17-04-10 Qualcomm Answer To Apple Complaint

Case 3:17-cv-00108-GPC-MDD Document 61 Filed 04/10/17 PageID.

636 Page 1 of 139

1 Evan R. Chesler (N.Y. Bar No. 1475722; pro hac vice)

[email protected]
2 CRAVATH, SWAINE & MOORE LLP
825 Eighth Avenue
3 New York, NY 10019
Telephone: (212) 474-1000
4 Facsimile: (212) 474-3700
5 David A. Nelson (Ill. Bar No. 6209623; pro hac vice)
[email protected]
6 QUINN EMANUEL URQUHART & SULLIVAN, LLP
500 West Madison St., Suite 2450
7 Chicago, Illinois 60661
Telephone: (312) 705-7400
8 Facsimile: (312) 705-7401
9 Karen P. Hewitt (SBN 145309)
[email protected]
10 JONES DAY
4655 Executive Drive, Suite 1500
11 San Diego, California 92121
Telephone: (858) 314-1200
12 Facsimile: (858) 345-3178
13
[Additional counsel identified on signature page]
14
15 Attorneys for Defendant and Counterclaim Plaintiff
QUALCOMM INCORPORATED
16
17 UNITED STATES DISTRICT COURT
18 SOUTHERN DISTRICT OF CALIFORNIA
19 APPLE INC., No. 17-cv-0108-GPC-MDD
20 Plaintiff, QUALCOMM
INCORPORATEDS
21 v. REDACTED ANSWER AND
DEFENSES;
22 QUALCOMM INCORPORATED,
REDACTED
23 Defendant. COUNTERCLAIMS FOR
DAMAGES, DECLARATORY
24 JUDGMENT, AND
INJUNCTIVE RELIEF
25
DEMAND FOR JURY TRIAL
26
Judge: Hon. Gonzalo P. Curiel
27
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QUALCOMMS ANSWER & COUNTERCLAIMS Case No. 17-cv-0108 GPC MDD

Case 3:17-cv-00108-GPC-MDD Document 61 Filed 04/10/17 PageID.637 Page 2 of 139
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Counterclaim-
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Defendant.
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QUALCOMMS ANSWER & COUNTERCLAIMS Case No. 17-cv-0108 GPC MDD

1 TABLE OF CONTENTS
2 Page
3
ANSWER ................................................................................................................ 1
4
COUNTERCLAIMS ............................................................................................. 45
5
NATURE OF THE ACTION ................................................................................. 45
6
PARTIES ............................................................................................................... 57
7
JURISDICTION AND VENUE ............................................................................. 57
8
FACTUAL ALLEGATIONS ................................................................................. 58
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I. Qualcomms Role in the Development of Cellular Technology. .................. 58
10
A. The Fundamental Technology That Enables Cellular
11 Communications. ............................................................................... 58
12 B. Qualcomm Has Been, and Continues To Be, the Leader in Cellular
R&D. ................................................................................................. 60
13
C. The Standardization of Cellular Communications Technology. ......... 60
14
D. The Evolution of Cellular Standards. ................................................. 62
15
II. Qualcomms Patent Portfolio, Standard-Essential Patents, and the
16 Meaning of FRAND. ................................................................................... 66
17 A. R&D Risks......................................................................................... 67
18 B. The FRAND Commitment. ................................................................ 68
19 III. Qualcomms Long History with the Contract Manufacturers. ...................... 71
20 A. Qualcomm Entered into License Agreements with the Contract
Manufacturers over the Past Two Decades......................................... 72
21
B. The Contract Manufacturers License Agreements Are Consistent
22 with ETSIs IPR Policy. ..................................................................... 73
23 C. Qualcomms Intellectual Property Provides Tremendous Value to
Apples Products. ............................................................................... 74
24
D. Apple Has Repeatedly Chosen To Rely on the Contract
25 Manufacturers License Agreements Instead of Taking a Direct
License from Qualcomm. ................................................................... 76
26
E. Apart from Apples Interference, the Contract Manufacturers Have
27 Consistently Abided by the Terms of Their License Agreements
with Qualcomm. ................................................................................ 77
28
QUALCOMMS ANSWER & COUNTERCLAIMS -i- Case No. 17-cv-0108 GPC MDD
1 IV. Qualcomms Chipset and Software Relationship with Apple. ...................... 78

2 A. Apples Use of Qualcomms Chipsets and Software. ......................... 79
3 B. Qualcomm Provides Technical Assistance That Is Critical to the
Success of the iPhone......................................................................... 79
4
V. The Complex Contractual Relationship Between Qualcomm and Apple. ..... 80
5
VI. Qualcomm Has Satisfied Its FRAND Commitments to ETSI with
6 Respect to Apple. ......................................................................................... 87
7 A. Qualcomm Provided Extensive Information About Its Patent
Portfolio. ............................................................................................ 88
8
B. Qualcomm Has Provided a Complete, Written Offer
9 on FRAND Terms. ............................................................................. 90
10 C. Apples Response to Qualcomm Was Unreasonable. ......................... 91
11 D. Qualcomm Offered to Arbitrate Any Dispute over Licensing
Terms. ................................................................................................ 92
12
VII. Apple Has Engaged in a Multifaceted Attack on Qualcomms Business. ..... 93
13
A. Apple Actively Induced Investigations of Qualcomm. ....................... 94
14
B. Apple Interfered with Qualcomms Agreements with the Contract
15 Manufacturers. ................................................................................... 99
16 C. Apple Misrepresented the Performance of Qualcomm-Based
iPhones and Threatened Qualcomm Not To Disclose the Truth. ...... 102
17
D. Apple Is Withholding Approximately in Chipset
18 Payments That It Owes Qualcomm. ................................................. 106
19 E. Apple Materially Breached the Master Software Agreement. .......... 109
20 COUNT I
21 Tortious Interference with Qualcomms License Agreements
with the Contract Manufacturers .......................................................................... 110
22
COUNT II
23
Declaration That Qualcomms License Agreements with the Contract
24 Manufacturers Do Not Violate Qualcomms FRAND Commitments to ETSI...... 114
25 COUNT III
26 Declaration That Qualcomms License Agreements with the Contract
Manufacturers Do Not Violate Competition Law ................................................. 116
27
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QUALCOMMS ANSWER & COUNTERCLAIMS -ii- Case No. 17-cv-0108 GPC MDD
1 COUNT IV
2 Declaration That Qualcomm Has Satisfied Its FRAND Commitments
to ETSI with Respect to Apple ............................................................................. 118
3
COUNT V
4
Breach of the Statement of Work, dated February 28, 2013 ................................. 120
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COUNT VI
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Breach of the Business Cooperation and Patent Agreement ................................. 121
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COUNT VII
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Breach of Implied Covenant of Good Faith and Fair Dealing .............................. 124
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COUNT VIII
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Unjust Enrichment ............................................................................................... 126
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COUNT IX
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Declaration That Qualcomm Is Released from Any Obligation To Make Further
13 Payments Under the Cooperation Agreement ....................................................... 127
14 COUNT X
15 Violations of the California Unfair Competition Law .......................................... 128
16 COUNT XI
17 Breach of the Master Software Agreement ........................................................... 129
18 DEMAND FOR JURY TRIAL ............................................................................ 131
19 PRAYER FOR RELIEF....................................................................................... 131
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QUALCOMMS ANSWER & COUNTERCLAIMS -iii- Case No. 17-cv-0108 GPC MDD
1 ANSWER
2 Defendant Qualcomm Incorporated (Qualcomm), by its undersigned
3 counsel, hereby answers Apple Inc.s Complaint for Damages, Declaratory
4 Judgment and Injunctive Relief (the Complaint), filed January 20, 2017, and
5 asserts its defenses.
6 Except as otherwise expressly set forth below, Qualcomm denies each and
7 every allegation contained in the Complaint, including without limitation the Table
8 of Contents, headings, sub-headings, footnotes, diagrams, and tables contained in
9 the Complaint.
10 Qualcomm specifically denies liability to Apple, or that Apple has suffered
11 any legally cognizable damage for which Qualcomm is responsible. Qualcomm
12 expressly reserves the right to amend and/or supplement its answer and defenses.
13 Subject to the foregoing, Qualcomm states as follows:
14 1. Qualcomm denies the allegations in Paragraph 1, except states that
15 investigations of Qualcomm by certain regulatory agencies are ongoing.
17 (i) Qualcomm has made substantial contributions to the development of standards
18 related to how cellular phones connect to voice and data networks; and
19 (ii) Qualcomm is entitled to a fair royalty for its intellectual property.
20 3. Qualcomm denies the allegations in Paragraph 3.
22 Apple purports to describe the relief it seeks. Qualcomm refers to the Business
23 Cooperation and Patent Agreement between Qualcomm and Apple
24 (Cooperation Agreement) and the Korea Fair Trade Commission (KFTC)
25 Decision No. 2017-0-25, dated January 20, 2017, in Case No. 2015SiGam2118 for
26 their contents. Qualcomm filed a complaint and stay application regarding KFTC
27 Decision No. 2017-0-25 with the Seoul High Court on February 21, 2017; the
28 complaint proceeding is Case No. 2017Nu48, and the stay proceeding is Case
QUALCOMMS ANSWER & COUNTERCLAIMS -1- Case No. 17-cv-0108 GPC MDD
1 No. 2017Ah66. Qualcomm refers to its complaint and stay application for their
2 contents. Qualcomm further states that, pursuant to the terms of the Cooperation
3 Agreement, Qualcomm was not required to and did not make any payments to
4 Apple under that Agreement for the second, third, and fourth quarters of 2016.
5 5. Qualcomm denies the allegations of the first and third sentences of
6 Paragraph 5, except states that (i) Apple purports to describe the relief it seeks;
7 and (ii) the iPhone was not the first cellular phone or smartphone.
9 common standards are beneficial in that they, among other things, allow cellular
10 phones to work together, facilitate the collaborative development of new
11 technologies, enable improvements in the overall cellular ecosystem, and promote
12 investment in R&D.
14 (i) standardization can provide many benefits, including, among other things,
15 promoting interoperability among wireless devices and networks and incentivizing
16 investments in infrastructure, as well as fostering improvements in the technology;
17 and (ii) certain standard-setting organizations request members to make certain
18 commitments to license standard-essential patents (SEPs) on reasonable and
19 non-discriminatory (RAND) or fair, reasonable and non-discriminatory
20 (FRAND) terms.
24 (i) Qualcomm filed certain actions against Meizu in China on June 30, 2016;
25 and (ii) Apple purports to assert claims relating to certain patents that it contends
26 are related to patents that Qualcomm asserted in its June 30, 2016 actions against
27 Meizu and that Qualcomm has disclosed as potentially essential to the 3G/UMTS
28 and/or 4G/LTE standard.
2 Apple purports to describe the relief it seeks.
4 Apple is a California corporation with its principal place of business at 1 Infinite
5 Loop, Cupertino, California 95014, and that Apple designs and markets certain
6 products.
7 13. Qualcomm denies the allegations in Paragraph 13, except states
8 that Qualcomm is a Delaware corporation with its principal place of business at
9 5775 Morehouse Drive, San Diego, California 92121. Qualcomm further states
10 that it is a global company and that its business includes, but is not limited to, the
11 development and commercialization of wireless telecommunications technologies,
12 products, and services.1
14 (i) Qualcomm has offices and employees in the Southern District of California; and
15 (ii) Qualcomm conducts business in the Southern District of California.
17 (i) Qualcomm conducts business primarily through two reportable segments,
18 Qualcomm CDMA Technologies (QCT) and Qualcomm Technology Licensing
19 (QTL); (ii) Qualcomm Technologies, Inc. (QTI) is a wholly owned subsidiary
20 of Qualcomm Incorporated; (iii) QTI operates as a separate legal entity from
21 Qualcomm Incorporated; and (iv) QTI, together with its subsidiaries, operates
22 substantially all of Qualcomms product and services business, including QCT.
24 Apple purports to describe its claims and the relief it seeks.
25
1
26 Qualcomm objects to the Complaints definition of Qualcomm to the extent
that it does not distinguish between Qualcomm Incorporated and the subsidiaries
27 and/or divisions of Qualcomm. Qualcomm reserves all rights to object to Apples
28 purported definition for purposes of discovery or any other aspect of this action.

4 Qualcomms principal place of business is in the Southern District of California.
7 venue is proper in this Court.
10 (i) Apple purports to assert claims related to the Cooperation Agreement; and
11 (ii) the Cooperation Agreement contains a forum selection clause that requires any
12 litigation initiated by Apple to be filed in San Diego County, California.
13 Qualcomm refers to the Cooperation Agreement for its contents.
15 (i) Apples first iPhone was released in 2007; and (ii) Apple purports to describe the
16 certain features of the iPhone.
18 (i) Apples iPad was released in 2010; and (ii) Apple purports to describe certain
19 features of the iPad and its market share.
22 (i) the iPhone and certain models of the iPad can send and receive, over cellular
23 networks, telephone calls and/or other voice and video communications, text
24 messages, and Internet data; (ii) baseband processor chipsets are among the
25 hardware components that, together with software and other components, enable
26 mobile wireless devices to utilize a standardized telecommunications network; and
27 (iii) AT&T, Verizon, Sprint, and T-Mobile are carrier companies.
28
2 (i) baseband processor chipsets are components contained in certain Apple iPhone
3 and iPad devices; and (ii) iPhones and iPads contain a number of components and
4 technologies. Qualcomm further states that Apples contract manufacturers
5 purchase baseband processor chipsets from Qualcomm.
7 (i) certain cellular service providers, baseband processor chipset manufacturers, and
8 wireless device manufacturers are members of standard-setting organizations
9 (SSOs); and (ii) SSOs in the wireless telecommunications industry generally
10 create and promulgate standards that may be implemented by mobile devices and
11 network infrastructure.
13 standards are critical to the wireless communications industry and can provide
14 many benefits, including, among other things, promoting interoperability among
15 wireless devices and networks and incentivizing investments in infrastructure, as
16 well as fostering improvements in the technology.
18 32. Qualcomm denies the allegations in Paragraph 32, except refers to
19 the cited materials for their contents.
20 33. Qualcomm denies the allegations in Paragraph 33, except refers to the
21 cited ETSI document for its contents.
23 some disclosed patents may relate to mandatory features of a standard while others
24 may relate only to optional features. Qualcomm refers to the opinion in Microsoft
25 v. Motorola, Inc., No. C10-1823JLR (W.D. Wash.) (the Microsoft opinion), for
26 its contents.
28 wireless telecommunications standards are complex and that a number of entities
1 have disclosed patents that may be essential to such standards. Qualcomm refers
2 to the Microsoft opinion for its contents.
7 Microsoft opinion for its contents.
10 opinion in Broadcom Corp. v. Qualcomm Inc., No. 06-4292 (3d Cir.), for its
11 contents.
14 (i) ETSI is an SSO; (ii) Qualcomm is a member of ETSI; (iii) ETSI produces
15 globally accepted standards for the telecommunications industry; and (iv) ETSI
16 created or helped create numerous telecommunication standards, including the
17 2G/GSM, 3G/UMTS, and 4G/LTE cellular communication standards. Qualcomm
18 further states that ETSI is based in Sophia Antipolis, France and has more than
19 800 members, including Apple, from countries across five continents.
21 ETSIs Intellectual Property Rights (IPR) Policy for its contents.
23 ETSIs IPR Policy for its contents.
25 ETSIs Dynamic Reporting portal and database for their contents.
26 47. Qualcomm denies the allegations in Paragraph 47, except refers to its
27 IPR undertakings submitted to ETSI for their contents.
2 contract with ETSI for its contents.
6 cellular technology has evolved over time, beginning with so-called 1G, which
7 used analog technology and allowed only voice transmission.
9 (i) so-called 2G cellular technology includes GSM and CDMA standards; and
10 (ii) 2G digital technology offers improved capacity and functioning compared to
11 1G analog technology. Qualcomm further states that most cellular telephones in the
12 United States today use at least 2G technology.
14 (i) so-called 3G cellular technology includes the UMTS and CDMA2000
15 standard; (ii) UMTS incorporates WCDMA technology; and (iii) certain products
16 employ both 2G and 3G technologies.
18 LTE, which is sometimes referred to as a 4G cellular standard, includes a number
19 of releases that have provided a number of improved features.
21 certain multimode chipsets support both 3G and 4G standards.
23 each baseband processor chipset supports certain cellular communication standards.
25 certain carrier networks employ certain cellular standards. Qualcomm further states
26 that in the United States, AT&T and T-Mobile use 2G GSM and 3G
27 UMTS/WCDMA, and Verizon and Sprint use 2G CDMA One and 3G
28 CDMA2000, and that all of those carriers use 4G LTE.
2 (i) wireless handsets may be configured to a particular carriers specifications; and
3 (ii) different regions and countries may use different cellular standards.
8 2016 Annual Report on Form 10-K, dated November 2, 2016, for its contents.
11 the development of commercially viable cellular chipsets requires investments of
12 time, effort, and money.
14 that Qualcomm owns patents relating to implementations of certain cellular
15 standards and has made disclosures of patents pursuant to the policies of certain
16 SSOs.
18 becoming a successful supplier of cellular chipsets requires investments of time,
19 effort, and money to provide reliable products.
22 multiple vendors offered baseband chipsets during the year 2006, including
23 Infineon, Broadcom, Ericsson, Renesas, and Texas Instruments.
27 since 2007, Apple has been reimbursing its contract manufacturers for royalties
28
1 they paid to Qualcomm under license agreements the contract manufacturers signed
2 with Qualcomm.
4 (i) Apple released the first iPhone using Intel (then Infineon) baseband processor
5 chipsets in 2007; (ii) Qualcomm has license agreements with certain contract
6 manufacturers that make products for Apple and pay royalties directly to
7 Qualcomm; and (iii) the contract manufacturers pass certain costs and expenses to
8 Apple.
10 (i) Qualcomm has license agreements with certain contract manufacturers that make
11 products for Apple and pay royalties directly to Qualcomm; and (ii) those license
12 agreements contain confidentiality provisions.
15 (i) Qualcomm and Apple have engaged in licensing negotiations; and (ii) the parties
16 have exchanged written correspondence regarding licensing and refers to that
17 correspondence for its contents.
20 Qualcomm and Apple have engaged in licensing negotiations.
21 79. Qualcomm denies the allegations in Paragraph 79, except states that it
22 is without knowledge or information sufficient to form a belief as to the truth of the
23 allegations regarding Apples royalty payments to other patent holders, and
24 therefore Qualcomm denies the allegations regarding Apples royalty payments to
25 other patent holders.
26 80. Qualcomm states that it is without knowledge or information sufficient
27 to form a belief as to the truth of the allegations in Paragraph 80, and therefore
28 Qualcomm denies the allegations in Paragraph 80. Qualcomm further states that
1 Apple has not provided Qualcomm an unredacted version of the allegations in

