They say you’re not supposed to bite the hand that feeds you, but apparently, no one chose to tell Apple that. The computer and mobile giant is suing mobile chip manufacturer Qualcomm for upwards of $1 billion for allegedly committing patent infringement. The kicker, Qualcomm is one of Apple’s biggest parts suppliers.
According to Associated Press reports, Apple alleges Qualcomm is a “greedy monopolist” engaged in abuse of power by holding a key segment of the mobile market hostage in order to extort royalties for “iPhone innovations that have nothing to do with Qualcomm’s technology.”
In other words, Apple is saying one of their major suppliers is profiting off of Apple’s property and representing it as its own. In one example, Apple claims Qualcomm demanded royalty payments for Apple’s fingerprint ID system, which was built into recent iPhone models.
Qualcomm is, of course, flatly denying any wrongdoing, arguing: “We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple’s practices and a robust examination of the merits…”
Apple responded to that legal word salad with a slam worthy of a WWE character: “Qualcomm’s recent effort to cover its tracks – by punishing Apple for providing truthful testimony at the request of government regulators – underscores the lengths to which Qualcomm will go to protect its extortion scheme.”
Extortion? Scheme? Cover its tracks… Yes, those are definitely fighting words. And it appears, at least at the onset, Apple has the upper hand.
Right before this lawsuit landed on the front page of tech and business sections, the Federal Trade Commission filed its own lawsuit against Qualcomm, alleging the company has been, “imposing unfair licensing terms on manufacturers…”
Apple immediately offered to “cooperate” with the FTC investigation. But is Apple’s lawsuit viable, or are they piling on Qualcomm while the company is busy dealing with the FTC investigation and litigation?
Whatever the case, Qualcomm stock dipped a bit after the punch and counterpunch landed on the headlines. Now, company leadership is forced to make some serious decisions about how to prioritize which headache to handle first and how to marshal its legal team to defend its position while also calming increasingly antsy investors. Not easy tasks, and decisions that will be sure to test their mettle.
Depending on their management decisions, this time next year we could be reading about a company that beat back both a corporate Goliath and the federal government. Or we could be reading about a company on the ropes with some very serious management problems to address.