Qualcomm escalates Apple patent feud, goes after component suppliers

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REUTERS/Mike Blake/File Photo

(Reuters) – Chipmaker Qualcomm has escalated its patent battle with Apple, suing Foxconn and three other Taiwanese manufacturers that supply iPhone and iPad components for not paying royalties.

Apple filed a lawsuit against Qualcomm in January, accusing it of overcharging for chips and refusing to pay some $1 billion in rebates – a move that came days after the US government accused the chipmaker of using anticompetitive tactics to maintain a monopoly over key semiconductors in mobile phones.

Qualcomm has called Apple’s suit baseless and has said the iPhone maker was encouraging regulatory attacks on its business.

On Wednesday, Qualcomm said in its complaint that Apple had advised the four contract manufacturers to withhold royalty payments and agreed to indemnify them against any damages resulting from the breach of their agreements with Qualcomm.

It did not disclose the sum of the alleged unpaid royalties in the complaint which was filed in the United States District Court for the Southern District of California. Qualcomm is seeking an order for the suppliers to comply with contractual obligations as well as damages.

Foxconn, formally known as Hon Hai Precision Industry Co and one of Apple’s main suppliers, said it had not yet received documents regarding the lawsuit and declined further comment.

Wistron Corp also said it had not received the relevant documents. Pegatron Corp declined to comment, while Compal Electronics Inc did not offer immediate comment.

Last month, Qualcomm slashed its profit and revenue forecasts for the current quarter, saying it excluded revenue receivable from the four contract manufacturers.

Qualcomm, the largest maker of chips used in smartphones, said in its filing that Apple is trying to force the company to agree to an “unreasonable demand for a below-market direct license”.

Apple reiterated that it had been trying to reach a licensing agreement with Qualcomm for more than five years but the company has refused to negotiate fair terms.

Qualcomm’s shares fell 1% to $55.36 on Wednesday while Apple’s shares slid 3.4% to $150.25.

Shares in the Taiwanese suppliers fell between 0.4% and 2% in early Thursday trade except for Compal which rose 1.5 percent.

(Reporting by Narottam Medhora and Supantha Mukherjee in Bengaluru; Additional reporting by Jess Macy Yu in Taipei; Editing by Maju Samuel and Edwina Gibbs)

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