back to article Qualcommotion: Sueball return alleges Apple 'pay-to-play' deal

Qualcomm has hit back at Apple over claims it overcharged the fruity firm for IP licensing, revealing that it had a pay-to-play deal to get its chip technology into iThings. The claim comes as part of a 139-page court filing made as part of the ongoing worldwide legal dispute between the two tech titans. “Qualcomm seeks, …

  1. Dave 15 Silver badge

    er Bribery?

    We pay you to buy from us? Surely even if this is somehow at a corporate level is this not bribery? We all make products and invest in products in the hope of sales... hats one thing, but to actually pay another company money on the understanding that they will then buy from you seems a bit underhanded. Of course this being two US companies there will not be any issue with the courts or government, but can you imagine if Rolls Royce had paid Boeing to make sure Boeing bought their engines????

    1. Anonymous Coward
      Anonymous Coward

      Re: er Bribery?

      It was the bribery aspect that first caught my attention, but is bribery actually illegal in business-to-business deals?

      Whilst bribery is generally regarded as unethical, ethicality in business has only ever really been a PR factor because few people would willingly buy from a company who were blatantly unethical.

      The effect of bribery within a deal is going to alter the the apparent costs/payments, so I it could lead to inaccurate financial reporting and subsequent taxation liabilities but that case would be between the government and the companies.

    2. Robert Carnegie Silver badge

      Re: er Bribery?

      I could be absolutely misinformed, but I think Tesco and Premier Foods (Kipling), to name two, got into trouble by requiring suppliers to pay Tesco and Premier Foods a bonus for the privilege of selling goods to Tesco and Premier Foods. But not apparently trouble because it was illegal - just evil. I too don't understand how it isn't "bribery". Maybe because you can bribe a person but not a corporation.

      So presumably Premier Foods had to pay this tax to Tesco.

      All this may have stopped. Or not. Or started again when people stopped noticing.

      1. Frumious Bandersnatch

        Re: er Bribery?

        I believe that this practice goes by the nice, friendly name of "'hello' money".

  2. Anonymous Coward
    Anonymous Coward

    What I don't understand...

    ...are the actual points of (civil/contract?) law that are being contested here.

    Neither of the parties seem to be claiming that they were mislead or deceived; it seems to me that both sides had the competence and resources to perform due diligence and knew exactly to what they were both agreeing, warts and all, so where's the case?

    Although it seems that both sides knowingly employed practices that were arguably unethical, are any of those practices actually illegal in business law?

    1. Brewster's Angle Grinder Silver badge

      Re: What I don't understand...

      I imagine they're suing for breach of contract (express of implied) with a side order of any legislation in reach.

      1. Anonymous Coward
        Anonymous Coward

        Re: What I don't understand...

        I don't see mention of a breach of contract in the article. The main thrust seems to be that Apple agreed to purchase stuff from Qualcomm and then after the event decided that it wasn't happy with the price to which it had agreed.

        Unless there was something in the sales contract limiting the profit that Qualcomm made from the deal, and it tuned out that Qualcomm exceeded that limit, then I can't quite see what Apple's complaining about; it knew what it was paying for and how much it would cost.

        1. Anonymous Coward
          Anonymous Coward

          @LeeE

          What Apple is complaining about is that Qualcomm was charging for the patent licensing portion of the chip as a percentage of the phone's price. That is specifically not allowed for patents covered under FRAND, and has been held to be so in multiple courts in multiple countries all around the world.

          What I'm not sure about is the CDMA patents, which may not be covered under FRAND but are rather more of a "standard" in name only.

          No one who needs CDMA functionality is in a position to complain about Qualcomm because they could refuse to sell to you and then your phones can't be used on Verizon or Sprint in the US. Qualcomm is worried though because as they upgrade to LTE the need for 3G CDMA to support those carriers is less every year, before long no one will need Qualcomm's chips in the US and their gravy train will be over.

          1. Anonymous Coward
            Anonymous Coward

            Re: @LeeE: @DougS

            "What Apple is complaining about is that Qualcomm was charging for the patent licensing portion of the chip as a percentage of the phone's price. That is specifically not allowed for patents covered under FRAND, and has been held to be so in multiple courts in multiple countries all around the world."

            If Qualcomm were charging on a percentage of the phone's price then Apple could not have been ignorant of that fact and so must have knowingly colluded in a deal that was in contravention of FRAND.

            If this is really the basis of Apple's complaint then why have they waited until now to make their complaint when they could have legitimately done so before the deal was agreed?

            1. Anonymous Coward
              Anonymous Coward

              Re: @LeeE: @DougS

              Wrong. The customer is NEVER liable for violation of FRAND licensing agreements, because they were not a party to those agreements, only the patent owners in the pool and the standards organization were!

