WashPo: Sealed Qualcomm docs show Apple’s ‘bad faith’

From Reed Albergotti’s “Apple said Qualcomm’s tech was no good. But in private communications, it was ‘the best.’” in Saturday’s Washington Post:

During the roughly two years Apple was locked in a legal battle with one of its suppliers, Qualcomm, the iPhone maker publicly argued that the chip maker’s technology was worthless.

But according to an internal Apple memo Qualcomm showed during the trial this week between the two tech companies, Apple’s hardware executives used words like “the best” to describe Qualcomm’s engineering. Another Apple memo described Qualcomm as having a “unique patent share” and “significant holdings…”

The documents [seen by a Washington Post reporter in court] raise questions about the methods Apple used to inflict pain on Qualcomm and whether Apple really believed its own arguments to lawmakers, regulators, judges and juries when it tried to change not just its long-standing business agreement with Qualcomm but the very laws and practices that have allowed inventors to profit from their work and investments. Apple has argued that Qualcomm’s patents were no more valuable than those of competitors like Ericsson and Huawei, but Qualcomm argued in court that the documents show otherwise.

“While it’s very common for companies who are engaged in legal disputes to play hardball, the disclosure of these documents is very unsettling,” said Adam Mossoff, a law professor at George Mason University and director of the Center for the Protection of Intellectual Property. “It potentially reveals that Apple was engaging in a bad faith argument both in front of antitrust enforcers as well as the legal courts about the actual value and nature of Qualcomm’s patented innovation.”

My take: We used to see more of the dark side of Apple when Steve Jobs was still running the show.

15 Comments

  1. David Emery said:

    WTF? Does this author not understand the adversarial basis of our legal system?

    3
    April 20, 2019
  2. Steven Noyes said:

    The Washington Post continues its slide into nothingness.

    “During the roughly two years Apple was locked in a legal battle with one of its suppliers, Qualcomm, the iPhone maker publicly argued that the chip maker’s technology was worthless.”

    Is an outright lie and borders on quality of wording I would expect to read in the National Inquirer. Apple never once claimed Qualcomm’s technology was worthless, just that having Qualcomm take multiple royalties on technology developed others was not fair.

    In short, Apple said it was worth less than what Qualcomm claimed.

    5
    April 20, 2019
    • Aaron Belich said:

      Yeah, I saw that and was looking for a citation… also WAPO comments are cringe-worthy.

      3
      April 20, 2019
    • “In short, Apple said it was worth less than what Qualcomm claimed.”

      Worth less or worthless? The tricks a writer can play with letter spaces!

      3
      April 20, 2019
      • Steven Noyes said:

        🙂 Thanks. One of my better word plays.

        2
        April 20, 2019
    • Robert Paul Leitao said:

      Steven:

      I agree. At no time do I remember Apple ever claiming Qualcomm’s patents or IP were worthless. In my view, this is an outrageous statement. Many of Apple’s claims concerning the patents in question is that Qualcomm was violating FRAND (Fair, Reasonable and Non-Discriminatory) terms in the royalty rates demanded for SEP (Standards-Essential Patents).

      It should be a surprise to no one there are internal Apple documents that evaluated the quality or value of the patents and intellectual property owned or developed by Qualcomm that Apple licensed.

      Apple never claimed the essential patents in question were worthless. Apple had been accruing royalty expenses and setting aside the funds Apple believed Qualcomm was due under fair licensing agreements and instructed its suppliers to do the same. While there may have been some claims a few related patents were invalid, that certainly doesn’t mean Apple claimed the IP was worthless. It may have meant Apple claimed some of the patents in question were not enforceable. That’s much different than claiming IP is worthless.

      Anyone seriously interested in Qualcomm’s licensing rates and practices should look at the settlement between Qualcomm and China’s National Development and Reform Commission (NDRC) in early 2015 that ended a contentious royalty rate and licensing dispute. Qualcomm reduced its royalty rates for patents used in China by about one-third to end the case.

      3
      April 20, 2019
  3. Fred Stein said:

    Apple won. They won fair and square… if the payments amounts published are correct, or nearly so.

    Apple’s case was that 5% was excessive, not F/R, fair and reasonable. Had Qualcomm offered a 1.5% charge at the outset, Apple would have no case.

    A quick check of QCOM’s income statement on Yahoo, says their GM was about 60% pre-dispute. Their net profitability dropped during the dispute and went negative in 2018.

    2
    April 20, 2019
  4. Robert Paul Leitao said:

    In my view, this may be a case of a highly technical legal dispute colliding with retail reporting and the outcome of the wreck is a badly damaged story for the reader.

    3
    April 20, 2019
  5. Jerry W Doyle said:

    Reed Albergotti’s reporting is not driven to capture the true narrative of events occurred. Albergotti’s reporting is driven to capture the dark moments within the story line so as to imply something larger that obfuscate the true narrative that should capture readers’ attention making them understand with clarity implications of what they’re being told must be true, because the story is rooted supposedly in fact.

    Patents are critical intellectual property playing an integral role in the global marketplace. Apple would have pursued its litigation with Qualcomm, but a new reality emerged that Apple needed Qualcomm more than Qualcomm needed Apple. This is where Tim Cook excels as Chief Executive Officer of Apple better than Steve Jobs.

    Tim Cook has that unique tact and sangfroid that Jobs lacked. The settlement with Qualcomm is where Cook once again shows us his unique skill of pulling back from a position in deciding what is best for Apple. It reinforces for us all why Tim C is so effective in running the organization. When Steve was alive and ready to push forward to the extreme on similar kinds of issues only one senior executive within the entire organization could reason Steve back onto the judicious path to pursue. Tim C did no different this week in the Qualcomm issue as he did with Steve when he was CEO.

    5
    April 20, 2019
    • Aaron Belich said:

      Excellent analysis. Thank you Jerry.

      0
      April 20, 2019
  6. Peter Kropf said:

    Most people miss a key point mentioned elsewhere. The structure of licensing has changed dramatically. Previously, Qualcomm’s licensing was to Apple’s chipmakers. The new licensing model licenses Qs patent portfolio to Apple, directly. I believe this means that Apple can design and incorporate QCom based modems and such within any Apple-designed chips such as the current A-Series line.

    Making this possible and legal may have been Apple’s most fundamental goal in the agreement and also QCom’s biggest bargaining chip.

    1
    April 21, 2019
    • David Drinkwater said:

      Agree. I posted similar to Friday’s piece about the Apple-Qualcomm settlement. I think that Apple has fundamentally negotiated a relationship with a contract chip manufacturer that has “trained” many of Apple’s recently acquired design engineers. Apple’s former Qualcomm employees will know *exactly* how to design chips *specifically* for Apple to buy from Qualcomm, which chips will not be made available to anyone else on the planet. Big win for Apple.

      To the general broader and (respectfully) in my opinion stupider idea presented here that Apple acted in “bad faith” and didn’t like Qualcomm’s tech, I say poppycock (I’m liking that word today): Apple surely respected Qualcomm’s capabilities. And they would have happily had (and hopefully now do have) an equitable relationship with Qualcomm. They just felt that Qualcomm’s use of their excellent technology was over-leveraged. Un-FRAND-ly.

      One should also note (at least in my opinion) that it is not a lawyer’s job to do what is right. It is a lawyers job to win cases. So the documents that may appear distasteful to some are simply a matter of lawyers doing their jobs.

      0
      April 22, 2019

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