2 Paragraph 80.
4 to form a belief as to the truth of the allegations in Paragraph 81 and footnote 1, and
5 therefore Qualcomm denies the allegations in Paragraph 81 and footnote 1.
6 Qualcomm further states that Apple has not provided Qualcomm an unredacted
7 version of the allegations in Paragraph 81 and footnote 1.
9 U.S. Fair Trade Commissions (FTC) complaint in Case No. 5:17-cv-00220
10 (N.D. Cal.) (the FTC Complaint) for its contents.
12 the retail price for certain baseband processor chipsets can be approximately $10 to
13 $20, or more.
15 (i) Apples contract manufacturers buy certain components from Qualcomm; and
16 (ii) separately, the contract manufacturers pay agreed-upon patent royalties to
17 Qualcomm.
19 to form a belief as to the truth of the allegations in Paragraph 85, and therefore
20 Qualcomm denies the allegations in Paragraph 85.
23 U.S. Supreme Courts opinion in Quanta Computer, Inc. v. LG Elecs., Inc., No. 06-
24 937, for its contents.
26 FTC Complaint for its contents.
27
28
2 (i) QTI is a wholly owned subsidiary of Qualcomm Incorporated; and (ii) QTI
3 operates QCT.
5 press release, entitled Qualcomm Implements New Corporate Structure, dated
6 October 1, 2012, for its contents.
9 allegations regarding Apples purported intentions, and therefore Qualcomm denies
10 the allegations regarding Apples purported intentions.
18 Qualcomm and Apple have entered certain agreements, and refers to those
19 agreements for their contents.
21 Cooperation Agreement for its contents.
23 Cooperation Agreement for its contents. Qualcomm further states that Apple has
24 not provided Qualcomm an unredacted version of the allegations in Paragraph 100.
9 letter to Apple regarding the Cooperation Agreement, dated October 9, 2016, for its
10 contents.
15 Marketing Incentive Agreement, dated January 8, 2007 (the MIA), for its
16 contents.
18 Strategic Terms Agreement, dated December 16, 2009 (the STA), and the
19 Amended and Restated Strategic Terms Agreement, dated February 28, 2013 (the
20 ASTA) for their contents.
22 Transition Agreement, dated February 11, 2011 (the TA), for its contents.
24 First Amendment to the Transition Agreement, dated January 1, 2013 (the
25 FATA), for its contents.
27 MIA, the STA, the ASTA, the TA, and the FATA for their contents.
28
2 Qualcomm and Apple have engaged in certain negotiations over a period of time.
4 (i) in 2015, Qualcomm offered to license to Apple a portfolio of Qualcomms
5 Chinese 3G and 4G standard-essential patents on terms consistent with
6 Qualcomms FRAND commitments to ETSI and with the decision and order of
7 Chinas NDRC; and (ii) Apple rejected that offer.
9 that (i) Qualcomm and Apple exchanged correspondence regarding patent licensing
10 on multiple occasions on and after February 5, 2016, and refers to that
11 correspondence for its contents; and (ii) Qualcomm provided Apple with nearly
12 2,000 pages of detailed information regarding its portfolio of patents disclosed to
13 ETSI as potentially essential to 3G and 4G standards, including Qualcomms list of
14 U.S. patents disclosed to ETSI as potentially essential to 3G and 4G standards.
15 Qualcomm refers to its website for its contents.
17 (i) on June 15, 2016, Qualcomm offered Apple a license to Qualcomms Chinese
18 3G and 4G SEPs on FRAND terms and conditions and sent Apple a draft Complete
19 Terminal Chinese Patent License Agreement, and refers to that correspondence and
20 draft agreement for their contents; and (ii) on July 15, 2016, Qualcomm offered
21 Apple a license to Qualcomms rest of world 3G and 4G SEPs on FRAND terms
22 and conditions and sent Apple a draft Complete Terminal Patent License
23 Agreement, and refers to that correspondence and draft agreement for their
24 contents.
26 in a letter dated September 13, 2016, Apple made a non-FRAND offer to
27 Qualcomm, and Qualcomm refers to that correspondence for its contents.
28
1 119. Qualcomm denies the allegations in Paragraph 119 and footnote 2,

2 except states that (i) Qualcomm and Apple have engaged in licensing negotiations;
3 and (ii) the parties have exchanged written correspondence regarding licensing, and
4 Qualcomm refers to that correspondence for its contents. Representatives of
5 Qualcomm and Apple met in-person on December 16, 2016, and December 21,
6 2016. During those meetings, Qualcomm presented claim charts for certain of its
7 patents, and answered Apples questions regarding those claim charts. Qualcomm
8 offered to present hundreds of additional claim charts. Rather than engage in
9 further negotiation and discussion, Apple chose to engage in litigation.
11 except states that Meizu was a smartphone maker in the Chinese market in 2015,
12 and Qualcomm filed certain actions against Meizu in June 2016. Qualcomm refers
13 to those actions and the Reuters article entitled Qualcomm Files 17 New
14 Complaints in China Courts Against Smartphone Maker Meizu, dated June 30,
15 2016, for their contents.
17 except refers to its complaints against Meizu, the press release entitled Qualcomm
18 Files Complaint Against Meizu in China, dated June 24, 2016, and the press
19 release entitled Qualcomm Files Patent Infringement Complaints Against Meizu in
20 China, dated June 30, 2016, for their contents.
22 Qualcomm disclosed to ETSI that each of the Patents-in-Suit may be or may
23 become essential to a 3G/UMTS and/or 4G/LTE standard.
25 Qualcomm owns U.S. Patent No. 7,246,242 (the 242 patent), entitled Integrity
26 Protection Method for Radio Network Signaling, and refers to the 242 patent for
27 its contents and relation to other patents.
28
2 Qualcomm owns U.S. Patent No. 6,556,549 (the 549 patent), entitled Method
3 and Apparatus for Signal Combining in a High Data Rate Communication System,
4 and refers to the 549 patent for its contents and relation to other patents.
6 Qualcomm owns U.S. Patent No. 9,137,822 (the 822 patent), entitled Efficient
7 Signaling over Access Channel, and refers to the 822 patent for its contents and
8 relation to other patents.
10 Qualcomm owns U.S. Patent No. 7,289,630 (the 630 patent), entitled Counter
11 Initialization, Particularly for Radio Frames, and refers to the 630 patent for its
12 contents and relation to other patents.
14 Qualcomm owns U.S. Patent No. 8,867,494 (the 494 patent), entitled System
15 and Method for Single Frequency Dual Cell High Speed Downlink Packet Access,
16 and refers to the 494 patent for its contents.
19 and Apparatus for Data Transmission on a Reverse Link in a Communication
20 System, and refers to the 725 patent for its contents.
23 and Apparatus for a Quick Retransmission of Signals in a Communication System,
24 and refers to the 469 patent for its contents.
25 130. Qualcomm denies the allegations in Paragraph 130, except
26 states that Qualcomm owns U.S. Patent No. 9,059,819 (the 819 patent), entitled
27 Flexible Uplink Control Channel Configuration, and refers to the 819 patent for
28 its contents.
3 for Initiating in a Terminal of a Cellular Network the Measurement of Power Levels
4 of Signals and a Terminal, and refers to the 021 patent for its contents.
9 owns a very large number of patents around the world that have been disclosed to
10 ETSI as potentially essential to one or more cellular standards and refers to ETSIs
11 Dynamic Reporting portal and database for their contents.
18 opinion in LaserDynamics, Inc. v. Quanta Computer, Inc., Nos. 2011-1440, 2011-
19 1470 (Fed. Cir.), for its contents.
25 the opinion in In re Innovatio IP Ventures, LLC Patent Litig., No. 11 C 9308 (N.D.
26 Ill.), for its contents.
28 (i) Apple currently sells the 16GB iPhone SE for $399; and (ii) Apple currently
1 sells the 256 GB iPhone 7 Plus for $969. Qualcomm further states that it is without
2 knowledge or information sufficient to form a belief as to the truth of the
3 allegations regarding products sold by Walmart, and therefore Qualcomm denies
4 the allegations regarding products sold by Walmart. Qualcomm refers to the cited
5 Walmart web page for its contents.
7 Apple sells multiple versions of each generation of iPhones and iPads at different
8 prices.
10 cited opinions for their contents.
12 opinion in GPNE Corp. v. Apple, Inc., No. 12-CV-02885-LHK (N.D. Cal.), for its
13 contents.
18 Microsoft opinion and ETSIs Dynamic Reporting portal and database for their
19 contents.
22 opinion in Apple, Inc. v. Motorola Mobility, Inc., No. 11-cv-178-bbc (W.D. Wis.),
23 for its contents.
25 has entered into non-exhaustive patent agreements, including non-exhaustive
26 license agreements, with modem chipmakers and has never excluded a competing
27 cellular modem chip maker from supplying cellular modem chips. Qualcomm
28
1 refers to the final transcript of its Q4 and Fiscal 2005 Earnings Conference Call of
2 November 2, 2005, for its contents.
4 (i) Qualcomm presented at the Jefferies Technology Conference on October 2,
5 2007, and refers to the transcript of that presentation for its contents; and (ii) on
6 December 10, 2007, Qualcomm filed a Brief of Qualcomm Inc. as Amicus Curiae
7 Supporting Respondent in Quanta Computer, Inc. v. LG Elecs., Inc., No. 06-937,
8 and refers to that brief for its contents.
10 2016 Annual Report on Form 10-K, dated November 2, 2016, its 2007 Annual
11 Report on Form 10-K, dated November 8, 2007, and its 2008 Annual Report on
12 Form 10-K, dated November 6, 2008, for their contents.
14 2014 Annual Report on Form 10-K, dated November 5, 2014, and the KFTCs
15 Decision No. 2017-0-25, dated January 20, 2017, in Case No. 2015SiGam2118, for
16 their contents.
22 FTC Complaint for its contents.
24 Qualcomm has been subject to investigations by competition authorities in China,
25 South Korea, Taiwan, Japan, Europe, and the United States.
27 that (i) the Japan Fair Trade Commission (JFTC) issued an order on
28 September 30, 2009; (ii) the Tokyo High Court issued a decision to stay the JFTCs
1 September 30, 2009 order, dated February 11, 2010; (iii) Chinas NDRC issued an
2 Administrative Sanction Decision in connection with its investigation of
3 Qualcomm on February 9, 2015; (iv) Qualcomm implemented a Rectification Plan,
4 dated February 9, 2015, in connection with the NDRCs Administrative Sanction
5 Decision; (v) the NDRC published a press release on February 10, 2015, stating
6 that Qualcomms Rectification Plan satisfied its Administrative Sanction Decision;
7 (vi) the European Commission (EC) issued a Statement of Objections in Case
8 AT.39711, dated December 8, 2015; (vii) the EC issued a Statement of Objections
9 in Case AT.40220, dated December 8, 2015; (viii) the KFTC issued Decision
10 No. 2017-0-25, dated January 20, 2017, in Case No. 2015SiGam2118; and
11 (ix) Qualcomm filed a complaint and stay application regarding KFTC Decision
12 No. 2017-0-25 with the Seoul High Court on February 21, 2017, the complaint
13 proceeding is Case No. 2017Nu48, and the stay proceeding is Case No. 2017Ah66,
14 and refers to the foregoing documents for their contents.
16 (i) the FTC notified Qualcomm of an investigation in September 2014; (ii) the FTC
17 filed the FTC Complaint on January 17, 2017; and (iii) the FTC issued a press
18 release titled FTC Charges Qualcomm With Monopolizing Key Semiconductor
19 Device Used in Cell Phones, on January 17, 2017. Qualcomm refers to the FTC
20 Complaint and the cited press release for their contents.
22 (i) Chinas NDRC issued an Administrative Sanction Decision in connection with
23 its investigation of Qualcomm on February 9, 2015; (ii) Qualcomm implemented a
24 Rectification Plan, dated February 9, 2015, in connection with the NDRCs
25 Administrative Sanction Decision; and (iii) the NDRC published a press release on
26 February 10, 2015, stating that Qualcomms Rectification Plan satisfied its
27 Administrative Sanction Decision. Qualcomm refers to the foregoing documents
28 for their contents.
2 (i) Chinas NDRC issued an Administrative Sanction Decision in connection with
3 its investigation of Qualcomm on February 9, 2015; (ii) Qualcomm implemented a
4 Rectification Plan, dated February 9, 2015, in connection with the NDRCs
5 Administrative Sanction Decision; (iii) the NDRC published a press release on
6 February 10, 2015, stating that Qualcomms Rectification Plan satisfied its
7 Administrative Sanction Decision; and (iv) since February 9, 2015, Qualcomm has
8 entered into more than 100 license agreements with Chinese companies on terms
9 consistent with the Rectification Plan. Qualcomm refers to the foregoing
10 documents for their contents.
12 (i) in 2006, the JFTC notified Qualcomm of a possible investigation; (ii) the JFTC
13 issued an order, dated September 30, 2009; and (iii) the Tokyo High Court issued a
14 decision to stay the JFTCs September 30, 2009 order on February 11, 2010.
15 Qualcomm refers to the foregoing documents for their contents.
17 that (i) the KFTC issued Decision No. 2009-281, dated December 30, 2009, in
18 Case No. 2009Jisik0329; (ii) the Seoul High Court issued a judgment, dated June
19 19, 2013, in Case No. 2010Nu3932, which modified KFTC Decision No. 2009-281;
20 (iii) the KFTCs Decision No. 2009-281 and the Seoul High Courts June 19, 2013
21 judgment are at issue in Case No. 2013Du14726 pending before the Supreme Court
22 of Korea; (iv) the KFTC issued Decision No. 2017-0-25 in Case
23 No. 2015SiGam2118, dated January 20, 2017; (v) the KFTC issued a press release,
24 dated December 28, 2016; and (vi) Qualcomm filed a complaint and stay
25 application regarding KFTC Decision No. 2017-0-25 with the Seoul High Court on
26 February 21, 2017, the complaint proceeding is Case No. 2017Nu48, and the stay
27 proceeding is Case No. 2017Ah66. Qualcomm refers to the foregoing documents
28 for their contents.
2 (i) the EC notified Qualcomm of an investigation in October 2014; (ii) the EC
3 issued a Statement of Objections in Case AT.39711 on December 8, 2015; (iii) the
4 EC issued a Statement of Objections in Case AT.40220 on December 8, 2015; and
5 (iv) the EC issued a press release on December 8, 2015. Qualcomm refers to the
6 foregoing documents for their contents.
8 investigations of Qualcomm by the JFTC and the Taiwan Fair Trade Commission
9 (TFTC) were ongoing as of the date of Apples Complaint.
11 that regulatory agencies investigating Qualcomm have sought information from
12 third-parties, including Apple.
14 except states that (i) Apple produced documents to the FTC; (ii) a representative of
15 Apple gave a presentation in an open session before the KFTC in Case
16 No. 2015SiGam2118 on August 17, 2016; and (iii) Apple has provided certain
17 information to the EC and TFTC in connection with investigations of Qualcomm.
18 Qualcomm states that it is without knowledge or information sufficient to form a
19 belief as to the truth of the allegations regarding depositions of Apple executives.
21 that (i) Qualcomm has made submissions to the KFTC in connection with
22 Case No. 2015SiGam2118; and (ii) Qualcomm representatives, including its
23 President, were present when Apple testified in an open session before the KFTC in
24 Case No. 2015SiGam2118 on August 17, 2016.
27
28
2 from 2013 through mid-2016, Qualcomm made payments to Apple under various
3 agreements, including the Cooperation Agreement.
5 pursuant to the terms of the Cooperation Agreement, Qualcomm was not required
6 to and did not make certain payments to Apple.
9 to and did not make certain payments to Apple. Apple submitted certain
10 documentation to Qualcomm in connection with the Cooperation Agreement for
11 each quarter of 2016, and Qualcomm refers to that documentation for its contents.
13 Qualcomm and Apple executives met around mid-September 2016.
15 that Apple made a presentation to the KFTC in Case No. 2015SiGam2118 on
16 August 17, 2016, titled Apples Response to KFTC: Views on Qualcomms
17 Abuse of Dominance, and refers to that presentation for its contents.
19 Qualcomm and Apple corresponded regarding the Cooperation Agreement after
20 the second quarter of 2016, and refers to such correspondence for its contents.
22 belief as to the truth of the allegations regarding Apples intentions, and therefore
23 Qualcomm denies the allegations regarding Apples intentions.
25 Qualcomm and Apple corresponded regarding the Cooperation Agreement after the
26 second quarter of 2016, and refers to such correspondence for its contents.
27
28
12 allegations regarding each of Apples interactions with government agencies, and
13 therefore Qualcomm denies the allegations regarding each of Apples interactions
14 with government agencies.
16 Qualcomm and Apple entered into the Cooperation Agreement, and refers to that
17 Agreement for its contents.
27
28
8 except states that Qualcomm sent Apple a letter regarding the Cooperation
9 Agreement on December 2, 2016, and refers to that letter for its contents.
10 Qualcomm further states that it filed ex parte applications pursuant to 28 U.S.C.
11 1782 in the Northern District of California, and refers to those applications for
12 their contents. Qualcomm refers to the opinion in In re Ex Parte Application of
13 Qualcomm Inc., Nos. 5:16-mc-80002-PSG to -80008-PSG (N.D. Cal.), for its
14 contents.
18 cited materials for their contents.
20 (i) the FTC, the EC, and the TFTC are members of the International Competition
21 Network (ICN); and (ii) the ICN has published Guidance on Investigative
22 Process, and refers to that publication for its contents.
26 opinion in In re Ex Parte Application of Qualcomm Inc., Nos. 5:16-mc-80002-PSG
27 to -80008-PSG (N.D. Cal.), for its contents.
28
2 Korean Monopoly Regulation and Fair Trade Act for its contents.
8 allegations regarding Apples expectations and estimates, and therefore Qualcomm
9 denies the allegations regarding Apples expectations and estimates.
12 206. Qualcomm repeats and realleges its responses to the preceding
13 Paragraphs with the same force and effect as if fully restated herein.
15 Qualcomm and Apple have entered certain agreements, including the Cooperation
16 Agreement.
26 to and did not make any payment to Apple under that Agreement for the fourth
27 quarter of 2016.

