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Apple Dodges Billions in Qualcomm Claims in Contract Spat

Edvard Pettersson

(Bloomberg) -- Apple Inc. won’t have to face billions of dollars in possible damages over Qualcomm Inc.’s allegations the iPhone maker incited an antitrust investigation of the chipmaker’s business practices and lied to Korean regulators.

A federal judge in San Diego on Thursday agreed with Apple that there’s no evidence the company’s cooperation with government investigators violated the terms of an agreement under which Qualcomm had been paying billions of dollars in what Apple says were rebates for patent royalties.

U.S. District Judge Gonzalo Curiel concluded Qualcomm can’t receive a refund of the rebates it already paid under a "truce" with the iPhone maker, which had made it the exclusive supplier of phone chipsets for five years. The judge also said Qualcomm isn’t entitled to a declaration that it’s off the hook for outstanding payments under their 2013 Business Cooperation and Patent Agreement because of the pending litigation.

"Qualcomm’s position that Apple’s filing of this lawsuit released Qualcomm from its payment obligations already accrued is without merit," Curiel said. "Apple did not file a lawsuit during the BCPA. And Apple’s filing of the lawsuit does not retroactively relieve Qualcomm of past payment obligations."

The ruling cuts a big hole in Qualcomm’s counterclaims that are part of a contract dispute with Apple scheduled to go to trial in April. Apple sued Qualcomm in January 2017 after the chipmaker stopped making payments under their 2013 agreement. Under the terms of that pact, Apple was blocked from suing Qualcomm or initiating lawsuits, among other things.

Qualcomm has said it stopped the quarterly payments after Apple’s allegedly false statements to the Korea Fair Trade Commission in August 2016.

“Apple has made false and misleading statements to antitrust regulators aimed at instigating unjustified action against Qualcomm," Don Rosenberg, Qualcomm’s general counsel, said in a statement. “Although the court today did not view Apple’s conduct as a breach of Apple’s promises to Qualcomm in the 2013 Business Cooperation and Patent Agreement, the exposure of Apple’s role in these events is a welcome development.”

Apple has already offset the payment at issue under the agreement against royalties that were owed to Qualcomm, according to Rosenberg’s statement.

Qualcomm has lost billions of dollars in revenue after Apple, through its Asian manufacturers, stopped paying patent royalties in 2017.

Meanwhile, the companies are waiting for a jury to rule in a separate trial in San Diego over whether Apple infringes three of Qualcomm’s patents for technology used in smartphones.

Although the $31.6 million in damages Qualcomm is seeking in that trial won’t break the bank for Apple, a win for the chipmaker will support its overall argument that its technology contributes much more to the commercial success of the iPhone than Apple is willing to either admit or pay for.

The case is In re: Qualcomm litigation, 17-cv-00108, U.S. District Court, Southern District of California (San Diego).

(Updates with Qualcomm response in seventh paragraph.)

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net

To contact the editors responsible for this story: Elizabeth Wollman at ewollman@bloomberg.net, Peter Blumberg, Steve Stroth

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