Author: Don Clark and Daisuke Wakabayashi / Source: New York Times
Andy Wong/Associated Press
SAN FRANCISCO — For the past two years, Apple and Qualcomm have dueled on three continents over the division of billions of dollars of smartphone profits and even how much consumers pay for their phones.
On Tuesday, just as a trial had begun in a federal courtroom in San Diego over a suit Apple had filed against Qualcomm, the two companies said they had essentially made up.
The companies, one the maker of iPhones and the other the largest provider of mobile chips, said they had agreed to dismiss all litigation between them worldwide. They added that they had reached a six-year agreement for Apple to pay unspecified royalties on Qualcomm’s patents.
That deal, which was effective as of April 1, included a two-year option for an extension, plus a multiyear agreement for Qualcomm to supply chips to Apple. In addition, Apple will make an undisclosed one-time payment to Qualcomm.
At the heart of the disputes was a disagreement over how Qualcomm charges royalties on patents that it holds on mobile chips. The company, based in San Diego, had pioneered a type of cellular communications in the 1990s that later became a mainstay of mobile devices. That allowed it to charge royalties on nearly every smartphone sold — even if the phone did not actually use Qualcomm chips. Apple eventually objected to that arrangement.
The provisions of the deal announced on Tuesday suggest at least a partial victory for Qualcomm and its patent-driven business model, which has also attracted harsh scrutiny from regulators like the Federal Trade Commission. Qualcomm’s shares, which have been hurt by the two-year dispute with Apple, jumped 23 percent on word of the settlement.
The chip maker said it expected the settlement to yield incremental revenue of $2 a share as shipments of Apple handsets affected by the settlement grow. At roughly 1.2 billion Qualcomm shares outstanding, that would translate to around $2.5 billion in additional revenue from a combination of royalties and chips, said Stacy Rasgon, an analyst at Sanford C. Bernstein.
In agreeing to settle the case, Apple tacitly acknowledged it was able to live with Qualcomm’s business model — assuming the price of Qualcomm’s royalties is more to Apple’s liking. A slide the companies distributed on Tuesday said the deal “reflects value and strength of Qualcomm’s intellectual property.”
An Apple spokesman and a Qualcomm spokeswoman said no further details of the settlement were immediately available. Qualcomm said more information might be disclosed when it releases financial results on May 1.
The battle between the two companies began in January 2017 when the F.T.C. filed a case against Qualcomm that partly leaned…
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