5 Apple and Qualcomm engaged in certain communications regarding the
6 Cooperation Agreement during two 30-day periods and did not resolve their dispute
7 regarding the Cooperation Agreement.
10
11
12
14 the FTC filed the FTC Complaint on January 17, 2017, and refers to that complaint
15 for its contents. Qualcomm states that it is without knowledge or information
16 sufficient to form a belief as to the truth of the allegations regarding Apples
17 intentions, and therefore Qualcomm denies the allegations regarding Apples
18 intentions.
22 Apple and Qualcomm each had an obligation to act fairly and in good faith with
23 respect to their obligations under the Cooperation Agreement.

4 California Civil Code 1671(b) for its contents.
14 California Code of Civil Procedure 1060 for its contents.
15 239. Qualcomm denies the allegations in Paragraph 239 and denies that the
16 declaratory relief sought by Apple is appropriate, except states that certain rights
17 and obligations under the Cooperation Agreement are at issue.
20 Apple purports to seek declaratory relief in its Complaint.
21 242. Qualcomm denies the allegations in Paragraph 242 and denies that the
22 declaratory relief sought by Apple is appropriate, except states that certain rights
23 and obligations under the Cooperation Agreement are at issue.
27 242 patent for its contents.
28
1 245. Qualcomm states that the allegations in Paragraph 245 state a legal
2 conclusion to which no response is required. To the extent a response is required,
12 Qualcomm denies the allegations in Paragraph 248, except states that Apple
13 purports to seek declaratory relief in its Complaint.
27
28
27
28

27
28
19 U.S. Supreme Courts opinion in Quanta Computer, Inc. v. LG Elecs., Inc., No. 06-
20 937, for its contents.
28
2 Apple purports to seek declaratory relief in its Complaint.
18 U.S. Supreme Courts opinion in FTC v. Actavis, Inc., No. 12-416, for its contents.
23 allegations regarding Apples purported track record, and therefore Qualcomm
24 denies the allegations regarding Apples purported track record.
27 allegations regarding Apples incentives, and therefore Qualcomm denies the
28 allegations regarding Apples incentives.
10 opinion in Bendix Corp. v. Belax, Inc., Nos. 17343, 17344 (7th Cir.), for its
11 contents.
13 that (i) Chinas NDRC issued an Administrative Sanction Decision in connection
14 with its investigation of Qualcomm on February 9, 2015; (ii) Qualcomm
15 implemented a Rectification Plan, dated February 9, 2015, in connection with the
16 NDRCs Administrative Sanction Decision; (iii) the NDRC published a press
17 release on February 10, 2015, stating that Qualcomms Rectification Plan satisfied
18 its Administrative Sanction Decision; and (iv) the FTC filed the FTC Complaint on
19 January 17, 2017. Qualcomm refers to the foregoing documents for their contents.
21 belief as to the truth of the allegations regarding the European Commissions
22 findings, and therefore Qualcomm denies the allegations regarding the European
23 Commissions findings.
28
3 allegations regarding device manufacturers purported preferences, and therefore
4 Qualcomm denies the allegations regarding device manufacturers purported
5 preferences.
9 allegations regarding non-Qualcomm suppliers conveyance of intellectual property
10 rights, and therefore Qualcomm denies the allegations regarding non-Qualcomm
11 suppliers conveyance of intellectual property rights.
19 Apple is a high-volume purchaser of cellular chipsets, and that certain benefits may
20 come from being a component supplier to Apple.
25 California Business & Civil Code 17200, et seq. (the UCL) for its contents.
27 the opinion in Columbia Metal Culvert Co. v. Kaiser Aluminum & Chem. Corp.,
28 No. 77-1846 (3d Cir.), for its contents.

3 opinion in Cel-Tech Commcns, Inc. v. L.A. Cellular Tel. Co., No. S066735 (Cal.),
4 for its contents.
9 Apple purports to seek certain relief in its Complaint.
10 Qualcomm denies the allegations in Paragraphs A-U of Apples Prayer for
11 Relief, except states that Apple purports to seek certain relief in its Complaint.
12 DEFENSES
13 Qualcomm asserts the following defenses. Apples claims also are barred in
14 whole or in part for the reasons set forth in Qualcomms counterclaims filed
15 herewith, and the defenses set forth below incorporate the factual allegations of
16 Qualcomms counterclaims by reference. In asserting these defenses, Qualcomm
17 does not assume the burden of proof with respect to any issue as to which
18 applicable law places the burden of proof on the Plaintiff.
19 Qualcomm reserves the right to assert additional defenses, as warranted by
20 facts learned through investigation and discovery, and expressly reserves the right
21 to amend its answer to assert such additional defenses.
22 First Defense
23 Apples complaint, and each and every claim stated therein, fails to state a
24 claim on which relief can be granted.
25 Second Defense
26 Apples claims are barred in whole or in part by the applicable statutes of
27 limitations, including, but not limited to, California Business and Professions Code
28 17208 and 15 U.S.C. 15b.
1 Third Defense
2 Apples claims are barred in whole or in part by the doctrine of laches.
3 Fourth Defense
4 Apples claims are barred in whole or in part by the doctrine of estoppel.
5 Fifth Defense
6 Apples claims are barred in whole or in part by the doctrine of waiver.
7 Sixth Defense
8 Apples claims are barred in whole or in part by the doctrine of unclean
9 hands.
10 Seventh Defense
11 Apples claim for breach of contract is barred in whole or in part because
12 Apple breached the Cooperation Agreement, and therefore excused Qualcomm
13 from its obligations.
14 Eighth Defense
15 Apples claim for breach of contract is barred in whole or in part because of
16 its claims filed in this and other lawsuits around the world.
17 Ninth Defense
18 Apples claim for breach of contract is barred because Apple breached the
19 covenant of good faith and fair dealing implied in every contract governed by
20 California law, and therefore excused Qualcomm from its obligations.
21 Tenth Defense
22 Apples claim for breach of contract is barred because Apple has not suffered
23 any damages from any such alleged breach.
24 Eleventh Defense
25 Apples claim for breach of contract is barred by the doctrine of
26 misunderstanding to the extent there was no meeting of the minds on the meaning
27 of Section 7 of the Cooperation Agreement.
28
1 Twelfth Defense
2 Apples claims are barred in whole or in part because Qualcomms
3 interpretation of Section 7 of the Cooperation Agreement does not constitute a
4 liquidated damages provision under California Civil Code 1671(b).
5 Thirteenth Defense
6 Apples claims are barred in whole or in part because they are non-
7 justiciable.
8 Fourteenth Defense
9 Apples claims for declaratory relief are barred in whole or in part because
10 there is no active case or controversy under the Declaratory Judgment Act,
11 28 U.S.C. 2201-2202, and Apple is seeking an advisory opinion.
12 Fifteenth Defense
13 Apples claims are barred in whole or in part because Qualcomms alleged
14 conduct did not unreasonably restrain trade and was lawful, pro-competitive, and
15 based on legitimate business and economic justifications.
16 Sixteenth Defense
17 Apples claims are barred in whole or in part by the Illinois Brick doctrine,
18 which prohibits antitrust recovery by indirect purchasers.
19 Seventeenth Defense
20 Apples claims are barred in whole or in part because Apple has not suffered
21 antitrust injury or any injury of the type the antitrust laws were intended to prevent.
22 Eighteenth Defense
23 Apples claims are barred in whole or in part because it has sustained no
24 injury in fact or damages proximately caused by any act or omission of Qualcomm.
25
26
27
28
1 Nineteenth Defense
2 Apples claims are barred in whole or in part because any damages that
3 Apple purports to have suffered are too remote or speculative to allow recovery,
4 and it is impossible to ascertain and allocate such alleged damages with reasonable
5 certainty.
6 Twentieth Defense
7 Apples claims are barred in whole or in part because of ratification,
8 agreement, acquiescence or consent to Qualcomms alleged conduct.
9 Twenty-First Defense
10 Apples claim under Californias Unfair Competition Law is barred in whole
11 or in part because the alleged business practices are not unlawful, unfair, or
12 fraudulent, within the meaning of California Business & Professions Code 17200
13 or otherwise.
14 Twenty-Second Defense
15 Any monetary damages under California Business and Professions Code
16 17200, et seq., are barred in their entirety by those statutes and other applicable
17 legal authority.
18 Twenty-Third Defense
19 Apples claims are barred in whole or in part because it lacks standing.
20 Twenty-Fourth Defense
21 Apples claims seeking to disgorge royalties paid through the contract
22 manufacturers are barred in whole or in part because Apple lacks standing.
23 Twenty-Fifth Defense
24 To the extent that Apple has suffered damages, if at all, it has failed to take
25 reasonable measures to mitigate its damages in whole or in part, and is barred from
26 recovering damages that it could have reasonably avoided.
27
28
1 Twenty-Sixth Defense
2 To the extent that Apple has suffered damages, if at all, all damages were
3 caused by Apples own actions.
4 Twenty-Seventh Defense
5 To the extent that Apple has suffered damages, if at all, its damages are
6 subject to offset in the amount of any obligations Apple owes Qualcomm.
7 Twenty-Eighth Defense
8 Apple is not entitled to injunctive relief because any alleged injury to Apple
9 is not immediate or irreparable and Apple has an adequate remedy at law.
10 Twenty-Ninth Defense
11 Apples claims are barred in whole or in part because it is not entitled to
12 restitution or disgorgement of profits.
13 Thirtieth Defense
14 Apples claims are barred in whole or in part because any recovery would
15 result in unjust enrichment to Apple.
16 Thirty-First Defense
17 Apples claims are barred in whole or in part because Qualcomm has
18 satisfied its FRAND commitments.
19 Thirty-Second Defense
20 Apples claims are barred in whole or in part because Apple is an unwilling
21 licensee.
22 Thirty-Third Defense
23 Apples claims are barred in whole or in part because Qualcomm has not
24 violated competition law.
25
26
27
28
1 Thirty-Fourth Defense
2 Apples claims are barred in whole or in part because, at all relevant times,
3 Qualcomm complied with all applicable federal and state laws and regulations.
4 Thirty-Fifth Defense
5 Apple is not entitled to interest, attorneys fees or costs in connection with
6 this action.
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1 COUNTERCLAIMS
2 Counterclaim-Plaintiff Qualcomm Incorporated (Qualcomm),2 by its
3 undersigned counsel, alleges, with knowledge with respect to its own acts and on
4 information and belief as to other matters, as follows:
5 NATURE OF THE ACTION
6 1. Qualcomm is the worlds leading innovator of cellular technology.
7 Its inventions form the very core of modern cellular communications. No company
8 has done more to develop the technology that enables cellular networks and
9 systems; no company does more today to create and improve that technology for
10 the next generation; and no company can match the breadth, quality, or value of
11 Qualcomms cellular patent portfolio. Hundreds of cellular device suppliers around
12 the world have taken licenses from Qualcommor have sourced their products
13 from a manufacturer that has a license with Qualcommall on terms that reflect
14 the established market value of Qualcomms patent portfolio.
15 2. Apple is the worlds most profitable seller of cellular devices.
16 But as a late-comer to the cellular industry, Apple contributed virtually nothing
17 to the development of core cellular technology. Instead, Apples products rely
18 heavily on the cellular inventions of Qualcomm and others. Apples iPhones and
19 other products enjoy enormous commercial success, but without lightning-fast
20 cellular connectivityenabled in large part by Qualcomms inventionsApples
21 iPhones would lose much of their consumer appeal. Apple has built the most
22
23 2
Qualcomm Incorporated is the parent company. One division of Qualcomm
24 Incorporated is Qualcomm Technology Licensing (QTL), which grants licenses
or otherwise provides rights to use portions of Qualcomm Incorporateds
25 intellectual property portfolio. Qualcomm Incorporateds separate subsidiary,
Qualcomm Technologies, Inc. (QTI), operates substantially all of the products
26 and services businesses owned by Qualcomm Incorporated, including Qualcomm
CDMA Technologies (QCT), and substantially all of its engineering, research,
27 and development functions. For ease of reference only, in these Counterclaims,
28 QTL, QTI, and QCT will be referred to herein as Qualcomm.
1 successful consumer products in history by relying significantly on cellular

