Apple and Qualcomm announced that they have dropped all litigation in a multi-billion-dollar patent licensing dispute that has dragged on for more than two years across courts in China, Germany, and the U.S. However, the sketchy details of the settlement leave many unanswered questions.
Under the deal, Apple will pay Qualcomm an undisclosed fee. Qualcomm will give Apple a six-year license to its patents with an option for a two-year extension. It also signed a multi-year chip supply agreement with Apple.
Qualcomm said that it expects a $2 increase in its earnings per share as a result of the deal from a combination of royalties and chip sales. It will provide more details on its next quarterly earnings call on May 1.
For Qualcomm, the settlement could translate to billions of dollars in annual royalties and product sales from Apple. For Apple, it potentially means fielding a 5G iPhone many months sooner than expected to counter rivals Samsung, Huawei, Xiaomi, and others who already have such handsets. Both sides could see legal costs decline by tens of millions of dollars a year.
After the settlement was announced, Intel said that it will exit the 5G modem business. Apple was believed to be the sole customer for Intel’s already delayed product.
The deal came just hours into the start of one of the landmark cases in the dispute in San Diego. In separate cases, China and German courts banned some iPhones from sale in their jurisdictions due to patent infringement, but Apple minimized damages in some cases by updating software on affected handsets.
While the San Diego case will not proceed, a judge in San Jose is still expected to rule in a suit against Qualcomm brought by the Federal Trade Commission.
The FTC asked the court to prohibit Qualcomm from requiring a patent license as a condition of selling its chips. Qualcomm’s “no license, no chips” policy remains central to its licensing program that generates much of its corporate profits.
The judge’s decision in the FTC case could force Qualcomm to renegotiate some of its licensing deals and rates. It could also force it to license rival chip vendors with its standard-essential patents.
The Apple dispute also spawned a consumer class-action suit against Qualcomm. However, one attorney watching the cases said that the suit “was an uphill climb.”
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