Qualcomm and Apple Settle Long-Running Patent Royalty Dispute

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Apple argued that the chip technology it licensed from Qualcomm was fundamental to how smartphone's work, and that its payments should therefore be at a "reasonable rate", under the law.

Apple and Qualcomm announced a chipset supply agreement yesterday so this year's upgrades should revert to using Qualcomm - to sighs of relief from some of the potential upgraders. Following initial lawsuits, Apple had to rely exclusively on Intel to provide LTE modems for iPhones, thus eliminating its reliance on Qualcomm, until now, it seems. The company had been working on 5G chips for Apple, but the chips were not expected to arrive until 2020 at the earliest. Both sides scored victories in various court systems but they're finally calling a truce.

It seems that Apple will be making a one-time payment to Qualcomm to cover any IP use since Apple cut off payments to Qualcomm in 2017.

Intel shares rose about 3 percent on the news in extended trading after closing with a 0.8% gain. Recent reports claimed that Apple and its suppliers were seeking almost $30 billion in damages from Qualcomm.

Apple didn't fold this week because of Qualcomm's aggressive counter-litigation strategy: going after Apple's supply chain partners and seeking to get iPhones banned. Just when it seemed like the dispute between Apple and Qualcomm would have us popping corn for years to come, the companies today announced that they've chose to dismiss all litigation against each other, thanks to a new settlement agreement.

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Apple accuses Qualcomm, which holds the most patents for chips, of taking advantage of its dominant position to charge exorbitant amounts for its chips or access to its patents.

"The company will continue to meet current customer commitments for its existing 4G smartphone modem product line, but does not expect to launch 5G modem products in the smartphone space, including those originally planned for launches in 2020", Intel said in a statement late Tuesday. It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker. Apple had begun to have misgivings about that deal as it added more features to its increasingly popular line-up of iPhones.

To be clear, it's not just Apple that has an issue with Qualcomm. In 2016, Apple refused to pay the fees while Qualcomm refused to pay Apple the $1 billion called for in its agreement.

The surprise truce announced Tuesday came just as the former allies turned antagonists were facing off in a federal court trial that was supposed to unfold over the next month in San Diego. However, recent reports said that Apple was having trouble securing 5G modems for its first iPhone, prompting speculation that the handset will be postponed.