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U.S. judge rules Qualcomm owes Apple nearly $1 billion rebate payment

(Reuters) – A U.S. federal judge has a preliminary decision that Qualcomm Inc owes Apple Inc nearly $1 billion in patent royalty rebate payments, but the decision is not for Qualcomm to write a check to Apple because of other developments in the dispute.

FILE PHOTO: A woman holds her phone near to a Apple logo in Beijing, China on December 14, 2018. REUTERS/Jason Lee

Judge Gonzalo Curiel of the U.s. District Court for the Southern District of California on Thursday ruled that Qualcomm, the largest supplier of mobile phone chips, was required to pay nearly $1 billion in rebate payments to Apple, which for years has used Qualcomm’s modem chips to connect iPhones wireless data networks.

The payments were part of a business agreement for cooperation between the two companies, in the midst of the peculiar patent licensing practices of the consumer electronics industry.

In general, the contract factories that build Apple’s iPhones would pay Qualcomm billions of dollars per year for the use of Qualcomm’s patented technology in the iphone, a price that Apple would pay the contract factories. Separately, Qualcomm and Apple had a cooperation agreement pursuant to which Qualcomm would have to pay Apple a discount on the iPhone patent payments, if Apple agreed not to fall into the court or supervisors.

In a lawsuit filed two years ago, Apple sued Qualcomm, alleging that the chip supplier had broken the agreement by not paying almost $1 billion in patent royalty discounts.

Qualcomm, which, in turn, claimed that it stopped paying the rebate payments because Apple had broken the agreement by the insistence of other smartphone makers to complain to the supervisors and the making of “false and misleading” statements to the Korean Fair Trade Commission, which was investigating Qualcomm over antitrust allegations. Apple responded that it was making legitimate comments to regulators in an ongoing investigation.

Judge Curiel sided with Apple, ruling that Qualcomm owed the missed rebate payments.

“Although the Court today is not Apple’s behavior as a breach of Apple’s promises to Qualcomm in 2013, the Collaboration with companies and Patent Agreement, the exposure of Apple’s role in these events is a welcome development,” Don Rosenberg, executive vice president and general counsel of Qualcomm, told Reuters in a statement.

Apple has not immediately respond to a request for comment.

However, the decision is not final until after the end of the trial in the case, which begins next month. And it is unlikely that Qualcomm will have a new payment from Apple.

Apple’s contract factories, which under normal circumstances would pay Qualcomm for patent royalties are payable on iPhones, is already deducted from the nearly $1 billion in payments to Qualcomm. Qualcomm Rosenberg said that retained iPhone payments have already been processed in the Qualcomm’s existing financial statements.

“Apple already has a compensation of the payment in question under the agreement against the royalties that are owed to Qualcomm,” Qualcomm Rosenberg told Reuters.

Reporting by Stephen Nellis; Editing by Cynthia Osterman

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