Qualcomm (QCOM) on Monday said it had won a preliminary order from a Chinese court banning the importation and sale of several iPhone models in China that the court found violated two of Qualcomm patents. Apple (AAPL), meanwhile, said that all of its iPhone models remain available in China.
QUALCOMM SAYS GRANTED PRELIMINARY INJUNCTIONS AGAINST APPLE: Qualcomm announced on Monday that the Fuzhou Intermediate People's Court in China has ordered Apple to stop selling older iPhone models in the country after finding that Apple infringed on two of Qualcomm's patents. The preliminary order affects the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X. The preliminary injunctions relate to two Qualcomm patents that enable users to adjust and reformat the size and appearance of photos and to manage applications using a touch screen when viewing and navigating apps on their phones. iPhones are currently sold with the operating system iOS 12, which Apple says does not violate the patents. Don Rosenberg, Qualcomm's executive vice president and general counsel said in a statement that "Apple continues to benefit from our intellectual property while refusing to compensate us. These court orders are further confirmation of the strength of Qualcomm's vast patent portfolio."
APPLE DISPUTES QUALCOMM'S CLAIMS: Disputing Qualcomm's statement on the matter, Apple told CNBC's David Faber that "Qualcomm's effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world. All iPhone models remain available for our customers in China." It added that "Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated. We will pursue all our legal options through the courts." Apple may appeal the import and sales ban.
BACKGROUND: Qualcomm and Apple's legal battle started nearly two years ago, with Apple claiming that Qualcomm was abusing its position as the dominant supplier of smartphone modems to demand unreasonable fees. Apple's first lawsuit against Qualcomm was in January 2017, with Apple claiming Qualcomm was withholding money as retaliation for cooperation with antitrust investigations. This eventually resulted in more lawsuits and countersuits around the world. In September, Qualcomm accused Apple of delivering trade secrets to Intel (INTC) to improve the performance of modems. Bloomberg reported on September 17 that Apple said the U.S. International Trade Commission staff recommended the judge in their patent case find that there is no violation of three Qualcomm patents. A week and a half later, Bloomberg reported that ITC judge Thomas Pender ruled that Apple infringed one of three Qualcomm patents, but said it would be against the public interest to issue an import ban on iPhones. A month later, Qualcomm said in a court hearing that Apple is $7B behind in patent royalty payments, according to Reuters. Reuters noted on November 7 that Apple was not in talks "at any level" to settle its legal dispute with Qualcomm.
WHAT'S NOTABLE: Monday's ruling came from the Fuzhou Intermediate People's Court in China, the same court that banned the import of some Micron Technology's (MU) chips into China earlier this year. Qualcomm initially filed the case in China in late 2017.
PRICE ACTION: In morning trading, shares of Apple are down 2.4% to $164.46, while Qualcomm is up 2.6% to $57.43.
Keywords: iPhone, iPhones, ban, injunction, court order, lawsuit, legal battle, patent, infringe, infringement