Qualcomm Owes Apple $1billion Rebate Payment

A preliminary ruling was issued by a U.S. federal judge that states that Qualcomm Inc has to pay Apple Inc. nearly $1 billion as patent royalty rebate payments. However, with other developments in the dispute, the decision will not very likely end in Qualcomm writing out a check to Apple.

On Thursday, Judge Gonzalo Curiel ruled that Qualcomm has to pay around $1 billion as rebate payments to Apple which used the former’s modem chips in order to connect iPhones to wireless networks. Qualcomm is the largest supplier of mobile phone chips in the world.

The payments were supposed to be a part of a business agreement between Qualcomm and Apple as per the patent licensing practices in the consumer electronics industry.

The factories under contract that built iPhones for Apple would pay Qualcomm a large amount every year for the permission to use Qualcomm; patented technology in the iPhones. The contract factories were reimbursed for this by Apple. Apple and Qualcomm also had a separate agreement that stated that Qualcomm would pay a rebate on the patent payments if Apple agreed not to go to court.

The lawsuit filed by Apple two years ago, alleges that the Qualcomm broke the cooperation agreement by refusing to pay the $1 billion as patent royalty rebates.

This caused Qualcomm to allege that the payment was stopped as Apple broke the agreement by encouraging other smartphone makers to register complaints to the regulator as well as by making misleading and false statements to the Korean Fair Trade Commission, which at the time was investigating the chip company over antitrust allegations. Apple responded to this stating that it made lawful responses to the regulators due to the ongoing investigation.

Judge Curiel ruled that Qualcomm needs to pay the missed rebate payments to Apple. Apple released a statement stating that Qualcomm’s illegal practices were harming the company as well as the whole industry.

However, the decision will not be finalized until after the trial which is slated to begin next month. The contract factories which were supposed to pay Qualcomm for the patent royalties for using the Qualcomm chip in iPhones have withheld $1billion payments to the chip company. Apple cannot expect any new payment from Qualcomm also as they are unlikely to pay. According to Don Rosenberg, Executive Vice President at Qualcomm, the withheld iPhone payments have been already accounted for in the company’s current financial statements.

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