Apple, Qualcomm Announce Settlement In Patent Dispute

Speaker 1: 00:00 The San Diego trial that was supposed to be the big one in the years long feud between Qualcomm and apple ended abruptly yesterday before opening statements were finished, the two sides announced they'd reached a settlement. The agreement not only ends this lawsuit, but also resolves pending litigation between the two tech giants worldwide joining me by Skype to explain this surprising development and what it means to smartphone technology is reporter Shara Tib kin with Cnet, a website, the reports on technology, news and reviews, electronics and Shara welcome to the program. Thank you for having me. Have the company's released the terms of this settlement? Speaker 2: 00:38 No, they have not. They have just said that they have signed a multi year chip licensing agreement. So the licensing agreement will last six years and then they can extend it by a couple more years. They've also signed a chip supply agreement, so that means that apples I iPhones will again have Qualcomm modems, but we don't know how many years that is. We don't know any of the money. We don't know any of the licensing terms. Uh, so really we kind of know very little at this point. Speaker 1: 01:06 Do we know if this agreement settles the central issue that apple has been complaining about the claim that Qualcomm is charging too much in royalties for the use of its chips. Speaker 2: 01:16 So obviously the two companies had to come to some sort of agreement that they both felt was satisfactory towards them. I don't think that this really changed fundamentally Qualcomm's licensing business, one of the arguments that apple had was that it should only have to pay licensing fees based on the value of the chip itself instead of the value of the entire phone. Qualcomm very adamantly does not agree with that. I can't see Qualcomm agreeing to anything that would have changed that, uh, that would have just fundamentally change their entire business model. And there was no way that they were going to agree to something like that. So I think what probably happened is apple realize it needs five g chips. It decided to have this settlement with Qualcomm. I'm guessing they probably maybe split it down the middle of what Qualcomm was getting before. You know, we don't know right now, but I can't see Qualcomm doing anything that would really impact their business. So fundamentally, Speaker 1: 02:16 can you remind us what Qualcomm network connectivity chips contribute to how we use smartphones? Speaker 2: 02:22 So what Qualcomm makes our calls modems and basically these are the chips that help your phone connect to a mobile network. So if you think about it, when you put your phone in airplane mode, you're not connecting to any network. You're not on Wifi, you're not on a cell network, you're not pulling any data. So really all you can do is what is already on your phone. With Qualcomm's modems, you're able to connect to a Verizon network, for instance. And so you're able to get all of the stuff, all of the updates on your phone that you need a, you're able to call people, text people just basically communicate. So for Qualcomm, they're technology is what makes a phone a phone essentially. You know, apple, I think in their opening arguments was starting to make the point that, oh well, you know, there's also Wifi, you know, I don't really know how big of a role that was ultimately going to play, but for Qualcomm, what they do is help your phone connect to your cell network and you say this settlement might have a lot to do with Qualcomm's emerging five g technology. Speaker 2: 03:25 Tell us about that. We are seeing five g networks rolling out in the U S and kind of globally right now. Verizon turned on their network in Chicago, for instance, a five g is just this super fast new mobile network. It's brand new. We're just seeing the first devices for it. There were really only two companies that have five g chips that they sell to handset makers. So that was Qualcomm who sells to basically every android company. And then there was Intel who's only customer was really apple. Intel is about a year or two behind Qualcomm in five g smartphone shipped development. And because of this licensing battle, apple wasn't using Qualcomm chips. So what that means is later this year, basically every flagship phone that you could buy from Samsung, LG, basically every company, it's going to have a five g option. With apple. There was no not going to be a five g iPhone. Speaker 2: 04:22 The worry was that they wouldn't even have a five g iPhone next year. So this year it's still kind of early to have five g. The networks are just starting to roll out. They're still kind of spotty. It, it's still really early. But by the end of the year, next year we're going to really see five g and a lot more places it's going to be more stable. There's going to be a ton of devices. So it was really crucial that apple have a five g iPhone next year. By signing this agreement with Qualcomm, they're now able to hopefully have five g and the iPhone next fall. Uh, it's way too late for them to have it this year, but the belief is they'll have it next year. And then after the settlement was reached, Intel said that it's no longer going to be working on five g smartphone modems. So basically apple, you know, if they want a five g smartphone, they have to work with Qualcomm. Speaker 2: 05:11 And finally I want to ask you, I read that this settlement was surprising and the San Diego courtroom was pretty shocked. Why was it so surprising? Yeah, I was actually in the courtroom, uh, when this happened. These two companies have really been very contentiously battling. They both really seemed like they were really, really determined to fight this in court. Uh, apple CEO Tim Cook was slated to testify. He has never testified in a trial before even with all of the Samsung Litigation. Qualcomm CEO was slated to testify. It was major, major executives from both companies. And you know, as recently as January, Tim Cook said that they hadn't had any talks with Qualcomm sense kind of about the middle of last year. So it was surprising because people didn't really realize that they were talking again. Um, I think this also came together very quickly. Uh, it wasn't something that they've been talking for six months and then they, you know, we were hearing information that they're going to have a deal. It was more that these two seem to be completely opposed, that there was no way that they could come to any sort of agreement. So they were, Qualcomm's attorney was given him, giving his opening arguments at the time that the news broke, that they had found a settlement. So none of us in the courtroom expected this at all. It was very surprising. I've been speaking with a reporter, Shara Timken, have seen it. And thank you so much. Thank you. And in the interest of transparency, Qualcomm is a corporate sponsor of KPBS. Speaker 3: 06:52 [inaudible].