In a preliminary ruling, the U.S. District Court for the Southern District of California ruled that Qualcomm owed Apple nearly $1 billion in rebate payments that were part of the business cooperation agreement of the two companies. Today's ruling is unrelated to the patent fight that both companies are embroiled in, but pertains to the matter of patent royalty rebates.
As noted by Reuters, both companies had a patent licensing agreement that worked in the following manner:
In general, the contract factories that built Apple's iPhones would pay Qualcomm billions of dollars per year for the use of Qualcomm's patented technology in iPhones, a cost that Apple would reimburse the contract factories for. Separately, Qualcomm and Apple had a cooperation agreement under which Qualcomm would pay Apple a rebate on the iPhone patent payments if Apple agreed not to attack in court or with regulators.
While the agreement worked for several years, Qualcomm decided to stop paying Apple when it found that the company was making "false and misleading" statements to the Korean Fair Trade Commission, which was investigating Qualcomm at the time over antitrust violations. Qualcomm viewed this as a breach of its agreement, but Apple countered by saying that it was making lawful responses in an ongoing investigation.
Apple then filed the lawsuit stating Qualcomm had missed rebate payments, which amounted to nearly $1 billion. The judge sided with Apple in this issue, ordering Qualcomm to pay the $1 billion it owed. Qualcomm's general counsel Don Rosenberg commented on the ruling:
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.
It's unlikely a payment will be forthcoming as Reuters notes that Apple's contract factories have already withheld the $1 billion in payments to Qualcomm. A decision will be finalized when both companies meet in court next month.
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