Qualcomm Says Apple Needs to Take China iPhone Ban Seriously

(Bloomberg) -- Qualcomm Inc. General Counsel Don Rosenberg said Apple Inc. needs to take seriously a Chinese court's ban on the sale of some iPhone models.

The court order, granted last week after Qualcomm argued that Apple is infringing on its patents, is in force and cannot be circumvented automatically by a software or operating system update as the iPhone maker has claimed, according to Rosenberg. Qualcomm is seeking an extension of the ban to cover the latest models of the phone, he said in an interview on Bloomberg Television to be aired later Tuesday.

“It's something that needs to be taken very seriously,” Rosenberg said. The order “should be taking a bite out of Apple's sales right now.”

The two U.S. companies are locked in a worldwide dispute over licensing fees that Qualcomm charges for use of technology that the chipmaker says underpins all modern phone systems. Apple has argued its former supplier unfairly leverages its position as the biggest provider of chips for smartphones to force payment. Qualcomm has countered that Apple is using its intellectual property without paying for it, and legal cases are aimed at forcing it to lower licensing charges.

The Fuzhou Intermediate People's Court ruled that Apple is infringing two Qualcomm patents and issued injunctions against the sale of the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X, the San Diego, California-based chipmaker said last week. The order doesn't cover the newer iPhone XS, XR and XS Max, which were released after Qualcomm appealed to the court. The chipmaker is asking to extend the ban to those newer models, Rosenberg said Tuesday.

Apple said in a court filing that in 2017 it sold an estimated 50 million iPhone units in China. The device is the company's most important product, generating more than 60 percent of Apple's annual revenue.

The Qualcomm executive said the burden is on Apple to comply with the order or return to the court to prove that it's no longer in infringement. The ban will remain in place until the court reverses it, he said.

Rosenberg declined to comment on whether the two sides are in settlement talks, but said that his company is open to negotiation.

Qualcomm rose 1.2 percent to $57.66 at 12:30 p.m. in New York trading. The dispute with the iPhone maker has halted the flow of billions of dollars in licensing payments - its chief source of profit - and hurt its stock price, which was down 11 percent this year before Tuesday. Apple shares gained 1.5 percent to $166.46.

--With assistance from Candy Cheng.

To contact the reporters on this story: Emily Chang in San Francisco at echang68@bloomberg.net;Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Dan Reichl

©2018 Bloomberg L.P.