Apple and Qualcomm are to face off in court beginning on Monday in a patent battle two years in the making that questions the business model that drives the vast majority of Qualcomm’s profits.
Apple sued Qualcomm in early 2017, alleging the chip maker’s licensing practices abuse its dominant position in the market for mobile device modems. It is seeking $27 billion (£21bn) in damages.
Qualcomm argues Apple is merely using its financial clout to seek a better deal, and is asking for up to $15bn in lost revenues related to Apple’s industry lobbying.
The trial comes at a critical juncture for the smartphone industry, as networks prepare for the shift to 5G networks.
Since Apple’s original lawsuit Qualcomm has fought back with a number of countersuits against Apple around the globe, seeking bans on iPhone sales for alleged patent violations.
The trial in federal court in San Diego is the main event, however, and takes place on Qualcomm’s home turf, where its headquarters are located.
Apple argues that Qualcomm’s licensing practices, which require companies to agree to pay patent royalties before it will sell them its chips, impose an unfair burden on smartphone makers, one that has gone unchallenged until now only because of Qualcomm’s industry dominance.
The company is not alone in challenging Qualcomm’s sway in the industry, with US regulators making similar allegations in a January court hearing.
Regulators in South Korea, Taiwan, the EU and China have also imposed fines on Qualcomm for its business practices.
Apple argues that because Qualcomm’s more than 130,000 patents are essential to industry-wide standards, they should be licensed on so-called “fair, reasonable, and non-discriminatory” (FRAND) terms.
The company also alleges that Qualcomm’s practice of requiring manufacturers to pay royalties if they wish to purchase the company’s dominant smartphone modem chips amounts to illegal “double-dipping”, or charging customers twice for the same intellectual property.
Apple said that when it began using Qualcomm’s modems in 2011 with the iPhone 4, Qualcomm agreed to refund a proportion of Apple’s royalty payments – but only if Apple agreed to exclusively use Qualcomm’s modems.
“Qualcomm used unreasonable terms to gain even more unreasonable terms,” the iPhone maker said in a court filing.
The deal between the two companies continued until 2016, when Qualcomm withheld as much as $1bn in royalty payments. Apple argues Qualcomm did this because Apple testified against Qualcomm to the Korea Fair Trade Commission.
Apple is suing Qualcomm separately over the withheld payments.
For its part, Qualcomm argues its actions have been within the law and were only common-sense business practices.
The company has also counter-sued Apple on a number of fronts, including alleging that Apple stole confidential modem technology and passed it along to Intel.
The chip maker argued Apple stole “vast swaths of Qualcomm’s confidential information and trade secrets” so that Intel could use the information.
Apple is currently using Intel modem chips, but is reportedly developing its own modem technology for 5G phones.
The trial begins on Monday with jury selection.
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