The news cycle has been dominated by the Trump administration and its actions in the last 10 days. While this is certainly understandable and necessary for the media to report on, this is a business litigation blog — and so in that respect, we’d like to focus your attention on a business story that may not have caught your attention recently given the national issues that are at the forefront at this time.
Apple filed a lawsuit against Qualcomm for $1 billion, claiming that the tech giant — which now has a massive licensing component to their business — has been charging them royalties that Qualcomm has nothing to do with (allegedly).
Qualcomm completed the biggest deal in semiconductor history last year, worth an estimated $40 billion, when they bought chipmaker NXP Semiconductors. That deal, and Qualcomm’s extensive tech portfolio, give them a huge licensing library to profit from. As such, if you own a smartphone, you likely use Qualcomm tech somewhere in that phone. Every time a smartphone is sold, Qualcomm gets a cut in the form of royalties.
Normally, those who pay royalties would just grin and bear it. But Apple has had enough with Qualcomm. Given Qualcomm’s significant profits from licensing (somewhere around one third of their revenue) this lawsuit poses a significant threat to their way of business.
It will be interesting to see how this story develops over time, but for now, those who delve in royalties and licensing will be keeping a keen eye on this case and its legal ramifications.
Source: CNBC, “How Apple’s lawsuit threatens Qualcomm’s business model,” Ari Levy, Jan. 23, 2017