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Qualcomm to Push for iPhone Import Ban in Patent Fight With Apple

Sept. 17, 2018, 8:01 AM

Apple Inc. and Qualcomm Inc. are heading to the International Trade Commission to fight over a potential ban on imported iPhones, in the latest battle in their global patent licensing war.

Qualcomm says Apple shouldn’t be allowed to sell several iPhone models, including the iPhones 7 and 8, in the U.S. because they infringe three Qualcomm patents. The ITC’s decision could turn on not just the bread-and-butter patent law issues, but also the effect that an import blocking order would have on the market for data modem chips, also known as baseband chips.

The two companies will square off Sept. 17 at a hearing that’s expected to last several days. The ITC is expected to issue its final ruling by May 22, 2019, according to the agency’s website.

The ITC can block imports of the iPhone models if it finds Apple is infringing the patents. The commission must consider how an exclusion order would affect the public interest, such as whether it would improperly reduce market competition and slow down innovation in new technologies.

U.S. Patent Nos. 9,154,356and 9,473,336 relate to “carrier aggregation,” a technique used to increase data transmission speeds by using several carrier signals at once. Qualcomm says it’s a leader in developing the technology used in wireless data transmission standards such as LTE-Advanced. Its third patent, U.S. Patent No. 8,063,674, relates to power-saving features for integrated circuits.

Qualcomm sells modem chips with the patented technologies. Apple buys chips from Qualcomm and Intel Corp. Qualcomm argues the phones using the Intel chips are infringing. Qualcomm is asking the ITC to block imports of infringing iPhones that don’t use Qualcomm chips.

The ITC also is hearing another case involving Apple and a different set of Qualcomm patents. The two companies are locked in courtroom battles in the U.S., Germany, China and other countries as well.

Defining the Market

Apple argues it isn’t infringing the patents. The iPhone maker says the ITC should not ban iPhone imports in any case because doing so would hurt consumers and hinder new technology development.

Qualcomm and Intel are the only two sellers of “premium” baseband chips used in high-end phones, Apple contends. The requested exclusion order essentially would give Qualcomm a monopoly and raise smartphone prices, Apple argues.

An ITC exclusion order would slow development of the upcoming 5G data transmission standards in the U.S., because innovation depends on improvements in premium baseband chips, Apple claims. Non-premium baseband chips from other suppliers don’t have the same features, and aren’t suitable substitutes for Intel and Qualcomm’s, it argues.

The premium baseband chip market is an artificial one Apple created to support its public interest argument, Qualcomm says. There’s no proper definition of that premium market, and there are plenty of other baseband chip suppliers, the company says.

What’s more, the chipset market is global, not restricted to the U.S., Qualcomm argues. Intel can still supply chips for iPhones in other markets even if it can’t sell its chips for Apple devices in the U.S., Qualcomm says.

The exclusion order won’t hinder the development of 5G, Qualcomm says. The three patents aren’t essential to any data transmission standards, and other companies are free to develop their own 5G-related technologies, the San Diego-based company says.

Apple is trying to underplay its dominance in the baseband chip market by focusing on how an exclusion order would supposedly harm Intel, Qualcomm says. Apple designed the infringing products and is using its component supplier to evade the exclusion order, Qualcomm argues. Apple’s public interest argument would create a dangerous precedent, the chipmaker claims.

Administrative Law Judge MaryJoan McNamara will hear the case. Quinn Emanuel Urquhart & Sullivan LLP, Adduci, Mastriani & Schaumberg LLP, Cravath, Swaine & Moore LLP, and Norton Rose Fulbright US LLP are representing Qualcomm. Fish & Richardson PC and Wilmer Cutler Pickering Hale and Dorr LLP is representing Apple.

The case is Certain Mobile Electronic Devices and Radio Frequency and Processing Components Thereof, USITC, No. 337-TA-1093, hearing 9/17/18

— With assistance from Susan Decker

To contact the reporter on this story: Peter Leung in Washington at pleung@bloomberglaw.com

To contact the editor responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com