Apple (AAPL) - Qualcomm Legal Battle Takes an Ugly Turn

A generic image of a pen on top of a stock chart.
Credit: Shutterstock photo

Apple IncAAPL and Qualcomm Inc's QCOM legal dispute over royalty payments just got nastier. Per Bloomberg, the company has accused Qualcomm of having an "illegal business model" that helps the company to earn more patent money and at the same time stifles innovation.

Apple has referred to the landmark ruling handed in the Impression Products Inc Vs. Lexmark International Inc case recently. In the case, reportedly, Supreme Court had ruled that companies (like Lexmark) can't have any patent rights once they sell the product, thereby preventing such companies to earn more money for the second time during resale.

Per Reuters, Apple has said that Qualcomm's licensing practices (making clients ink patent licensing agreements before buying chips) are questionable. This is because not only does Apple pay for the chips but the license agreement also enables Qualcomm to haul a small amount of the selling price of the iPhone in "exchange for supplying the modem chips that let phones connect to cellular data networks."

Per the recent Lexmark ruling, Qualcomm is entitled to earn money just once - either for the license or for buying the chip, argues Apple. Apple has been reportedly quoted saying "This is precisely the kind of double dipping, extra-reward system that the court's decision sought to eliminate."

On the other hand, Qulacomm responded to Apple's latest allegations by saying "Apple is trying to distract from the fact that it has made misleading statements about the comparative performance of its products, and threatened Qualcomm not to disclose the truth. It simply is untrue that Qualcomm is seeking to collect royalties for Apple innovations that have nothing to do with Qualcomm's technology."

The Apple-Qualcomm dispute started in January this year when Qualcomm was slapped with a $1 billion lawsuit related to licensing royalty payments by Apple. In the suit filed in the U.S. District Court for the Southern District of California, Apple accused Qualcomm of overcharging for chips and refusing to pay some $1 billion in promised rebates. Later on, Apple also asked its manufacturing partners Foxconn, Pegatron, Wistron and Compal Electronics to stop paying Qualcomm and agreed to indemnify them if Qualcomm took them to court.

Apple Inc. Price

Apple Inc. Price | Apple Inc. Quote

In April, Qualcomm launched a counterattack on Apple by mentioning the value of its invented technologies, their contribution and share in the industry through its licensing program. The filing also elaborated on Apple's illegal and improper handling of agreements and negotiations with device manufacturers, misleading regulators to attack Qualcomm around the world and not utilizing the full performance of Qualcomm's modem chips in its iPhone 7.

We are unlikely to see an end to this legal dispute in the near term.

Zacks Rank & Stock Price Movement

At present, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

In the last one year, shares of the company have registered growth of 51.8% compared with the Zacks categorized Computer Mini industry's gain of 50.7%.

Stocks to Consider

Some better-ranked stocks in the broader tech space include TiVo Corp TIVO and MercadoLibre MELI . Both sport a Zacks Rank #1 (Strong Buy).

In the trailing four quarters, TiVo and MercadoLibre delivered average positive earnings surprises of 67.56% and 26.74%, respectively.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MercadoLibre, Inc. (MELI): Free Stock Analysis Report

QUALCOMM Incorporated (QCOM): Free Stock Analysis Report

TiVo Corporation (TIVO): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More