              1. Anonymous Coward
                Anonymous Coward

                Re: @LeeE: @DougS

                I wasn't thinking in terms of Apple's liability for violation of FRAND, just that I think that Apple must have known that they were agreeing to a deal in which FRAND was being violated because Qualcomm couldn't have priced on percentage without knowing the cost of the phones/tablets in which their products were being used, which in turn, they could only have got from Apple. Apple also would have looked at the prices being charged and realised that they were being charged on a percentage but did the deal anyway instead of reporting it.

                1. Anonymous Coward
                  Anonymous Coward

                  Re: @LeeE: @DougS

                  Reporting someone for charging you unfairly when they are the ONLY game in town for a large segment of your customer base isn't a good idea. It is like how MIcrosoft had the PC companies cowed about their anticompetitive contracts back in the 90s. They couldn't afford to piss them off and risk retaliation. Some were reluctant to speak on the record even during the FTC case.

                  1. Anonymous Coward
                    Anonymous Coward

                    Re: @LeeE: @DougS

                    "It is like how MIcrosoft had the PC companies cowed about their anticompetitive contracts back in the 90s. They couldn't afford to piss them off and risk retaliation. Some were reluctant to speak on the record even during the FTC case."

                    Ah yes, I remember that, and seem to recall similar goings-on with Intel withholding subsidies to PC builders who also wanted to offer systems with CPUs from other suppliers.

                    Still doesn't make it right though.

        2. Brewster's Angle Grinder Silver badge

          Re: What I don't understand...

          "I don't see mention of a breach of contract in the article."

          I've not read the contract, but I'm guessing "...withholding payments due..." would violate it.

          1. Anonymous Coward
            Anonymous Coward

            Re: What I don't understand... @BAG

            'I've not read the contract, but I'm guessing "...withholding payments due..." would violate it.'

            That accounts for only one of the three complaints in Apple's lawsuit.

            The other two complaints are about charging royalties for unused IP and overcharging for IP that was used, to both of which Apple knowingly agreed.

    2. Anonymous Coward
      Anonymous Coward

      Re: What I don't understand...

      What I don't understand is Qualcomm's claim that they had to make "substantial investments" due to Apple. All Apple was doing was buying Qualcomm's latest wireless chip that supported cellular, wifi and bluetooth standards. It isn't like Apple had their own wireless standard Qualcomm needed to support, so they were going to produce the exact same stuff whether or not Apple was a customer.

  3. zanto
    FAIL

    Even​ more damning for Apple

    Read on another news site that Qualcomm also talked about how Apple not only knee capped the Qualcomm modern inside the iPhone7 compared to the Intel modem, but also tried to arm twist Qualcomm into not talking about this.

    1. Anonymous Coward
      Anonymous Coward

      Re: Even​ more damning for Apple

      I don't see how Qualcomm can complain about. Apple is buying a product from them, it isn't Qualcomm's business if Apple chooses to limit its performance to match the slower Intel version. Depending on what whether Apple's insistence they keep quiet about it was some sort of a threat there could be something there, but if it was written into a contract or was agreed to by Qualcomm without any threats made then Qualcomm can't complain about that either.

      Apple did the same thing with the iPhone 6S, which used SoCs made by both TSMC and Samsung. The TSMC SoCs used a measurably smaller amount of power, and almost certainly could have been clocked higher than the Samsung parts. But they didn't want to have people getting phones with different performance depending on the luck of the draw of what chip they get. Some people still complained if they got a Samsung chip, but the battery life specs were based on it, not the TSMC, so basically people who got one of those got a 'bonus' for free.

      1. zanto

        Re: Even​ more damning for Apple

        Except that here, people who got the iPhone7 with the Qualcomm chip didn't get the bonus performance for free. A better analogy with the iphone6s case would have been Apple adding a shunt resistor across the battery of the phones with the tsmc chip in order to drain the battery faster.

        1. Anonymous Coward
          Anonymous Coward

          Re: Even​ more damning for Apple

          They didn't get the higher data rates (i.e. comparison to higher clock rate for the TSMC A9) but they did marginally better throughput at a given LTE category (i.e. comparison to TSMC A9 using marginally less battery for a given amount of work)

          It is exactly the same thing. Shunting the battery to drain the TSMC A9 faster would be likely if they added a bit of latency and reduced the throughput of the Qualcomm LTE chip to match the slightly worse performance of the Intel LTE chip.

  4. Sir Sham Cad

    Apple had not responded

    Nope and I suspect that'll be as much as we'll actually ever know until the iAttackLawyer pens the retaliating "No, *you're* a poopyhead!" letter.

    1. David 132 Silver badge

      Re: Apple had not responded

      Exactly. When playground fights evolve into the adult world, this is the form they take.

      "You smell!"

      "Nuh-uh!"

      "I am rubber, you are glue!"

      (Actually, that leads me to a wonderful thought - wouldn't it be amazing, not to mention far more entertaining, if court cases like this were fought Monkey-Island-Sword-Fight style?

      "In Re Qualcomm vs. Apple, testimony from the first party asserted that 'You fight like a dairy farmer'. Response from Counsel for the second party was 'How appropriate. You fight like a cow.'

      The defense rests.")

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