2 technologies pioneered by Qualcomm.
3 3. Now, Apple wants to pay far less than fair value for a license to
4 Qualcomms patents.
5 4. Apple cannot credibly contest the value of Qualcomms patent
6 portfolio, as hundreds of licenseesincluding the companies that manufacture
7 Apples cellular deviceshave consistently paid royalties reflecting that value to
8 Qualcomm for years. So Apple has attempted to force Qualcomm to accept less
9 than fair value for the use of its intellectual property by wielding its immense power
10 over Qualcomm and by engaging in a host of unlawful acts, including at least the
11 following:
12 Apple failed to uphold its end of the bargain in the parties Business
13 Cooperation and Patent Agreement (the Cooperation Agreement),
14 by, among other things, intentionally giving government agencies false
15 and misleading information and testimony about Qualcomm;
16 Apple interfered, and continues to interfere, with Qualcomms long-
17 standing contracts with the manufacturers of Apples cellular devices,
18 causing them to withhold nearly in royalties owed to
19 Qualcomm;
20 Apple has withheld approximately owed to Qualcomm
21 under another contract relating to a high-speed feature of Qualcomms
22 chipset;
23 Apple chose not to utilize certain high-performance features of the
24 Qualcomm chipsets for the iPhone 7 (preventing consumers from
25 enjoying the full extent of Qualcomms innovation); and then, when
26 the Qualcomm-based iPhones still outperformed the Intel-based
27 iPhones, Apple (i) falsely claimed that there was no discernible
28 difference between iPhones with Qualcomms chipsets and iPhones
1 with Intels chipsets, and (ii) acted to prevent Qualcomm from

2 revealing to consumers the extent to which iPhones with Qualcomms
3 chipsets outperformed iPhones with Intels chipsets; and
4 Apple materially breached the parties Master Software Agreement by
5
6
7 5. Apples goal is clearto leverage its immense power to force
8 Qualcomm into accepting less than fair value for the patented technologies that
9 have led innovation in cellular technology and helped Apple generate more than
10 $760 billion in iPhone sales.
11 6. Qualcomm asserts these counterclaims to enforce its contractual rights,
12 to receive fair value for its intellectual property, and to stop Apples unlawful
13 attacks.
14 7. Qualcomm Pioneered the Development of Core Cellular
15 Technologies. Since its founding in 1985, Qualcomm has been designing,
16 developing, and improving cellular communication systems, networks, and
17 productssuccessfully inventing numerous core technologies that have
18 transformed how the world communicates. Qualcomm invented fundamental
19 technologies at the heart of 2G, 3G, and 4G cellular communications, is leading
20 the industry to 5G, and has contributed innumerable additional innovations used in
21 virtually every modern cell phone. Over the past three decades, Qualcomm has
22 invested more than $40 billion in research and development. From 2010 to 2016,
23 Qualcomm typically spent more than 20% of its revenue per year on R&D.
24 Qualcomms nearly 20,000 engineers continue to push the boundaries of cellular
25 and other mobile technology through groundbreaking innovation. Qualcomms
26 patent portfolio currently includes more than 130,000 issued patents and patent
27 applications worldwide.
28
1 8. Qualcomms technologies enable the cellular ecosystem that allows

2 smartphones to send and receive vast amounts of data and voice communications at
3 rapid speeds, seamlessly and reliably, from anywhere within reach of a cellular
4 network. Qualcomms inventions are necessary for the entire cellular network to
5 functionthey are not limited to technologies in modem chipsets or even cell
6 phones. For example, Qualcomms technological contributions enable popular
7 smartphone apps such as Uber, Snapchat, Spotify, Apple Music, Skype, Google
8 Maps, and Pokmon GO, among others.
9 9. Rather than keep its core inventions to itself, Qualcomm chose to
10 patent its inventions, contribute them to standards bodies, and voluntarily license
11 them to cellular device manufacturers. As a result, companies have been able to
12 use Qualcomms technology to create the products and experiences that consumers
13 enjoy today. Qualcomm, through its licensing division, QTL, now has license
14 agreements with hundreds of companies covering 3G and 4G cellular technologies
15 and products.
16 10. Separate from its licensing business, Qualcomms subsidiary,
17 Qualcomm Technologies, Inc., QTI, designs industry-leading components, such as
18 chipsets and associated software. QTIs cellular components are sold (and the
19 associated software is licensed) for use in the manufacture and operation of cellular
20 devices. QTI has consistently been the leader in bringing to market cutting-edge
21 chipsetssometimes years ahead of the competition.
22 11. Qualcomms patent portfolio is priced and licensed separately from the
23 pricing and sale of QTIs components. A Qualcomm licensee pays the same
24 royalty to Qualcomm for a license to Qualcomms patent portfolio regardless of
25 whether its licensed cellular devices use components supplied by QTIs subsidiary,
26 the licensee itself, or another QTI competitor.
27
28
1 12. Apple Has Built the Most Profitable Company in the World, Relying
2 Heavily on Qualcomms Patented Technologies. With a market capitalization of
3 more than $700 billion, $246 billion in cash reserves, and a global sphere of
4 influence, Apple has more money and influence than many countries. Relying
5 heavily on Qualcomm technology, Apple has become the dominant player in cell
6 phone sales. Apples dominance has grown every year since the iPhones launch in
7 2007. In recent years, Apple has captured upwards of 90 percent of all profits in
8 the smartphone industry.
9 13. But Apple achieved its success without contributing much, if anything,
10 to the innovations at the heart of cellular communications. Apple has long
11 recognized that Qualcomm and others developed the essential cellular technologies
12 used by its products today. In fact, Apple has publicly admitted that the full value
13 of its products is realized only when the underlying cellular technologysuch as
14 4G LTEadequately enables their capabilities. Qualcomm was hard at work
15 developing LTE before Apple introduced the first 2G iPhone.
16 14. Apple Has Voluntarily Chosen To Operate Through Long-standing,
17 Independent License Agreements Between Qualcomm and the Contract
18 Manufacturers. When Apple sought to commercialize the iPhone in the mid-
19 2000s, it needed to ensure that the phones would be licensed to practice
20 Qualcomms technologies. Apple, for its own commercial reasons, chose not to
21 take a direct license from Qualcomm, though Qualcomm has always been willing
22 to negotiate a direct license with Apple.
23 15. Instead of entering into a direct license agreement with Qualcomm,
24 Apple decided (i) to outsource manufacturing of its iPhones and iPads to other
25 companies (the Contract Manufacturers); and (ii) to rely on those Contract
26 Manufacturers existing license agreements with Qualcomm. At the time Apple
27 made the decision not to take a direct license, Apples iPhones did not use any
28
1 chipsets or other products purchased from Qualcomm. Thus, chipset supply could
2 not have played any role in Apples decision.
3 16. Apple claims that Qualcomm has used its alleged power with respect
4 to certain chipsets to force unfair licensing terms on Apple. But the facts tell a
5 different story. Each of Qualcomms license agreements with the Contract
6 Manufacturers was signed before Apple used any Qualcomm chipset in its
7 products. Some were signed before Apple had sold even a single iPhone. And
8 the relevant licensing terms stayed the same when Apple began using Qualcomm
9 chipsets in iPhones in 2011.
10 17. The terms of the Contract Manufacturers license agreements with
11 Qualcomm and the royalties they pay were negotiated regardless of which chipset
12 supplier the Contract Manufacturers were using. The agreements have always been
13 wholly independent of which suppliers chipsets the Contract Manufacturers use in
14 the phones they manufacture for Apple (or for any of their other customers).
15 18. The Contract Manufacturers license agreements are generally similar
16 to the license agreements Qualcomm has entered into with hundreds of other
17 cellular device manufacturers. The terms of such licenses are customary in the
18 cellular industry. Indeed, virtually every significant cellular device manufacturer in
19 the cellular industry has recognized the value of Qualcomms technology and
20 entered into a license agreement with Qualcommtaking a license to Qualcomms
21 portfolio of patents and calculating royalties as a percentage of the net selling price
22 of the device, generally subject to per unit running royalty caps. The royalties
23 payable to Qualcomm by the Contract Manufacturers are a mere fraction of the
24 price that Apple charges consumers for its iPhones. Indeed, Qualcomms per-
25 device royalties for its portfolio of tens of thousands of patents are far less than
26 what Apple charges consumers for a basic plastic phone case.
27 19. Since the release of the first 3G iPhone nearly a decade ago, the
28 Contract Manufacturers have been consistently paying Qualcomm royalties under
1 their license agreements, based on their sales to Apple of the cellular devices they
2 manufacture.
3 20. Apple Rejected Qualcomms FRAND Offer for a Direct License.
4 Although Apple benefits from the Contract Manufacturers license agreements,
5 Qualcomm and Apple have had on-and-off negotiations about a potential direct
6 license agreement for years. Most recently, Qualcomm and Apple engaged in
7 negotiations regarding a direct license agreement from 2015 until Apple filed this
8 lawsuit. At Apples request, in July 2016, Qualcomm extended a written, fair,
9 reasonable, and nondiscriminatory (FRAND) licensing offer to Apple for
10 Qualcomms 3G and 4G standard-essential patents (SEPs).
11 21. Apple rejected Qualcomms offer and indicated that it was unwilling
12 to negotiate a license only for Qualcomms cellular SEPs. Apple then requested a
13 license to far more patents than the license Apple had initially requested from
14 Qualcomm and claimed that the value of Qualcomms patents was substantially less
15 than their fair-market value. Apple sought a license to all patents that Qualcomm
16 disclosed as potentially essential to 3G and 4G standards, and even swept in patents
17 and applications that may apply to future 5G standards that are still under
18 development. For all this, Apple offered to pay Qualcomm royalties
19 of approximately per phone, a small fraction of the royalty that other
20 smartphone vendors would pay for a comparably priced phone.
21 22. To appreciate the unreasonableness of Apples offer, one need only
22 compare it to the royalties that Apple demands for its own patents. In Apples
23 recent litigation with Samsung, Apple argued that just three Apple patents on
24 touch-screen features (pinch-to-zoom, tap-to-zoom, and bounce-back) were
25 worth a reasonable royalty of $7.14 per phone. That is, Apple claims that only
26 three of its patents on these features are worth what Apple is
27 willing to pay for Qualcomms thousands of patents, taken together, on
28 fundamental technologies that are essential to cellular communication. It is neither
1 fair nor reasonable to contend, as Apple does, that the cumulative value of years of
2 Qualcomm innovation driving core cellular technology pales in comparison to the
3 value of just three Apple user-interface patents.
4 23. Apple Has Engaged in Unlawful Tactics To Avoid Paying Fair
5 Value for Qualcomms Technology. In an effort to obtain a below-market price
6 for Qualcomms technology, Apple has launched an unlawful attack on
7 Qualcomms business. Apples various lawsuits against Qualcomm are simply
8 another step in its aggressive strategy of constructing commercial disputes and then
9 claiming it has been victimized. After bringing this lawsuit in January, Apple filed
10 other lawsuits against Qualcomm in China, the United Kingdom, and Japan. This
11 tactic is familiar to those in the industry; Apple has previously accused its suppliers
12 and rivals alike (such as Nokia and Samsung) of unlawful monopolization when
13 they have sought compensation for the use of their patents. In an effort to reduce
14 its supply costs, Applethe wealthiest company in the worldrepeatedly has cast
15 itself as an antitrust victim. But the facts refute any such notion. In reality, these
16 lawsuits are designed to enhance Apples already formidable negotiating leverage.
17 24. Apples global attack against Qualcomm has included the following
18 unlawful acts:
19 25. First, Apple wrongfully induced regulatory action against Qualcomm
20 and then falsely accused Qualcomm of extortion. In doing so, Apple failed to
21 uphold its end of the bargain under the parties Cooperation Agreement.
22 26. In early 2013, Qualcomm and Apple entered into the aptly named
23 Business Cooperation and Patent Agreement. The contract was clear: Qualcomm
24 would make substantial payments to Apple for a variety of consideration, but only
25 so long as Apple satisfied its own obligations under the Agreement.
26 27. In its Complaint, Apple misrepresents the nature of the Cooperation
27 Agreement, stating that the sole purpose of Qualcomms payments under the
28 Agreement was to reduce Apples royalty burden. That is not true. Each party to
1 the Cooperation Agreement provided meaningful value to the other. In particular,

