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7 November 2017Patents

Broadcom-Qualcomm deal: Apple patent dispute may hold the key

Broadcom’s reported $130 billion takeover bid for Qualcomm may depend on Qualcomm and Apple resolving their patent dispute, while the deal could have a wider IP impact, according to lawyers.

Yesterday, November 6, several reports stated that semiconductor company Broadcom had made an offer for industry rival Qualcomm, with valuations ranging from $103 billion to $130 billion.

If approved, it will be the biggest technology deal of its kind and would create a company with a market value of over $200 billion.

“This deal has many moving parts. From an IP perspective, resolving the Qualcomm/Apple dispute over substantial iPhone royalties is certainly key to getting this deal done and might be one of the central motivators of it,” said Michael Powell, founder of Navigating IP.

“Complex disputes involving IP can require extraordinary measures to resolve, especially when so much is at stake,” he added.

The clash with Apple began in January when the iPhone maker  accused Qualcomm of abusing its monopoly in the mobile device market to gain unfair royalties from Apple’s inventions.

Apple claimed it had been overcharged billions of dollars by Qualcomm. The semiconductor company  counterclaimed.

In July, Qualcomm filed a  complaint with the US International Trade Commission, alleging that Apple infringed six of its patents in the iPhone model and requesting a ban on imports.

In September, Qualcomm   lost its bid for an injunction staying all foreign actions brought by Apple against the semiconductor company.

Reports by the Financial Times state that Qualcomm is set to reject the “unsolicited” bid from Broadcom, with the company stating that the offer significantly undervalues its business.

“There has been a threat by Apple to remove the business from future iOS handsets and pass that on to Intel, as it has a better working relationship,” explained Jonathan Abrams, partner at Gregory, Abrams Davidson.

“That threat is on the horizon for Qualcomm, and the Broadcom offer, from their point of view, and the point of view as company with an existing relationship with Apple, makes a lot of sense. Even purely from a relationship perspective,” he added.

The companies have a large number of patents for mobile phone chips and parts, and Pat Treacy, head of EU and competition law at Bristows, said the offer comes at an interesting time.

“Qualcomm is currently a key player in discussions about how licensing should work in the context of the move towards 5G technology and the increasing importance of the internet of things (IoT),” she explained.

Treacy said there is no doubt that the potential acquisition comes at an important time for the industry, with the European Commission on the verge of publishing a communication about the future of licensing patents relating to  standardised technologies for IoT.

“Qualcomm are also deeply involved in litigation (not least with Apple) about some aspects of its licensing practices, and any change of ownership might have an effect in both the licensing and the litigation context.”

James Seymour, partner at EIP, said there is no doubt that Qualcomm has been an influential force in the licensing of cellular standard-essential patents.

“This model has recently been coming under greater scrutiny from antitrust authorities worldwide. If successful with the acquisition, which is not a given, it will be interesting to see whether Broadcom have the appetite to maintain the integrated business model, or whether they see greater value by splitting the chipset business from the patent licensing business.

“If there is a split, we might see a more emboldened patent licensing business, but that seems a long way off at this time.”

Paul Sutton, partner at Sutton Magidoff, said Qualcomm is expected to hold out for a far larger acquisition price than that currently being offered by Broadcom.

He added: “If Broadcom and Qualcomm are unable to reach agreement on an acquisition price, it is anticipated that Broadcom chief executive Hock Tan will wage a hostile takeover.”

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19 December 2017   Tessera Technologies, a subsidiary of Xperi Corporation, has settled all pending litigation with semiconductor company Broadcom.