Qualcomm and Apple drop all lawsuits and reach a settlement!

Early this morning, Qualcomm and Apple simultaneously released statements on their official websites, announcing that they had reached a settlement agreement. The settlement includes the two parties dismissing all lawsuits between the two companies worldwide, Apple will pay Qualcomm a licensing fee, and the two parties have reached a six-year direct licensing agreement.

This means that the global litigation battle between Qualcomm and Apple over antitrust and patent infringement over the past two years has come to an end.

On Qualcomm's investor relations website, Qualcomm published a summary of the settlement agreement, including:

1. Qualcomm obtains direct authorization from Apple. Previously, Qualcomm's licensing agreement with Apple was not a direct authorization, but was charged to Apple's contract manufacturers, i.e. OEMs. Qualcomm has always hoped to obtain direct authorization from Apple, but Apple refused.

According to the latest settlement agreement, this six-year direct licensing authorization will take effect on April 1, 2019, and Apple will pay Qualcomm licensing fees. The agreement comes with a two-year extension option, which means it is a "6+2" year direct licensing agreement.

Apple will pay Qualcomm a one-time payment. Apple has refused to pay Qualcomm licensing fees since the first quarter of 2016, and the payment was further shelved because Apple and its contract manufacturers, including Foxconn, Compal, Pegatron and Wistron, accused Qualcomm of charging too high patent royalties. Qualcomm previously said that the payment totaled billions of dollars. At present, the exact amount of the payment is unknown, but it is likely to be a large amount.

2. Both parties withdraw all lawsuits worldwide. Starting in January 2017, Apple launched a lawsuit against Qualcomm, successively initiating antitrust lawsuits against Qualcomm in the United States International Trade Commission (ITC), Federal Trade Commission (FTC), and U.S. district courts. In response, Qualcomm successively initiated patent infringement lawsuits against Apple in courts in the United States, China, Germany and other places around the world on the grounds of patent infringement.

Before the settlement, Qualcomm had won almost all of its patent lawsuits against Apple in many places around the world, including injunctions against iPhone products that infringed patents from local courts in China and Germany. In addition, the US ITC also found the facts of patent infringement and was inclined to issue an injunction, but the result is still under review. The US Federal Trade Commission's trial of Qualcomm's antitrust investigation has ended and is currently awaiting a verdict. In addition, the contract dispute between the two parties regarding licensing is also under trial. This settlement means that all these lawsuits between the two parties will be terminated.

3. Multi-year chip supply agreement. Until the release of iPhone 7 in 2016, Qualcomm was Apple's only baseband chip supplier. Apple said that Qualcomm had provided incentives to obtain the status of sole supplier, while Qualcomm said that this was because Apple had no other choice but Qualcomm in terms of baseband chips. This was once the focus of the court battle between the two parties.

Apple has always not wanted its component supply chain to have only one supplier, but Qualcomm has a leading advantage in baseband chips. Currently, Intel, Apple's only baseband supplier, has made slow progress in product performance and evolution, especially in 5G. The Android camp is currently launching an aggressive offensive against Apple. Losing Qualcomm means that Apple is at a disadvantage against the Android camp in the 5G era. 5G may be one of the important reasons for the reconciliation between the two parties.

This time, Qualcomm stated that the two parties signed a multi-year chip supply agreement, but did not disclose whether it would become the sole supplier again. We need to wait for further information to be released by both parties.

Fourth, it stabilized Qualcomm's licensing model. The primary purpose of Apple's lawsuit against Qualcomm is to destroy Qualcomm's important licensing business model, but from the current results, this model has not been effectively shaken. Previously, the U.S. District Court had ruled that Qualcomm must license open standard essential patents to competitors, but how and to what extent the ruling will be implemented remains to be seen.

Fifth, it reflects the value and strength of Qualcomm's patents. In its lawsuit against Apple, Qualcomm has been emphasizing its licensing model. Its method of charging for the entire device is actually due to its great contribution in the field of intellectual property rights, and it needs to protect its innovations in the field of intellectual property rights, which are not only reflected in the communication standard essential patents of baseband chips.

Looking at Qualcomm's patent lawsuits against Apple around the world, on the one hand, it is trying to force Apple to settle by banning sales, and on the other hand, it is also demonstrating its strong reserves of Qualcomm's non-standard essential patents. The recognition of Qualcomm's patents by global judicial institutions also proves Qualcomm's value and contribution in high-quality patents. Apple's differential treatment and refusal to enforce the injunctions made by global judicial institutions have also been criticized by the outside world.

Although the settlement between the two parties was "surprising" to the outside world, it was also reasonable. Qualcomm has been proving the validity and value of its patents through patent litigation, while Apple's antitrust lawsuit against Qualcomm has not been able to provide effective evidence. In the past two years of tug-of-war, although Apple took the lead in attacking Qualcomm, Qualcomm subsequently fought back frequently, and Apple seemed to be losing ground.

During this process, Qualcomm has been sending signals that it hopes the two sides will reach a settlement. Qualcomm executives have repeatedly stated that the two sides will reach a settlement, while Apple has always maintained a tough attitude and refused to give in. Apple hopes that the FTC's antitrust investigation into Qualcomm can make a radical change, but judging from the current results, multiple factors have prompted Apple to compromise and return to the negotiating table.

On the surface, the result of the settlement between the two parties hurts Apple, but in the long run, Qualcomm and Apple's reconciliation may be the best outcome for both parties. Apple can continue to consolidate its leading position in the mobile phone industry, Qualcomm can regain its important customer orders, and both parties can withdraw from the complicated legal proceedings and devote more energy to the innovation of the mobile phone industry, which will also help the entire mobile phone industry, especially the development of the entire mobile phone industry ecosystem when 5G arrives.