2 Qualcomms payments under the Cooperation Agreement were in exchange for,
3 among other things, promises from Apple that it (i) would cooperate with
4 Qualcomm in the development and deployment of certain technologies, (ii) would
5 not launch various patent attacks against Qualcomm or its customers, and
6 (iii) would not actively induce or initiate litigationincluding investigations by
7 government agenciesagainst Qualcomm. These contractual provisions reflect
8 Qualcomms attempt to limit Apples ability to abuse its leverage over Qualcomm.
9 Although Apple now characterizes the Cooperation Agreement differently for
10 litigation purposes, Qualcomm expected to receive significant value from Apple for
11 the payments it agreed to make under the Agreement.
12 28. Qualcomm has been relieved of its obligation to make Cooperation
13 Agreement payments to Apple because, among other reasons, Apple has misled
14 government agencies around the world about Qualcomms business practices in
15 order to induce regulatory proceedings against Qualcomm. As merely one
16 example, on August 17, 2016, Apple told the Korea Fair Trade Commission
17 (KFTC) that Apple has yet to add a [second chipset] supplier because of
18 Qualcomms exclusionary conduct. But when Apple made that statement to the
19 KFTC, it already had added Intel as a second baseband chip supplier and had
20 purchased Intel chips to incorporate in the iPhone 7, which was only a few weeks
21 away from its September release. Apple already knew that every iPhone 7 offered
22 for sale in Korea would incorporate an Intel chip, not a Qualcomm chip. Apples
23 statement to the KFTC was false.
24 29. Following Apples misstatements, as the parties were attempting to
25 resolve the Cooperation Agreement dispute in late 2016, Apple asked Qualcomm to
26 propose ways in which Apple could address Qualcomms concerns about Apples
27 misstatements. In response, Qualcomm suggested corrections that Apple could
28 provide to the KFTC to help mitigate some of the damage its misstatements had
1 caused. What Apple now repeatedly portrays as extortion in its Complaint was,
2 in reality, merely Qualcomm responding to Apples request.
3 30. At the time, Apple presented its request for clarifying statements it
4 could provide to the KFTC as a peace offering to Qualcomm. Qualcomm
5 responded with good-faith suggestions on how Apple could clarify and correct the
6 record before the KFTC. Apple now claims that Qualcomms suggestions were
7 extortion. Not only is that a false accusation, but it mischaracterizes Qualcomms
8 good-faith effort to resolve a dispute by responding to Apples request.
9 31. Second, to apply even more pressure on Qualcomm, Apple has directly
10 interfered with Qualcomms long-standing license agreements with the Contract
11 Manufacturers. Apples tortious interference has violated both the parties
12 Cooperation Agreement (thereby extinguishing Qualcomms payment obligations)
13 and California law.
14 32. As explained above, the Contract Manufacturers voluntarily entered
15 into their license agreements with Qualcomm, and they have consistently paid
16 Qualcomm royalties on both Apple products and non-Apple products for years.
17 But in another example of Apple wielding its enormous commercial leverage over
18 its suppliers, Apple has intentionally caused at least some of the Contract
19 Manufacturers to withhold payments from Qualcomm. Due to Apples direct
20 interference, certain Contract Manufacturers have failed to pay Qualcomm nearly
21 in royalties, and the prospect of Apples continued interference threatens
22 significant additional injury to Qualcomm.
23 33. Separately, for years, Apple has pressured the Contract Manufacturers
24 not to cooperate with audits that Qualcommthrough independent royalty
25 auditorshas the right to conduct under the Contract Manufacturers license
26 agreements. As a result, Qualcomm has been unable to verify the accuracy of the
27 Contract Manufacturers royalty reports.
28
1 34. Third, Apple misrepresented the performance of iPhones with

2 Qualcomm chips and prevented Qualcomm from telling consumers about the
3 superiority of its chips. Some versions of Apples latest iPhone (iPhone 7)
4 incorporate Qualcomm chipsets, while others incorporate Intel chipsets. Apple
5 effectively chose to limit the performance of the Qualcomm-based iPhones by not
6 taking advantage of the full potential speed of which Qualcomms modems are
7 capable. Apples actions were intended to prevent consumers from realizing that
8 iPhones containing Qualcomm chipsets performed far better than iPhones
9 containing chipsets supplied by Intel.
10 35. Apple not only deprived Qualcomm of the opportunity to have
11 consumers appreciate Qualcomms best technology, but Apple also attempted to
12 prevent Qualcomm from disclosing the superior performance of its chipsets to the
13 public. Even after Apple chose not to utilize speed-increasing features for the
14 Qualcomm-based iPhones, independent studies revealed that Qualcomm chipsets
15 continued to outperform Intel chipsets. To try to prevent disclosure of the
16 performance disparity between the Qualcomm chipset and the Intel chipset, Apple
17 told Qualcomm that it would be unacceptable for Qualcomm to make or sponsor
18 any public comparisons between the Qualcomm-based iPhone and the Intel-based
19 iPhone. Apple warned that if Qualcomm engaged in or sponsored such
20 comparisons, Apple would use the marketing resources at its disposal to retaliate
21 against Qualcomm and that Qualcomms standing as an Apple chipset supplier
22 would be jeopardized. But Apple stated publiclyand falselythat there was
23 no discernible difference between iPhones using Intel chipsets and iPhones using
24 Qualcomm chipsets. Apples conduct violates California unfair competition law.
25 36. Fourth, Apple is improperly withholding approximately
26 in payments that it owes Qualcomm under a contract for a high-speed chipset
27 feature called carrier aggregation. Apple owes approximately
28 under the parties contract known as the Statement of Work, dated February 28,
1 2013 (the 2013 SOW). Apple has admitted that it owes approximately
2 under that contract, but refuses to pay even that undisputed sum unless
3 Qualcomm releases its claim to the full amount that Apple owes and otherwise
4 accedes to Apples demands. Apples refusal to pay constitutes a breach of the
5 2013 SOW and is further evidence of Apples coordinated attack on Qualcomms
6 business.
7 37. Fifth, Apple has breached its obligations under the parties Master
8 Software Agreement by
9
10
11
12
13
14
15
16
17
18 38. Apples Conduct Has Violated Multiple Laws and the Parties
19 Agreements. By selectively disclosing terms of the parties confidential
20 agreements, Apple has told a one-sidedand inaccuratestory.
21 39. Apple has disproportionate bargaining power, uses that power to force
22 Qualcomm (and other suppliers) into accepting unfair and unreasonable terms, and
23 has abused its power by launching unfounded attacks on Qualcomm in an attempt
24 to force Qualcomm into accepting lower royalties.
25 40. Apples global attack on Qualcomms business has caused and
26 continues to cause significant harm to Qualcomm. Qualcomm brings these
27 counterclaims to seek redress for and prevent future threatened harm from Apples
28 tortious interference with Qualcomms contracts, breach of the parties 2013 SOW,
1 breach of the parties Cooperation Agreement (and its implied covenant of good
2 faith and fair dealing), unjust enrichment, unfair business practices, and material
3 breach of the parties Master Software Agreement. Qualcomm seeks declaratory
4 relief, injunctive relief, compensatory damages, punitive damages, restitution, and
5 attorneys fees.
6 PARTIES
7 41. Qualcomm is a Delaware corporation with its principal place of
8 business at 5775 Morehouse Drive, San Diego, California. Qualcomm is
9 recognized as an industry leader and innovator in the field of wireless technologies.
10 Qualcomm has more than 130,000 patents and patent applications around the world
11 relating to cellular technologies and other cutting-edge technologies. Qualcomm
12 derives a substantial portion of its revenues and profits from licensing its
13 intellectual property. QTIs subsidiary sells chipsets, and associated software, for
14 cell phones and other cellular devices. Qualcomm has developed technologies
15 enabling the 2G, 3G, and 4G families of cellular standards for cellular devices, and
16 is a leader in developing forthcoming 5G technologies.
17 42. Apple is a California corporation with its principal place of business at
18 1 Infinite Loop, Cupertino, California. Apple designs, markets, and sells
19 throughout the world cellular devices that implement the 2G, 3G, and 4G families
20 of cellular standards.
21 JURISDICTION AND VENUE
22 43. This court has jurisdiction over the subject matter of this action
23 pursuant to 28 U.S.C. 1367, and Qualcomm seeks declaratory relief pursuant to
24 28 U.S.C. 2201(a) and 2202.
25 44. This Court has personal jurisdiction over Apple because it is organized
26 and exists under the laws of California.
27 45. Venue is proper in this District because Apple brought this action and
28 thereby consented to venue. Alternately, venue is proper in this District pursuant to
1 28 U.S.C. 1391(b)-(d). Additionally, venue is proper in this District pursuant to

2 the forum-selection clauses in the parties Cooperation Agreement and the parties
3 Master Software Agreement.
4 FACTUAL ALLEGATIONS
5 I. Qualcomms Role in the Development of Cellular Technology.
6 46. Qualcomm has played the leading role in the creation and
7 advancement of modern cellular communication technologies.
8 47. When Qualcomm was founded in 1985, cell phones were cumbersome,
9 heavy devices. They supplied only voice communications, with inconsistent
10 quality, to limited numbers of mostly wealthy consumers who could afford the
11 devices and the expensive per-minute charges for using them. Early networks were
12 very limited and inefficientaudio quality was poor, users sometimes heard
13 portions of others calls, handoffs were noisy, and calls frequently dropped.
14 48. Today, cell phones are remarkably powerful devices delivering reliable
15 voice service and lightning-speed data and mobile computing to billions of
16 consumers around the world at affordable prices.
17 49. Achieving this level of performance was the result of the efforts of
18 Qualcomm and a handful of other industry pioneers that developed new and
19 radically more efficient technologies enabling cellular systems, networks, and
20 products. Qualcomms innovative technological contributionsrepeatedly
21 recognized as best in classhave driven growth in the cellular communications
22 industry and lowered costs for device manufacturers, carriers, and consumers.
23 50. Apple, on the other hand, has played little to no role in developing
24 cellular communication technologies.
25
A. The Fundamental Technology That Enables Cellular
26 Communications.
27 51. Cellular communications are constrained by the radio spectrum over
28 which voice and data travel. Like real estate, radio spectrum is a limited, albeit
1 invisible, physical resource, and the steadily increasing use of wireless

2 communications means steadily increasing demand for the same limited supply of
3 bandwidth. Radio spectrum is considered so valuable that in 2015, when the U.S.
4 Federal Communications Commission (FTC) held an auction for the rights to use
5 very limited portions of spectrum in the United States, the successful carriers,
6 Verizon and AT&T, collectively paid close to $45 billion for the rights to use the
7 auctioned spectrum.
8 52. Cellular communications are also constrained by performance
9 requirements, such as voice quality, call drop rate, average downlink and uplink
10 data rates, maximum downlink and uplink data rates, coverage, battery life, and
11 the need to deliver quality services to as many users as possible at the same time.
12 53. Thus, cellular communications pose a number of fundamental system-
13 engineering challengesnamely, designing communication systems and
14 methodologies that allow both user equipment (such as cell phones) and network
15 equipment (such as base stationsthe cell towers that detect signals and connect
16 them to the cellular network) to share efficiently the capacity of the available radio
17 spectrum, while still meeting performance requirements.
18 54. To satisfy the ever-growing demand for more users, more data, and
19 higher speeds, engineers must develop systems that allow more information to
20 travel over the limited available spectrum. Specifically, engineers must address
21 how cellular devices interact with the network, and vice versa, including developing
22 efficient and reliable methods to encode and transmit data through the spectrum,
23 multiple access technology that allows multiple devices to use the same slice of
24 spectrum at the same time, and protocols that coordinate communications between
25 base stations at the cell towers and cellular devices.
26 55. This technology endeavors to accomplish several important (and
27 sometimes competing) goals: (i) make the most efficient use of the scarce spectrum
28 available; (ii) work within the size and power constraints of handheld devices,
1 which need to be small, lightweight, and power-efficient; and (iii) enable efficient
2 networks and ongoing compatibility from generation to generation of cellular
3 standards. The utility of any cellular device, including Apples iPhone, depends
4 critically on this enabling technology.
5 56. Qualcomm has been pioneering such enabling technology for more
6 than 30 years.
7 B. Qualcomm Has Been, and Continues To Be, the Leader in
8 Cellular R&D.
9 57. To conduct its R&D and other business activities, Qualcomm employs
10 approximately 20,000 engineers in more than 40 countries. Qualcomm also has

11 invested tens of billions of dollars in R&D focused on cellular and wireless
12 communications technology. For example, between 2014 and 2016 alone,
13 Qualcomm invested at least $5 billion in R&D every yearan average of more
14 than 20% of its revenue each year. Those investments, which place Qualcomm at
15 the forefront of the cellular communications industry, have produced numerous
16 industry-changing innovations in wireless and other technologies.
17 58. Qualcomms unparalleled commitment to R&D has allowed it to
18 continue offering pioneering innovations to the cellular industry. Qualcomm has
19 driven the development and commercialization of successive generations of cellular
20 technology and, today, is one of only a handful of companies driving the next-
21 generation 5G standard.
22 C. The Standardization of Cellular Communications
23 Technology.
59. To put Qualcomms significance to the cellular industry in context,
24
it is important to understand how cellular standards have developed since cell
25
phones were introduced in the 1980s.
26
60. Standardization endeavors to bring together the best engineering
27
resources to develop and identify the optimal solution to enormously complex
28
1 engineering challenges. Standard-development organizations (SDOs) are at the

2 center of this process. The main SDOs in the wireless telecommunications industry
3 have set up a partnership, called 3GPP, where hundreds of companies work
4 together to identify technical problems and create solutions called standards.
5 3GPP sets requirements, including performance requirements, for successive
6 generations of cellular technology and then develops technical specifications that
7 provide the functionality, reliability, and spectral capacity needed to meet those
8 requirements. The SDOs that formed the 3GPP partnership then convert these
9 specifications to standards that are used worldwide.
10 61. These SDOs work through 3GPP to foster technological
11 advancement by focusing development in areas most beneficial to the cellular
12 industry at largecarriers, infrastructure manufacturers, cellular device
13 manufacturers, and othersand to the general public. One of the key roles of these
14 SDOs is to develop, approve, and promulgate thousands of detailed, complex
15 technical specifications that enable cellular communications to function. Each new
16 generation of cellular technology has depended on numerous inventions from a
17 small number of innovators around the globe. The most significant of these
18 innovators is Qualcomm.
19 62. Cell phones, by definition, are useful only if they can communicate
20 with a network. Yet today, cell phones are manufactured or supplied by hundreds
21 of different companies around the world, while multiple companies also design and
22 manufacture cellular infrastructure such as base stations. Thus, one important
23 function of standardization is to ensure compatibility, allowing devices from any
24 manufacturer to operate on a given network, and on networks around the world.
25 63. But the cellular standards-development process is not just a selection
26 among a variety of available and equally viable options, such as picking a standard
27 shape for electrical outlets and plugs. Instead, SDOs consistently set goals for next-
28 generation cellular standards that demand capabilities and performance levels that
1 the existing generation of technology has not yet achieved, while maintaining
2 flawless compatibility with existing networks. SDOs thus set the agenda for
3 innovators R&D efforts, and vice versa, in an iterative process that drives
4 innovators to invent important new technologies. Innovators propose their
5 technology approaches, along with considerable justification, as a part of the
6 standardization process for the next generation. The engineers participating in the
7 standard setting process (some of whom represent implementers that make no
8 contributions to the standard) evaluate the technology approaches and develop the
9 standard by choosing those technologies that meet the standards requirements and
10 will be optimal for the operation and success of the standard as a whole.
11 D. The Evolution of Cellular Standards.
12 64. The first commercial cell phone networks in the United States were
13 deployed in 1983. These first generation (1G) networks relied on analog radio
14 technology that had barely changed since World War II. Call quality was poor, and
15 signals often crossed into neighboring frequencies, causing interference and
16 dropped calls.
17 65. Demand for cellular communications nonetheless grew rapidly,
18 increasing from approximately 200,000 users in 1985 to more than 1.5 million users
19 in 1988. As a result, network operators grew increasingly desperate for new
20 technology that could accommodate the user surge.
21 66. By the mid-to-late 1980s, a possible solution emerged: digital
22 technology called Time Division Multiple Access (TDMA). TDMA compressed
23 the data representing voice calls and then transmitted those data in alternating time
24 slots, enabling multiple users and conversations to share the same frequency.
25 TDMA could accommodate roughly three times as many phone calls within a given
26 amount of spectrum as could an analog system. TDMA was not without problems,
27 including poor voice quality and dropped calls. Yet, by the late 1980s, the
28
1 European Union (which had become the de facto arbiter of cellular standards)
2 decided that its 2G wireless networks would use a TDMA standard known as the
3 Global System for Mobile communications (GSM), and TDMA appeared primed
4 to become the 2G standard of choice worldwide.
5 67. That changed in 1989 when Qualcomm, then a small start-up
6 company, transformed the cellular industry by introducing Code Division
7 Multiple Access (CDMA). CDMA was initially introduced as a groundbreaking
8 2G cellular technology that vastly improved the capacity of cellular networks and
9 the quality of cellular service. A CDMA system uses codes to allow a large number
10 of users to communicate at the same time, sharing the same frequency channel.
11 CDMA offered far better call clarity than TDMA and could accommodate more
12 than three times the number of calls than TDMA for the same spectrum.
13 68. Despite CDMAs advantages over TDMA, the commercialization of
14 CDMA technology proved to be a risky and difficult endeavor. Qualcomm devoted
15 substantial time and resources demonstrating that CDMA was not only technically
16 superior but also commercially feasible. Ultimately, Qualcomms efforts resulted
17 in the adoption of the IS-95 standard by the Telecommunications Industry
18 Association, and the successful deployment of CDMA wireless networks in the
19 United States and elsewhere.
20 69. By the late 1990s, the cellular industry was thriving. However,
21 2G technologies proved unable to achieve the industry goals of increased speed,
22 reliability, and efficiency driven by consumer demand. The focus therefore shifted
23 to 3G technologies.
24 70. Qualcomms innovative solutions formed the basis of 3G. Indeed,
25 all three of the 3G variations that achieved commercial importance worldwide
26 were based on Qualcomms CDMA innovation: (i) the CDMA2000 standard;
27 (ii) the Wideband Code Division Multiple Access (WCDMA) standard;
28 and (iii) the hybrid Time Division Synchronous Code Division Multiple Access
1 (TD-SCDMA) standard (developed primarily for use in China). Although these

