Qualcomm Takes Big Hit Over Apple Dispute

Qualcomm’s (NASDAQ:QCOM) finances are taking heavy hits over its licensing dispute with Apple Inc. (NASDAQ:AAPL). The company reported a 40 percent decline in year-over-year profits for the third quarter of its fiscal year. Net income fell to $866 million from $1.44 billion reported in the same quarter of 2016. Revenue fell 11.1 percent to $5.4 billion.

Apple has refused to pay royalties to Qualcomm on certain technologies. Another unnamed licensee has also ceased royalty payments to the company. The firm’s patent licensing division took a huge hit, with revenue falling to $1.17 billion, down 42 percent year-over-year. Qualcomm’s shares fell 2 percent in after-hours trading.

Earlier this month, Qualcomm sued Apple for patent infringement. Qualcomm is seeking an injunction on iPhones that allegedly infringe on its technologies. Qualcomm’s U.S. International Trade Commission complaint details six patents that Apple is allegedly infringing upon. The ITC complaint targets iPhones that integrate wireless modems manufactured by Intel. Apple began using Intel modems with iPhone 7.

Qualcomm has filed two separate German cases in Mannheim and Munich, where it seeks to block the import and sale of all iPhones on the grounds of patent infringement. All current iPhone models sold in Europe rely on Intel components. The intellectual property at the heart of this dispute covers battery efficiency technology.

Qualcomm is leveraging two patents, one for each venue, in its new action against Apple. Specifically, the chipmaker is claiming infringement of U.S. Patent No. 8,698,558 for a “Low-voltage power-efficient envelope tracker” and No. 9,608,675 for a “Power tracker for multiple transmit signals sent simultaneously.”

A number of Taiwan-based contract manufacturers, including Foxconn, have also filed a lawsuit against Qualcomm in U.S. federal district court. The filing is a counterclaim to a lawsuit Qualcomm filed in May seeking to force Apple contract manufacturers to maintain royalty payments during the legal dispute.

The companies assemble the iPhone and other products on behalf of Apple. The suppliers began to underpay or withhold royalty payments in the first quarter. Theodore J. Boutrous, a lawyer for the four companies, said in a statement, “Qualcomm has confirmed publicly that this lawsuit against our clients is intended to make a point about Apple and punish our clients for working with Apple.”

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