In January 2017, Apple sued Qualcomm in Beijing Intellectual Property Court over the abuse of its dominant market position.
Apple alleged that Qualcomm abused its market dominance when licensing telecommunication standard-essential patents (SEPs) and selling baseband chipsets. Specifically, it complained that Qualcomm charges unfairly high royalties for licensing SEPs and sets unreasonably strict conditions for Apple to obtain the licence of SEPs; Qualcomm refuses to license SEPs to some SEP users; furthermore, Qualcomm restricts Apple to use exclusively the products/services it supplies or approves to use, etc. Therefore, Apple requested Qualcomm to compensate for its economic loss in the amount of Rmb1 billion. One week before this case, Apple also filed a US$1 billion lawsuit against Qualcomm in the US for the same reasons.
As one of the world’s biggest baseband chipsets manufacturers, Qualcomm owns numerous mobile communication SEPs and is in a dominant position in the mobile communication SEP markets and baseband chipsets markets of relevant countries. In fact, in 2015, Qualcomm received a large fine imposed by China National Development and Reform Commission for violation of Anti-Trust Law. Meanwhile, Qualcomm was also investigated, sued or punished for abuse of its dominant market position in other jurisdictions, including the US, South Korea and the EU.
These cases demonstrate that Qualcomm was punished or investigated in these countries for its worldwide business model, which, generally speaking, is to coerce or induce the handset makers to choose its baseband chipsets by means of bundling patent licensing into chipsets sales complemented by rebates or other monetary incentives, through using its dominant market position, and bundling patents, tie-in sales and forced cross-licence, etc.
This lawsuit brought by Apple is partly due to the fact that Qualcomm induced Apple to sign an exclusive agreement by granting rebates and because Apple provided its cooperation to the Korea Fair Trade Commission in its anti-trust investigation against Qualcomm. The dispute between these two large companies put Qualcomm into the spotlight again. It is so far reaching in terms of its impact on the industry that not only Qualcomm and Apple themselves, but also anti-trust enforcement authorities and even other baseband chipset or cell phone manufacturers in this industry may be brought into the case. Therefore, we are paying close attention to the progress of this case and will analyse the case from the perspective of facts and laws in the next article.