2 3G standards differ in some respects and compete in some geographies, all three are
3 based on Qualcomms breakthrough CDMA technology.
4 71. The high data rates provided by CDMA, along with new cell phone
5 features, changed the ways people used their devices, in that datanot just phone
6 callsbecame a core part of the user experience. Available radio spectrum once
7 again became overwhelmed by heavy traffic. The industry needed to take another
8 step forward.
9 72. Led by Qualcomms efforts, 3G technology became significantly more
10 advanced with the releases of major enhancements. This led to the adoption of
11 3.5G and 3.75G standards, such as High Speed Downlink Packet Access
12 (HSDPA), High Speed Packet Access (HSPA), and Evolved High Speed
13 Packet Access (HSPA+). Those technologies increased data speeds
14 exponentially.
15 73. Qualcomm did not stop with 3.75G. In fact, Qualcomm began
16 researching 4G technologies years before those technologies were standardized, and
17 a decade before their significant commercial rollout. As various industry players
18 worked on 4G technologies, Qualcomm made fundamental technological
19 contributions that propelled the industrys smartphone revolution forward. In 2006,
20 Qualcomm acquired another OFDMA innovator, Flarion Technologies, and
21 combined its innovations and research teams and efforts with Qualcomms own.
22 Together with Flarion, Qualcomm pioneered the application of Orthogonal
23 Frequency Division Multiple Access (OFDMA) and Single-Carrier Frequency
24 Division Multiple Access (SC-FDMA) to cellular systems.
25 74. OFDMA and SC-FDMA became the basis for the 4G standards,
26 known broadly as Long-Term Evolution (LTE). These innovations once again
27 expanded network capacity and vastly boosted data rates to speeds well beyond
28 those of 3G, 3.5G, and 3.75G systems.
1 75. Finding ways to substantially increase data transfer on a limited

2 amount of spectrum was the true impetus behind the smartphone revolution. By
3 2010, the cellular world had changed so dramatically that, for the first time, the
4 majority of cellular transmissions consisted of data, not voice calls. Today, cellular
5 systems are primarily occupied by transmission of enormous quantities of data
6 (such as email, files, pictures, streaming video, and music), with voice traffic
7 constituting only a tiny fraction of cellular transmissions, as illustrated in Figure 1
8 below.
9 Fig. 1: Worldwide Mobile Voice and Data Traffic, 2011-2016
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26 Source: Ericsson Mobility Report, November 2016.
27
28
1 76. Even now, with Qualcomm still leading the way, new iterations of
2 LTE technologies are being introduced, allowing gigabit per second data speeds for
3 networks that have upgraded to the most recent releases of LTE standards. Thanks
4 to Qualcomms continuing innovations, 4G LTE networks offer data speeds
5 thousands of times faster than the cellular technology that existed when Qualcomm
6 brought its first major CDMA breakthrough to the world.
7 77. It is 3G and 4G technologyenabled in large part by Qualcommthat
8 allows todays smartphones to send and receive vast amounts of data at previously
9 unimagined speed. The fast and reliable transfer of data facilitates other innovative
10 technologies, like precise positioning used for many apps, and has propelled
11 smartphones to be the fastest-selling consumer electronic devices in history. In
12 fact, by 2015, smartphones were outselling personal computers four to one.
13 78. While Qualcomm has beenand continues to bea leading
14 contributor to every cellular standard, up to and including LTE and the emerging
15 5G technologies, Apple has played virtually no role in their development. But
16 Apple itself has recognized how critical modern cellular networks are to
17 smartphones used around the world today and to Apples iPhone in particular. As
18 Apple CEO Tim Cook stated, advanced LTE technology can unleash the power
19 and capability of the iPhone in a way that an older network . . . would not.
20 79. Qualcomms innovations are set to form the core of the next-
21 generation 5G standard. Once again, Qualcomms technologies promise to vastly
22 improve the capabilities of cellular devices, networks, and systemsby, among
23 other things, multiplying data speeds, increasing reliability, and reducing the
24 latency of communications.
25 II. Qualcomms Patent Portfolio, Standard-Essential Patents, and the
26 Meaning of FRAND.
27 80. As a result of its massive investments in R&D, Qualcomm owns the
28 cellular industrys leading patent portfolio. Qualcomm makes licenses to its patent
1 portfolio broadly available to manufacturers and suppliers of cell phones and other
2 cellular devices.
3 81. Qualcomms portfoliowhich consists of more than 130,000 patents
4 and patent applicationsincludes patents that are essential to cellular standards,
5 patents that are essential to other standards, and patents that are not essential to
6 any industry standard but reflect valuable non-standardized technologies.
7 82. A patent is considered essential to a cellular standard when an aspect
8 of the standard cannot, as a technical matter, be implemented without practicing at
9 least one claim in the patent. Such patents are called standard-essential patents, or
10 SEPs, at the time of standardization. Qualcomms broad portfolio of cellular SEPs
11 includes inventions that are practiced by modem chips, inventions that are practiced
12 by other components, inventions that are practiced by combinations of components,
13 inventions that are practiced only by complete cellular devices, and inventions
14 practiced only by cellular devices interacting with a network or even just the
15 network itself.
16 83. By contrast, a non-standard-essential patent (NEP) is not technically
17 necessary to practice any feature of a standard. But an NEP may cover an invention
18 that provides important functionality and value to cellular devices or systems and
19 may be highly desired by consumers or cellular device manufacturers or suppliers.
20 As a result of its decades-long commitment to cellular and other mobile R&D,
21 Qualcomm owns tens of thousands of cellular SEPs and NEPs.
22 A. R&D Risks.
23 84. There are significant risks associated with investing in R&D to try to
24 improve cellular systems and communications. Costly technology development
25 efforts often fail. Some efforts result in technologies that are innovative but not
26 commercially successful, often for reasons beyond the inventors control. Other
27 efforts are technologically and commercially successful, but may not lead to
28
1 revenue until far in the future. And, because intellectual property (e.g., patented
2 innovations in the field of wireless communications) is intangible, it faces a
3 heightened risk of misappropriation by others (especially after it is disclosed to an
4 SDO) as compared to physical objects.
5 85. These basic risks inherent in R&D investments are compounded when
6 the technologies are developed for and contributed to an industry standard, such as
7 WCDMA or LTE. Innovators in industries in which technology is standardized,
8 like the wireless industry, bear the additional risks thateven if they succeed in
9 developing an effective technologytheir innovations will not be included in the
10 standard, or the standard will not be commercially successful.
11 86. Finally, as part of the standard-development process, before an
12 innovators technology is included in a standard, the innovator must make that
13 technology known to manufacturerspotentially including its own direct
14 competitorsseveral years before it can even hope to obtain payment in return in
15 the form of royalties. Generally, a major standard is finalized and approved years
16 before products that implement the standard come to market. By agreeing to
17 disclose proprietary technology so that it can be used in the implementation of a
18 standard, the innovator sacrifices a measure of the technological head-start its R&D
19 investments could earn, instead providing competitors ample time to learn and
20 develop products using that technology. Once standard-compliant products come
21 to market, manufacturers may postpone making fair payments to the innovators
22 who invested in the development of the standardeven while those manufacturers
23 reap profits only made possible by the patented innovations.
24 B. The FRAND Commitment.
25 87. Major SDOs have attempted to balance the need to encourage
26 innovators to contribute to standards, on the one hand, with the need for
27 implementers of standards to have access to the innovators intellectual property to
28
1 make standard-compliant products, on the other hand. Patent licensingand the

2 enforcement of patent rights when the patents are not licensedare critical to this
3 balance.
4 88. The most important and influential SDO in the cellular
5 communications industry (and the SDO relevant to this action) is the European
6 Telecommunications Standards Institute (ETSI). ETSI has more than
7 800 members from 67 countries and five continents. ETSIs Intellectual Property
8 Rights (IPR) policy expressly acknowledges the need to balance reward for
9 innovation and access to standardized technology:
10 [T]he ETSI IPR POLICY seeks to reduce the risk to
ETSI, MEMBERS, and others applying ETSI
11 STANDARDS . . . , that investment in the preparation,
adoption and application of STANDARDS could be
12 wasted as a result of an ESSENTIAL IPR for a
STANDARD . . . being unavailable. In achieving this
13 objective, the ETSI IPR POLICY seeks a balance
between the needs of standardization for public use in the
14 field of telecommunications and the rights of the owners
of IPRs. (ETSI IPR Policy 3.1 (emphasis added).)
15
89. To balance the need for adequate rewards for SEP holders and the
16
need for wide access to SEPs, ETSI requests that SEP holders agree to make
17
licenses available for certain specified rights under their SEPs on fair, reasonable
18
and non-discriminatory, or FRAND, terms and conditions. A patentee makes a
19
FRAND commitment to an SDO voluntarily, with the understanding that it will be
20
entitled to seek FRAND royalties from licensees of its SEPs in the future.
21
90. A FRAND commitment creates a contractual obligation between a
22
SEP holder and an SDO. Qualcomms FRAND commitments to ETSI govern its
23
licensing of its 3G and 4G SEPs, on which Apples iPhones and other cellular
24
devices depend.
25
91. What is considered fair and reasonable is intentionally given wide
26
latitude by ETSIs IPR policy. When determining whether the terms and scope of a
27
proposed license are fair and reasonable, accepted industry terms and conditions, as
28
1 well as widely accepted terms for a particular portfolio of SEPs, are compelling
2 evidence. Certain industry practices have come to be accepted as FRAND.
3 92. For example, it has long been accepted in the cellular industry that the
4 common practice of calculating royalties as a percentage of the net selling price of
5 the entire device (e.g., the iPhone) is consistent with a SEP holders FRAND
6 commitment.
7 93. Similarly, it is common practice for a SEP holder with a large number
8 of patents to license those patents as a single portfolio, rather than to negotiate
9 single-patent licenses one by one. In March 2016, a German court found that where
10 the plaintiff-patentee had consistently offered a worldwide portfolio license,
11 [t]his does not give rise to any [FRAND] concerns, as it corresponds to a well-
12 established licensing practice. Saint Lawrence Commcns v. Vodafone, docket
13 number 4a O 73/14, at 14, 19, Dsseldorf Regional Court (Mar. 31, 2016). Not
14 surprisingly given this background, Apples request for an offer from Qualcomm,
15 as well as its own most recent counteroffer to take a license to Qualcomms
16 technology, were for various kinds of portfolio licenses. The Contract
17 Manufacturers agreements, on which Apple has depended for a decade, are not
18 patent-by-patent licenses.
19 94. In fact, consistent with ETSIs IPR policy and the long-standing
20 industry practice among major SEP holders, Qualcomms license agreements with
21 cellular device manufacturers all include a portfolio of cellular SEPs for certain
22 standards. Many also include certain patents and applications that are essential to
23 non-cellular standards, as well as certain NEPs. Those agreements often grant
24 rights to practice Qualcomms cellular SEPs for the specified standards at any time
25 during the term of the agreement, plus many other patents and applications owned
26 by Qualcomm as of an agreed-upon date. This type of broad license is what almost
27 all licensees have sought, as licensees recognize the impracticality of conducting a
28 separate license negotiation for each of Qualcomms thousands of patents.
1 95. Apple recognized this industry practice and practical reality when it
2 sued Nokia-related entities in December 2016, exactly one month before it sued
3 Qualcomm. See Complaint 35, Apple Inc. v. Acacia Research Corp., et al.,
4 No. 16-cv-7266 (N.D. Cal., filed Dec. 20, 2016). In that action, Apple alleged that
5 the licensing practices of Nokia and its affiliated entities were not FRAND in part
6 because their conduct precluded Apple from obtaining a single license to their
7 collective portfolio of patents. Apple complained that Nokia deprived Apple of its
8 right to a single licensing negotiation for a single royalty for Nokias entire patent
9 portfolio. In this lawsuit against Qualcomm, Apple takes exactly the opposite
10 position, asserting that Qualcomms [f]ail[ure] to offer an individual license on a
11 patent-by-patent basis (or a patent family-by-patent family basis) violates
12 Qualcomms FRAND obligation.
13 96. FRANDs non-discrimination principle is intended to prevent
14 licensors from offering similar packages of value to similarly situated parties on
15 materially different terms. As such, widespread industry acceptance of broadly
16 similar licensing terms is a strong indication that an offer including such terms is
17 consistent with FRAND. In its lawsuits against Qualcomm and other SEP owners,
18 Apple has sought discriminatory royalties that are far lower than those its
19 competitors have received and paid for many years, and far lower than the royalties
20 Apples Contract Manufacturers have paid.
21 III. Qualcomms Long History with the Contract Manufacturers.
22 97. Over the past two decades, Qualcomm entered into license agreements
23 with the Contract Manufacturers. The terms of the Contract Manufacturers license
24 agreements are entirely consistent with ETSIs IPR policy. And those agreements
25 have been integral to the success of Apples cellular devices.
26 98. Time and again, Apple has chosen to continue relying on the Contract
27 Manufacturers license agreements, instead of entering a direct license agreement
28
1 with Qualcomm. But despite the enormous commercial success Apple has
2 achieved under this arrangement, Apple has now tortiously disrupted the Contract
3 Manufacturers long-standing relationships with Qualcomm in an effort to pay less
4 than fair-market royalties for Qualcomms intellectual property.
5 A. Qualcomm Entered into License Agreements with the
6 Contract Manufacturers over the Past Two Decades.
7 99. Apple does not manufacture iPhones and iPads itself. Instead, it pays
8 third-party manufacturers in China and Taiwan to construct its devices. The
9 Contract Manufacturers that manufacture Apples iPhones and iPads are:
10 (i) Foxconn, (ii) Pegatron, (iii) Wistron, and (iv) Compal. Each of the Contract
11 Manufacturers also manufactures products for other cellular device suppliers. And
12 each has a longstanding business relationship with Qualcomm that is independent
13 of Apple.
14 100. Each Contract Manufacturer, like virtually every other major cellular
15 device manufacturer in the world, has each taken a royalty-bearing license to
16 Qualcomms intellectual property.
17 101. Long before Apple sold its first cellular device in 2007, Qualcomm
18 began entering into license agreements (Subscriber Unit License Agreements)
19 with the Contract Manufacturers:
20 Qualcomms license agreement with Compal became effective
21 on February 10, 2000;
22 Qualcomms license agreement with Foxconn became effective
23 on October 18, 2005;
24 Qualcomms license agreement with Wistron became effective
25 on May 23, 2007; and
26 Qualcomms license agreement with Pegatron became effective
27 on April 29, 2010.
28
1 102. Under their license agreements, the Contract Manufacturers have been
2 able to use Qualcomms intellectual property to manufacture cellular devices,
3 including Apples iPhones and iPads, as well as other companies products.
4 B. The Contract Manufacturers License Agreements Are
5 Consistent with ETSIs IPR Policy.
6 103. Contrary to Apples allegations, Qualcomms license agreements with
7 the Contract Manufacturers are fully consistent with ETSIs IPR policy.
8 104. Each of the Contract Manufacturers negotiated with Qualcomm at
9 arms length and chose to sign an agreement with Qualcomm that grants it certain
10 rights, including a broad, portfolio-wide license to Qualcomms patents.
11 105. Each of the Contract Manufacturers license agreements provides
12 rights to practice Qualcomms cellular SEPs for the specified standards at any time
13 during the term of the agreement, plus many other patents and applications owned
14 by Qualcomm as of an agreed-upon date.
15 106. For example, in Foxconns agreement with Qualcomm,
16
17
18
19 107. The royalties for devices under each of the Contract Manufacturers
20 license agreements are calculated as a percentage of the net selling price of the
21 entire device (e.g., the iPhone).
22 108. Qualcomms license agreements with the Contract Manufacturers are
23 on terms broadly similar to the license agreements Qualcomm has entered with
24 many other companies, which have all recognized the enormous value that
25 Qualcomms intellectual property provides to their cellular devices.
26 109. The Contract Manufacturers license agreements with Qualcomm have
27 been integral to the success of Apples cellular devices.
28
1 C. Qualcomms Intellectual Property Provides Tremendous

