Apple was locked 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 Qual-comm’s engineering. Another Apple memo described Qual-comm as having a “unique patent share” and “significant holdings. “The sealed documents, obtained by Qual-comm through the discovery phase ahead of the trial, offer a rare window into the decision-making process of one of the most secretive and powerful companies on the planet, and how Apple’s internal discussions about Qual-comm differed from what it said publicly. Apple’s criticism of Qual-comm underpinned more than 80 lawsuits around the world and influenced governments to change laws and regulations in Apple’s favor. The emails and slide show presentation could soon be made available in the docket for all to see, since they were shown at trial. The two sides settled their dispute Tuesday, shortly after the trial began.
The documents also raise questions about the methods Apple used to inflict pain on Qual-comm and whether Apple really believed its own arguments to lawmakers, regulators, judges and juries when it tried to change not just its longstanding business agreement with Qual-comm but the very laws and practices that have allowed inventors to profit from their work and investments. Apple has argued that Qual-comm’s patents were no more valuable than those of competitors like Ericsson and Huawei, but Qual-comm 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 MOs off, 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 Qual-comm’s patented innovation.”
Qual-comm and Apple declined to comment. The settlement the two companies reached this week includes a six-year licensing agreement and a multiyear supply agreement. Apple will also make a payment of an unspecified amount to QUAL-COMM. For years, Apple had been buying Qual-comm’s wireless modem chips for its iPhones, and paying the chip maker about $7.50 per device, according to court documents. An internal memo from an accountant in 2009 said Qual-comm is “widely considered the owner of the strongest patent portfolio for essential and relevant patents for wireless standards,” according to a document revealed in court. In a March 2015 email that was part of the sealed documents, Apple’s vice president of hardware Johnny Srouji wrote of Qual-comm technology, “Engineering wise, they have been best. “But Apple began seeding plans to undermine Qual-comm, according to the sealed documents. An internal report obtained durings the discovery process and cited by Qual-comm Tuesday showed Apple had been planning to sue Qual-comm as far back as 2014, but it had planned to wait until after the end of 2016, until after Qual-comm paid billions of dollars in payments to Apple as part of a business cooperation agreement. An Apple document from June 2016, called “Qual-comm Royalty Reduction,” predates Apple filing suit against Qual-comm in San Diego federal court by more than six months.
The purpose was spelled out clearly: “Goal: Reduce Apple’s net royalty to Qual-comm.” Apple said in the document it planned to accomplish this in several ways, including “Hurt Qual-comm financially” and “Put Qual-comm’s licensing model at risk. “In the lawsuit Apple filed in 2017, it alleged that the chip maker and wireless pioneer had a stranglehold on the market for wireless modem chips. Apple contends that Qual-comm leveraged its position to overcharge for its patent licenses.According to internal documents revealed in court, Apple wrote that it entered into the patent licensing agreement “based on Qual-comm’s established and relatively transparent actual monetary collection of patent licenses.”Apple made similar arguments about Qual-comm’s alleged violation of FRAND obligations durings a January trial in California federal court in which the Federal Trade Commission accused Qual-comm of antitrust violations. The outcome of the FTC trial, which has yet to be decided, has the potential to set precedent not just for Apple and Qual-comm but for any inventor whose innovation becomes part of technology standards, including universities and individual researchers.