Apple Sues Qualcomm; Company's Legal Woes Begin To Pile Up

In the wake of Apple Inc. (NASDAQ: AAPL)'s statement last Friday, alleging anti-competitive practices on the part of QUALCOMM, Inc. (NASDAQ: QCOM), Credit Suisse highlighted in a note on Monday the multiple legal woes that have befallen the latter.

Apple's Allegations

Analyst Kulbinder Garcha noted Apple believes Qualcomm unfairly charges it royalties, at least five times more than other cellular patent licensers combined, for technologies they were not a part of. To protect this business scheme, Apple said Qualcomm has held back $1 billion in royalty rebate payments from it for responding truthfully to an investigation by law enforcement agencies.

Qualcomm At Loggerheads With FTC

Credit Suisse also noted that the FTC had earlier in the week charged Qualcomm with anticompetitive practices. The FTC had alleged:

• Qualcomm maintains a "no license, no chips" policy, forcing cell phone makers to pay elevated royalties on products that use a competitor's baseband processors.
• Qualcomm has consistently refused to license standard-essential patents to competitors.
• Qualcomm extracted exclusivity from Apple in exchange for reduced royalty rates.

Korean Antitrust Regulator Fines Qualcomm

The firm also noted that in late December the Korean Fair Trade Commission fined Qualcomm $850 million for violating antitrust laws related to its licensing business. The company had responded by suggesting that it will challenge the findings of the KFTC, which, according to it, reflects a flawed process and represents a violation of due process.

Lawsuits To Hit Major QTL Business

According to Credit Suisse, these multiple lawsuits affect Qualcomm's QLT business, which contributes to about 80 percent of its total corporate profit before taxes. The firm noted that the $1 billion Apple is suing Qualcomm for makes up about just 1 percent of its gross profit. That said, the firm noted that this is the second IP royalty rates lawsuit Apple has filed in recent months.

At Time Of Writing

• Apple was up 0.25 percent at $120.30.
• Qualcomm was down 12.50 percent at $55.02.

© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.