2 Value to Apples Products.
3 110. Apple needs some form of access to Qualcomms patent portfolio
4 because Apples cellular devices could not function without the use of Qualcomms
5 intellectual property. Without such access, Apple would infringe Qualcomms
6 patents. Apple itself has acknowledged that Qualcomms intellectual property
7 enables cellular devices downstream function and value.
8 111. Qualcomms inventions are not limited to technologies in modem
9 chipsets or even cell phones. Qualcomms intellectual property reads on everything
10 from a single chip to the entire mobile network, and it is recognized for driving
11 value to the entire device.
12 112. Qualcomms contributions to the system level of cellular
13 communications have been game-changing: Qualcomm vastly improved data
14 transfer rates (both download and upload speeds) and significantly lowered the cost
15 of transferring that data; Qualcomm increased the capacity of the cellular spectrum
16 by making the use of that spectrum far more efficient, enabling carriers to
17 accommodate more consumers and demand on their networks; Qualcomm made it
18 easier for consumers to use data and make voice calls at the same time; Qualcomm
19 reduced the static and interference that once made many cell phone calls
20 unintelligible; Qualcomm enabled longer use time and battery life through more
21 efficient radio access techniques. The list goes on.
22 113. Qualcomms intellectual property also enables numerous important
23 features on the iPhone. To name a few examples, thanks to Qualcomms
24 innovations:
25 The iPhone can be used as a WiFi hotspot and stream ultra-high-
26 definition (4K) videos.
27
28
1 The iPhone benefits from longer battery life, an auto-lock

2 feature, higher resolution, Application Switching, a dual antenna,
3 and Airplane Mode.
4 The iPhone includes assisted GPS technology, which makes
5 possible location-based services such as Google Maps, turn-by-turn
6 navigation, finding nearby restaurants, and many other location-based
7 features and apps such as Uber.
8 114. Above all, the iPhones value to consumers is driven by its ability to
9 connect with and transfer voice and data over cellular networks at rapid speedsa
10 capability heavily dependent on Qualcomms intellectual property. The iPhones
11 value to users depends largely on this capability, because many of the most popular
12 apps todayincluding Snapchat, Instagram, Spotify, Apple Music, Facebook,
13 YouTube, Uber, Google Mapsare centered around downloading or uploading
14 data-intensive images, maps, videos, or music wherever one is and whenever one
15 needs them.
16 115. As the respected author Thomas L. Friedman recently explained:
17 Most people think that they can watch Game of Thrones on their cell phone
18 because Apple came out with a better phone. No, Apple gave you a larger screen
19 and better display, but the reason [the video streams smoothly] is because
20 Qualcomm and AT&T and others invested billions of dollars in making the wireless
21 network and phones more efficient. Thank You for Being Late 80-81 (2016).
22 116. On an April 2016 earnings call, while explaining the weak sales of
23 iPhones in India, Apple CEO Tim Cook confirmed the iPhones dependence on
24 high-speed cellular connectivity for its success:
25 The LTE roll-out with India just really begins this year.
That will unleash the power and capability of the iPhone
26 in a way that an older network, 2.5G or even some 3G
networks, would not do.
27
28
1 117. Similarly, on an October 2016 earnings call, Tim Cook again

2 explained how 4G cellular technology drives the value and user experience on the
3 iPhone:
4 [T]here are enormous investments going on in 4G, and
we couldnt be more excited about that because it really
5 takes a great network working with iPhones to produce
that great experience for people. (emphasis added)
6
118. Apples public statements show that Apple recognizes the immense
7
value of Qualcomms intellectual property. Nevertheless, each time Apple and
8
Qualcomm have discussed entering into a direct license agreement, Apple has
9
refused to agree to fair market terms.
10
11 D. Apple Has Repeatedly Chosen To Rely on the Contract
Manufacturers License Agreements Instead of Taking a
12 Direct License from Qualcomm.
13 119. Over the past decade, as an alternative to relying on Qualcomms
14 license agreements with the Contract Manufacturers, Qualcomm and Apple have
15 periodically discussed a direct license agreement. Those discussions began as early
16 as 2007, when Apple consideredbut ultimately declinedto sign a license
17 agreement with Qualcomm. Importantly, at the time, Apple was not using any
18 Qualcomm components, and could therefore negotiate a direct license without
19 regard to chip supply. However, Apple chose not to enter into a direct license
20 agreement at that timeor since.
21 120. In 2010, Qualcomm and Apple revisited the possibility of a direct
22 license agreement, but Apple decided to continue to rely on the Contract
23 Manufacturers license agreements. In 2012, the parties again discussed entering a
24 direct license agreement to replace the Contract Manufacturers license agreements
25 (as to the devices they make for Apple), but did not reach a deal.
26 121. Most recently, from 2015 into 2017, Apple and Qualcomm engaged in
27 negotiations regarding a direct license agreement. But as before, those discussions
28 ended without Apple signing a license agreement.
1 122. As a result, Apple has continued to rely on the Contract

2 Manufacturers license agreementsand, in the process, has become the most
3 successful cellular device company in history.
4 123. However, despite the unprecedented success Apple has achieved while
5 relying on the Contract Manufacturers license agreements, Apple has tortiously
6 interfered (repeatedly) with the Contract Manufacturers long-standing relationships
7 with Qualcomm.
8 E. Apart from Apples Interference, the Contract
9 Manufacturers Have Consistently Abided by the Terms of
Their License Agreements with Qualcomm.
10
124. Until recently, for many years, the Contract Manufacturers
11
successfully operated under their license agreements and paid royalties to
12
Qualcomm on Apple and non-Apple products alike. In fact, each Contract
13
Manufacturer began paying royalties before Apple was its customer; thus, each
14
Contract Manufacturer paid Qualcomm royalties on non-Apple products before
15
paying royalties on Apple products.
16
125. Whether the products made by the Contract Manufacturers are Apple
17
or non-Apple, the royalty terms are the same, and the Contract Manufacturers have
18
consistently paid under their agreements.
19
126. It is only now17 years after the first Contract Manufacturer entered
20
into a license agreement with Qualcommthat the Contract Manufacturers have
21
collectively withheld nearly in royalties due under their license
22
agreements. And by its own admission, Apple is responsible for this change of
23
course by the Contract Manufacturers.
24
127. Apples interference in the Contract Manufacturers license
25
agreements is part of its larger strategy to pay less than fair value for Qualcomms
26
intellectual property. As part of that same campaign, Apple has alleged that
27
Qualcomm unlawfully uses its power as a supplier of chipsets and software to force
28
1 onerous licensing terms on Apple. But that is not and cannot be true. Apples
2 theory ignores that each of Qualcomms license agreements with the Contract
3 Manufacturers was entered into before Apple ever used a single Qualcomm chipset
4 in any Apple productand further ignores that the terms of the Contract
5 Manufacturers license agreements did not change when Apple began using
6 Qualcomm chipsets. The Contract Manufacturers licensing terms were not
7 affected by whether Apple used a Qualcomm chipset or a competitors chipset in its
8 iPhones.
9 IV. Qualcomms Chipset and Software Relationship with Apple.
10 128. In addition to its patent licensing business, Qualcomm today is also a
11 major supplier of chips and related software used in cellular devices. Independent
12 of the patent licensing business, QTIs subsidiary supplies a variety of customized
13 integrated circuits for use in cellular devices (e.g., phones, tablets, or other
14 computing devices). Qualcomms core chip products that it provides to Apple for
15 cellular devices are: (i) the baseband modem chip, which processes received voice
16 and data information and prepares the same for transmission; (ii) radio frequency
17 chips, which transmit and receive radio signals utilizing one or more frequencies;
18 (iii) the power management chip, which optimizes power consumption across a
19 cellular device; and (iv) chipsets that include a combination of the above products
20 as well as other hardware elements to support the functionality of a cellular device.
21 Each class of chip described above is sold in competition with a number of other
22 suppliers. Qualcomm leads the industry in the development of new chipset
23 technology.
24 129. Qualcomm also separately licenses its cutting-edge software that runs
25 on, and controls, the operation of its chipsets. Qualcomm devotes massive
26 resources to the development of its software, which includes millions of lines of
27 code and is a critical part of the product solutions that Qualcomm offers.
28
1 Qualcomm makes its software available to its customers under a software license
2 (which is not a patent license) that is negotiated and executed by entities within
3 Qualcomms chip business, rather than within the patent licensing business.
4 A. Apples Use of Qualcomms Chipsets and Software.
5 130. Apple currently uses Qualcomms chipsets in many of its cellular
6 devices. But this was not the case for the generations of the iPhone launched
7 between 2007 and 2010. From 2007 to 2010, Apple relied exclusively on chipsets
8 made by Infineon (which was acquired by Intel in 2011).
9 131. As the iPhones technological needs grew more sophisticated, Apple
10 began to look for a new chipset supplier capable of better meeting those needs.
11 Due to Qualcomms ability and willingness to meet Apples exacting technical and
12 schedule demands, as well as the superior quality of Qualcomms chipsets, by
13 around 2010 Apple had decided that it would begin using Qualcomm cellular
14 chipsets in iPhones. From 2011 until the fall of 2016, Qualcomm was the only
15 cellular chipset supplier used by Apple for new (i.e., non-legacy) iPhones. But that
16 changed in September 2016, when Apple released the iPhone 7 and 7 Plus. Some
17 iPhone 7 models still use Qualcomm chipsets; others now use Intel chipsets.
18 132. Apple does not purchase chipsets directly from Qualcomm. The
19 Contract Manufacturers purchase the chipsets and manufacture the iPhones and
20 other cellular devices, which they then sell to Apple for global distribution.
21
B. Qualcomm Provides Technical Assistance That Is Critical
22 to the Success of the iPhone.
23 133. Apple not only uses Qualcomms superior chipsets, but also routinely
24 demands and receives specialized technical solutions from Qualcomms world-class
25 engineers. Qualcomm goes to great lengths to serve Apple by providing any
26 assistance Apple demands, For example:
27 Qualcomm pioneered self-testing chipset technology and a
28 remote chipset testing method used by Apple, which has
1
2 Qualcomm helped Apple transition to 4G/LTE by
3 that was critical to the successful launch
4 of the iPhone 5.
5 Qualcomm offered Apple an envelope tracking solution,
6 which helps the iPhone save power and reduces heat when transmitting at
7 different signal strengths.
8 Qualcomm assigns numerous engineers
9
10
11 Qualcomm devised a
12 .
13 Qualcomm helped
14 .
15 Qualcomm developed a
16
17 134. All told, Qualcomms chipsets, software, and technical assistance have
18 been critical to the continued success of Apples cellular devices.
19 V. The Complex Contractual Relationship Between Qualcomm and Apple.
20 135. Understanding Qualcomm and Apples business relationship requires
21 an understanding of the key contracts between the parties. Although Apple
22 attempts to characterize itself as powerless against Qualcomm, the opposite is true.
23 As the terms of the parties agreements and negotiating history make clear, Apple
24 has substantial leverage over Qualcomm and has used that leverage to impose
25 onerous terms on Qualcomm.
26 136. Marketing Incentive Agreement. Although the first iPhone debuted
27 with 2G technology, Apple recognized that it would need to use a more advanced
28
1 technology for future releases. During lengthy negotiations, Apple threatened to

2 use its reputation and influence to steer the cellular industry away from
3 Qualcomms CDMA-based technology, and toward the inferior WiMAX
4 technology, unless Qualcomm agreed to make large marketing payments to Apple.
5 Apples threat, if executed, would have deprived consumers of the benefits of
6 CDMA-based technology, and deprived Qualcomm of royalties for the use of its
7 superior CDMA-based technology.
8 137. Accordingly, on January 8, 2007, Qualcomm signed the Marketing
9 Incentive Agreement (MIA) with Apple. The MIA required Qualcomm to make
10 payments to Apple in exchange for Apple announcing that it would use certain
11 technologies in its iPhones.
12 138. Strategic Terms Agreement. Apple launched the first iPhone in
13 June 2007. The second iPhone was launched in 2008 and implemented CDMA-
14 based 3G standards. While Apples 3G-capable iPhones have relied extensively on
15 Qualcomms patented technologies for nearly a decade, the early iPhones did not
16 use chipsets or software from Qualcomm. Instead, the first four generations of
17 iPhones launched from 2007 through 2010 used Infineon (now Intel) chipsets.
18 139. In 2008, Apples iPhone sales grew significantly compared to the year
19 before, making it easily the fastest growing smartphone. In 2009, iPhone sales
20 continued to expandmore than doubling the total from 2008.
21 140. As the iPhones technological needs evolved, Infineons chipsets and
22 software could not provide the power, flexibility, and reach that Apple needed. As
23 a result, on December 16, 2009, while Apple was still exclusively using Infineon
24 chipsets in the iPhone, Apple and Qualcomm entered into the Strategic Terms
25 Agreement (STA). The STA specified terms related to Qualcomms supply of
26 components to the Contract Manufacturers for Apples products, should Apple
27 decide at some point in the future to use Qualcomms chipsets in its products.
28
1 141. While Qualcomm was forced to give supply commitments and

2 assurances to Apple in the STA, Apple refused to commit to procure any
3 components from Qualcomm.
4 142. Master Software Agreement. The STA provided that Qualcomm
5 would deliver software used to operate chipsets pursuant to a separate software
6 agreement. On September 20, 2010, Qualcomm and Apple entered into the Master
7 Software Agreement (MSA).
8 143. The MSA grants Apple a limited license to Qualcomms copyrighted
9 software, governs Qualcomms provision of that software to Apple, and imposes a
10 number of restrictions on Apples use of that software and associated copyrights. It
11 is not a patent license. The MSA also contemplates that the parties will enter into
12 software addenda for specific software products, which they have done on a number
13 of occasions since 2010.
14 144. Transition Agreement. A few months prior to the launch of the
15 Qualcomm-based iPhone 4, Apple drafted a proposed Transition Agreement and
16 asked Qualcomm to sign it.
17
18
19 145. Apple and Qualcomm signed the Transition Agreement on February
20 11, 2011. Under the terms of the Transition Agreement, Apple required Qualcomm
21 to commit to pay Apple up to as an incentive for Apple to procure
22 Qualcomms chipsets for use in its devices. Qualcomm made that payment
23 commitment without any guarantee of how many Qualcomm chipsets would be
24 procured by Apple. This arrangement required Qualcomm to make substantial
25 investments (in addition to the in incentive payments) in product
26 development just to secure Apples businesswithout any guarantee of a return on
27 that investment. The Transition Agreement provided that Apple would forego or
28 reimburse portions of the only under certain conditions.
1 146. In its Complaint, Apple misstates the nature of the Transition

