innovation

APPLE VS. QUALCOMM: FIGHTING FOR THE RIGHT TO INNOVATE

By RICK MANNING

Qualcomm and Apple face off this month in what could wind up being the most significant intellectual property dispute this nation has seen in decades.

It boils down to this: The company that pioneered global smartphone connectivity — Qualcomm — and the company that currently holds 15.2 percent of the world’s smartphone market Apple — are embroiled in a multibillion-dollar battle over the technology that makes these devices tick.

The long-running dispute is actually multiple cases — approximately 50 separate legal actions filed in 16 jurisdictions across six countries, including a key hearing this month before the International Trade Commission (ITC) in Washington, D.C. Qualcomm is asking the ITC for what’s known as an exclusion order — or a ban on the importation of certain iPhones that use inferior Intel modems.

Its argument? That Apple is using Qualcomm’s innovations without a license to do so.

“Given their enormous market presence they think they can infringe (upon) our intellectual property with impunity,” Qualcomm executive vice president and general counsel Don Rosenberg said last week. “But we have the rule of law in our favor and so we’re hoping to get their attention by asking a court to stop them from infringing.”

Rosenberg is right. The rule of law is in Qualcomm’s favor. And it is essential for our nation’s economic future that it be upheld.

Most of the media coverage related to this case has focused on its potential impact on smartphones (and the broader smartphone market) — and that’s important. But it is much bigger than that.

At the heart of this case is a fundamental question that could define the next century of technological advancement in this country: Do we still believe in innovation in America? Or, conversely, are we becoming a nation where patented technology can be stolen whenever a corporation decides it doesn’t want to pay for it anymore?

Qualcomm is the company that connected cellphones to the internet. It is responsible for 3G, 4G and is currently pioneering 5G — a “new era of connectivity” that will provide consumers, networks, businesses and smartphone manufacturers with super-high speed, “fiber like” wireless solutions. According to one economic impact study, 5G will add more than $3 trillion to our nation’s gross domestic product and create upward of three million  new jobs.

Earlier this year, I advocated against, and President Trump ultimately blocked, a threatened takeover of Qualcomm by Broadcomm because the importance of the U.S. being the leader in 5G was widely recognized, and Qualcomm’s integral role in developing 5G is indisputable. Without Qualcomm’s innovation, the U.S. would cede its dominant position to other nations. It is clear that Qualcomm reinvests its licensing fees into critical research and development and Apple’s continued refusal to compensate Qualcomm for its innovation could also hinder the company’s (and thereby the country’s) ability to advance 5G.

Licensing the use of its patented innovations is the heart of Qualcomm’s business. It is also what keeps the company and its nearly 40,000 employees in business. Qualcomm’s patented modems and other innovations are so indispensable to the operation of smartphones and other mobile devices that the manufacturers of these devices have agreed to not only buy the company’s chips — but pay Qualcomm for the right to use the underlying technology.

Well, everybody pays except Apple — which is currently delinquent to the tune of up to $4.5 billion when it comes to licensing fees owed to Qualcomm.

Apple insists  it “believe(s) deeply in the value of intellectual property,” but its actions tell a different story. Not only is the company refusing to pay what it owes, it is being accused of infringing Qualcomm’s intellectual property (the basis of the ITC complaint). The company is also trying to stonewall the courts in an effort to keep its conduct from coming to light.

Last December, a federal judge in San Jose, California issued sanctions against Apple after it refused to turn over evidence related to one of the cases in this dispute.

Qualcomm’s position remains simple: Licensing agreements are an essential component of incentivizing innovation in this country.

Without them, innovation dies.

Or to put it another way: Do we want to kill off trillions of dollars in economic activity, and risk no longer being the leader in 5G, because one of the world’s richest companies doesn’t want to pay what it owes?

As originally published in Investor’s Business Daily.

Rick Manning is the President of Americans for Limited Government.  Americans for Limited Government is a non-partisan, nationwide network committed to advancing free market reforms, private property rights and core American liberties.  For more information on ALG please visit the website at www.GetLiberty.org.  You can also read more articles at www.dailytorch.com.

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