It appears that there is no respite to the prolonged legal battle between QUALCOMM Incorporated QCOM and Apple Inc. AAPL , with the latter now being held guilty of patent infringement of the former in a German court. With twin setbacks from two different courts in two countries within a fortnight, the sale of some iPhone models are likely to be affected in the global markets.
Just a few days back, the Fuzhou Intermediate People's Court in China held Apple guilty of twin patent infringement and ordered an immediate ban on sales of older iPhone models, from the 6S through the X in the country (read more: Qualcomm Wins Twin Patent Battle in China Against Apple ). Now, the District Court of Munich, Germany, has ordered a permanent injunction to the sale of some iPhone models in the country as these are found to infringe upon Qualcomm's intellectual property right for power savings in smartphones.
The bone of contention is a third-party violation of Qualcomm's patents around envelope tracking - a feature that helps phones preserve battery while sending and receiving wireless transmissions. Apple has allegedly used products from Qorvo, Inc. QRVO to bypass the patent in some of its iPhone models. With the verdict from the German court, Apple would have to pull out all iPhone 7 and 8 models from retailers across the country, while models like iPhone XS, iPhone XS Max and iPhone XR will remain available.
The embargo on sales on the infringed models is effective once Qualcomm posts the required bonds in the court within a few days. The German court has further declined Apple's request for a stay on the injunction and would determine the quantum of monetary damages that Apple is liable to pay at a later date.
Earlier, Qualcomm had accused Apple of misusing its secret software access to share information about its chips with Intel Corporation INTC engineers. This supposedly helped Intel to develop competitive modem chips for use in several iPhone models, thereby enabling Apple to entirely get rid of Qualcomm products from its portfolio with which it was entangled in a patent dispute.
To support its allegations, Qualcomm claimed that its modems required a combination of chips and software to allow phones to receive wireless data, owing to which it gave Apple access to its source code and software development tools to help it modify the software for iPhone compatibility. However, instead of honoring its commitment, Apple allegedly shared this confidential information with Intel. The latest court verdicts seem to be extensions of these continued spats.
Qualcomm has declined 12.9% on average in the past year, while the industry has rallied 3.3%.
Qualcomm currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
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