solutions. In 2016, a report from Cellular Insights claimed the iPhone 7 Plus with the Qualcomm modem “had a significant performance edge” over the phone with the Intel modem.
By late 2017, much of the gap between the modems had been closed. Citing an article from PCMag.com, the court filing states there was “a considerably smaller difference” between Qualcomm and Intel solutions.
Qualcomm claims it has information that Apple had “devised a plan” to improve the performance of Intel solutions “by stealing Qualcomm’s technology.” This would establish a second source of chips for the iPhone and allow it to both drive prices down and create another pain point for Qualcomm in its continued legal disputes.
Qualcomm is asking the court for damages from “actual losses, unjust enrichment, lost profits [and royalty]” as well as punitive damages. These numbers could be staggering if the court rules in favor of Qualcomm. Punitive damages are often more severe as they are meant to be a direct punishment to the offending company as a way to prevent the action from occurring again.
Moreover, Qualcomm’s claim is potentially much more damaging than the patent and business-model fights between it and Apple. Patent disputes are standard fare in today’s technology landscape, but IP theft is something usually left for international courts.
Other Apple partners that currently build and develop technologies, sharing with Apple more than other customers simply due to the market weight Apple holds, will have concerns over what Qualcomm has seen. Imagination Technologies, a company that provided graphics IP for the iPhone until just a couple of generations back, had murmured about stolen IP and patent infringement when Apple released its first internally designed graphics architecture.
Ryan Shrout is the founder and lead analyst at Shrout Research, and the owner of PC Perspective. Follow him on Twitter @ryanshrout.
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