2 Agreement and the parties negotiating positions. Apple claims that Qualcomm
3 forced Apple to deal exclusively with Qualcomm on the purchase of chipsets.
4 But, in fact, it was Apples draft of the Transition Agreement that included the term
5 about which it now complains.
6 147. Further, the Transition Agreement does not in fact require Apple to
7 deal exclusively with Qualcomm, as Apple demonstrated when it began purchasing
8 approximately of its chipsets from Intel while the amended Transition
9 Agreement was still in effect.
10 148. On January 1, 2013, Apple and Qualcomm entered into the First
11 Amendment to the Transition Agreement (ATA). The ATA retained the general
12 structure of the Transition Agreement, but required Qualcomm to pay yet additional
13 incentives to Apple.
14 149. The Business Cooperation and Patent Agreement. Around the same
15 time the parties were amending and extending the Transition Agreement, Apple
16 demanded a replacement agreement for the MIA, which was due to expire in late
17 2012. Apple and Qualcomm therefore entered into the Cooperation Agreement as
18 of January 1, 2013. The Cooperation Agreement required Qualcomm to pay Apple
19 hundreds of millions of dollars, but only if certain conditions were met.
20 150. Apple also misrepresents the nature and terms of the Cooperation
21 Agreement in its Complaint. Apple alleges that the sole purpose of Qualcomms
22 payments under the Cooperation Agreement was to reduce Apples royalty burden
23 in exchange for exclusivity. The terms of the contract make clear, however, that
24 Qualcomms payments under the Cooperation Agreement are in exchange for other
25 valuable consideration from Apple, including, among other things, Apples promise
26 (i) not to initiate, or actively induce a third party to initiate, litigation (including
27 regulatory investigations) against Qualcomm; and (ii) not to assert its patents
28 against Qualcomm. Apples patent standstill commitment provided
1 Qualcomm with assurance that Apple would not disrupt Qualcomms ability to
2 provide its chipsets to other customers, and Apple agreed not to assert its patents
3 against Qualcomm for certain past sales even after expiration of the Cooperation
4 Agreement. In other words, the parties negotiated for complete peace. For that,
5 Qualcomm agreed to make large payments to Apple each quarter.
6 151. The parties also agreed to various other forms of business cooperation.
7 For example, the parties agreed that Apple would support CDMA in its iPhones and
8 certain iPads and that senior executives of Apple and Qualcomm should meet at
9 least semi-annually to review Qualcomms products and industry trends and to
10 consider new technology opportunities that may be of mutual benefit. This was a
11 significant provision for Qualcomm given Apples enormous buying power and its
12 ability to either reward or punish suppliers like Qualcomm.
13 152. The terms of the Cooperation Agreement reflect the parties agreed-
14 upon goal of working together in good faith. As explained in more detail below,
15 Apple did not honor its contractual commitment and instead launched a global
16 attack against Qualcomm.
17 153. The 2013 Statement of Work. The STA provided the general terms for
18 Qualcomms supply of components to the Contract Manufacturers for Apples
19 products. Pursuant to the STA, Apple and Qualcomm subsequently entered into
20 various statements of work that provided the specific requirement that Qualcomm
21 supply the components at issue, and also dictated the supply terms for each new
22 model of Qualcomm chipset used in Apples products. Apple and Qualcomm
23 entered into one such Statement of Work on February 28, 2013 (the 2013 SOW),
24 to govern the supply of multiple models of Qualcomms chipsets to the Contract
25 Manufacturers.
26 154. Qualcomms MDM9625 chipset, which is governed by the 2013 SOW,
27 has a built-in feature related to carrier aggregation technology. Carrier
28 aggregation is a technology supported by advanced 4G networks that offers
1 increased bandwidth and faster data speeds. Qualcomm played a leading role in
2 developing carrier aggregation technology and making it mainstream. Apples
3 MDM9625 chipset-based device was to be the first iPhone that supported this
4 technology.
5 155. In negotiating the terms of the 2013 SOW,
6
7 Instead, Apple insisted that payment be made only upon the occurrence of certain
8 triggering events.
9 156. As discussed below, more than one of those conditions has since been
10 satisfied, triggering Apples obligation to pay for the carrier aggregation feature in
11 MDM9625 chipsets. In total, Apple owes Qualcomm approximately
12 in carrier aggregation payments under the 2013 SOW. Apple has admitted to
13 owing approximately of that amount but, to date, Apple has paid
14 nothing.
15 157. The ASTA, the iPhone 7 Statement of Work and the STA Assignment
16 Agreement. The STA was first amended on February 28, 2013; the resulting
17 Amended and Restated Strategic Terms Agreement (ASTA) contained largely the
18 same terms. In negotiations regarding the ASTA,
19
20
21 The STA was further amended by the parties Statement of
22 Work, dated December 7, 2015 (the iPhone 7 Statement of Work), and
23 accompanying STA Assignment Agreement.
24 158. In the iPhone 7 Statement of Work and STA Assignment Agreement,
25 Apple forced Qualcomm to agree to unprecedented supply commitments. For
26 example, even if Apple
27 Qualcomm must continue to supply chipsets for use in
28 Apple products In
1 addition, Qualcomm must continue to supply chipsets for use in Apple products
2
3
4
5
6
7
8 159.
9
10
11
12
13
14
15
16
17
18 160.
19
20
21
22
23
24
25
26
27 161.
28
1
2
3
4
5
6 162. Each of these agreements shows that it is Apple that holds the power in
7 the parties relationship.
8 VI. Qualcomm Has Satisfied Its FRAND Commitments to ETSI with
9 Respect to Apple.
10 163. From 2015 into 2017, Qualcomm and Apple engaged in negotiations
11 about Apple taking a direct license to Qualcomms cellular SEP portfolio. During
12 that time, Qualcomm provided extensive information regarding the strength of its
13 cellular SEP portfolio (as well as NEPs) and the applicability of Qualcomms
14 patents to Apple devices. Qualcomm also has made a complete, written license
15 offer to Apple for Qualcomms cellular SEP portfolio on FRAND terms. In
16 response, Apple rejected Qualcomms cellular SEP-only offer, accused Qualcomm
17 of breaching its FRAND commitment, and proposed instead a much broader license
18 to both Qualcomms cellular SEPs and NEPs and offered to pay substantially less
19 than the royalties that Qualcomm currently receives from the Contract
20 Manufacturers. When Apples offer is broken down to a per-device royalty using
21 Apples 2015 iPhone sales figures, it translates to a royalty of approximately
22 per device, while charging consumers as much as $970 (for the iPhone 7
23 Plus, 256GB).
24 164. Qualcomm fully satisfied its FRAND commitments to ETSI; Apple
25 demonstrated that it is unwilling to negotiate in good faith for a license to
26 Qualcomms cellular SEPs.
27
28
1 A. Qualcomm Provided Extensive Information About Its

2 Patent Portfolio.
3 165. In February 2016, Apple requested that Qualcomm provide to Apple,
4 for each cellular SEP that Qualcomm believes is practiced by Apple products, (i) an
5 explanation as to why [Qualcomm] think[s] Apples products infringe that patent,
6 (ii) a specific royalty demand, and (iii) the methodology [Qualcomm] used to
7 arrive at the royalty rate sought.
8 166. Apples request for patent-by-patent information is inconsistent with
9 industry practice for negotiating portfolio licenses. Such information is also
10 impossible to provide as a practical matter, which Apple well knows. In
11 accordance with the ETSI IPR policy, Qualcomm has disclosed thousands of
12 patents as potentially essential to one or more cellular standards. Demanding that
13 Qualcomm provide detailed information for each and every patent practiced by
14 Apples products was, and is, entirely impractical. For those reasons, industry
15 practice for major patent holders is to negotiate and license for a portfolio of patents
16 while exchanging information concerning a representative set of the patents in the
17 portfolio.
18 167. Nevertheless, Qualcomm did provide Apple with a wealth of
19 information regarding Qualcomms cellular SEP portfolio and its applicability to
20 Apple devices. For example, Qualcomm provided nearly 2,000 pages of detail
21 regarding its portfolio of patents disclosed to ETSI as potentially essential to 3G
22 and 4G standards. Qualcomm also gave multiple presentations on the breadth,
23 importance, strength, and value of Qualcomms patent portfolio, both for cellular
24 SEPs and other patents practiced by Apples products. (By contrast, Apple
25 provided no explanation of what value it attaches to its own patents, despite
26 proposing a cross-license to Apples cellular SEPs.)
27 168. Apple requested meetings to discuss representative claim charts
28 demonstrating how specific patents are practiced by Apple devices. Qualcomm
1 was willing to provide and discuss that information, and proposed that the parties
2 enter into an agreement that would enable the free exchange of this information
3 without the threat that one party would use the information to commence litigation
4 against the other. To that end, Qualcomm made a number of proposals. Qualcomm
5 first proposed a limited non-use agreementa common, reasonable condition on
6 the exchange of sensitive business information such as claim charts. Apple rejected
7 that option. Then the parties discussed a mutual standstill agreement. Apple
8 expressed interest in the idea, and Qualcomm undertook the work to draft the
9 proposed agreement. Apple then rejected that as well, refusing to offer edits or a
10 counterproposal. As Apples behavior demonstrates, Apple sought Qualcomms
11 business information for one reason and one reason onlyto acquire information it
12 could use in a complaint against Qualcomm, not to further the parties licensing
13 negotiations.
14 169. Notwithstanding Apples tactics, Qualcomm did as Apple asked,
15 providing a number of claim charts to Apple to demonstrate how specific patents
16 are practiced by Apple devices. Qualcomm conducted several in-person meetings
17 with Apple to review those claim charts. And Qualcomm was just getting started; it
18 was prepared to continue with numerous meetings to present hundreds of additional
19 claim charts. In fact, the parties already had scheduled another meeting to review
20 additional claim charts, but Apple filed this lawsuitincluding claims on certain of
21 the claim charts that Apple insisted Qualcomm presentbefore the meeting could
22 take place.
23 170. Apples numerous attempts to impose the onerous requirement of
24 patent-by-patent information as a condition of licensing demonstrate that Apple is
25 an unwilling licensee and engaged in those requests only to delay negotiations and
26 to posture for litigation.
27
28
1 B. Qualcomm Has Provided a Complete, Written Offer

2 on FRAND Terms.
3 171. Over the summer of 2016, Qualcomm provided Apple with a
4 complete, written offer, in two parts, for a license to Qualcomms cellular SEPs.
5 These written offers memorialized verbal offers that Qualcomm had provided to
6 Apple months earlier. On June 15, 2016, Qualcomm offered Apple a license to
7 Qualcomms Chinese 3G and 4G cellular SEPs on the same terms agreed to by
8 many Chinese cellular industry players in the last 18 months, and noted that an
9 offer for the rest of Qualcomms cellular SEPs would follow shortly. On July 15,
10 2016, as promised, Qualcomm provided Apple with an offer for a license covering
11 Qualcomms rest of world (i.e., other than China) 3G and 4G cellular SEPs.
12 172. Qualcomm has made a complete, written offer for its cellular SEPs
13 that complies with its contractual FRAND commitment in every respect.
14 173. The terms of Qualcomms offer are based on the market-established
15 value of Qualcomms portfolio. The value is grounded in 25 years of market
16 experience and hundreds of freely negotiated licenses to Qualcomms portfolio
17 currently in effect, many of which were recently negotiated with some of the largest
18 and most sophisticated companies in the industry.
19 174. Consistent with industry practice, Qualcomms offer calculates the
20 royalty as a percentage of the net selling price (NSP) of the entire device, subject
21 to a per unit cap. When licensing its entire portfolio of SEPs and NEPs, Qualcomm
22 (like other licensors in the industry) typically seeks royalties that are calculated as a
23 percentage of the full NSP of a licensed product. But Apple initially requested a
24 license only to cellular SEPsi.e., less than Qualcomms full patent portfolioso,
25 in accordance with the
26
27
28
1 175. Qualcomm has offered Apple a license to a portfolio of patents, not to

2 individual patents, because as the industry (and Apple, when it serves its own
3 interests) has long recognized, it would be practically impossible to conduct a
4 patent-by-patent negotiation of hundreds or thousands of patents. Moreover, courts
5 have recognized that portfolio-wide offers to large patent portfolios (such as
6 Qualcomms portfolio) are consistent with ETSIs IPR policy and that portfolio
7 licensing has procompetitive benefits.
8 C. Apples Response to Qualcomm Was Unreasonable.
9 176. Apple responded to Qualcomms complete, written offer by accusing
10 Qualcomm of breaching its FRAND commitment and by making an unreasonable
11 counteroffer which rejected Qualcomms offer.
12 177. Apple objected to Qualcomms offer on the ground that the offer
13 purportedly did not utilize the proper base for calculating a royalty. According to
14 Apple, the proper base should be no more than a portion of the price of the
15 baseband chipset, which Apple claims is the smallest salable patent-practicing unit
16 (SSPPU).
17 178. But this argument has no basis in law or industry practice. No court
18 has held that a royalty voluntarily negotiated between parties for a portfolio license
19 must be calculated as a percentage of an SSPPU value in order to comply with a
20 contractual FRAND licensing commitment. In fact, the Federal Circuit has
21 recognized that SSPPU is an evidentiary damages theory relevant to jury trials for
22 individual patents asserted in patent infringement litigation, not a rule relevant to
23 negotiations over a portfolio license in a commercial context.
24 179. ETSIs IPR policy does not require a patent holder to use the value of
25 any SSPPU as the royalty base. Further, since the start of the cellular industry, the
26 most widely accepted practice has been to charge patent royalties calculated as a
27 percentage of the NSP of the entire device. And because of the range and diversity
28
1 of Qualcomms SEP portfolio, and because the portfolio is comprised of patents

2 largely directed at cellular communications systems, the appropriate SSPPU (if any)
3 is the complete operational device.
4 180. Just as baseless was the royalty Apple counteroffered:
5 . When broken down to a per-iPhone royalty
6 using Apples 2015 sales figures, the proposed royalty would amount to less than
7 per devicea small fraction of the royalties Qualcomm currently receives
8 from the Contract Manufacturers.
9 181. Apples counteroffer is irreconcilable with its approach to valuing its
10 own patents. As noted above, in its recent litigation with Samsung, Apple claimed
11 that three Apple patents on user-interface features were worth $7.14 per phone.
12 That is, Apple claims that thousands of Qualcomm patents on fundamental
13 technologies that are essential to cellular communicationcritical to the usefulness
14 of the iPhone itselfpale in comparison to just three Apple patents on user-
15 interface features.
16 182. As the parties negotiating history makes clear, Apple is an unwilling
17 licensee.
18 D. Qualcomm Offered to Arbitrate Any Dispute over Licensing
19 Terms.
20 183. Recognizing that the negotiations ultimately might reach an impasse,
21 and to avoid expensive and protracted litigation, Qualcomm also has sought to
22 negotiate a framework to arbitrate some or all of the terms of a license agreement
23 without constraints on how Qualcomm or Apple could argue its case.
24 184. Qualcomm first proposed arbitration several months before the
25 licensing negotiations resumed in earnest. During the course of the negotiations,
26 Qualcomm made a series of offers in an attempt to find a mutually agreeable
27 arbitration framework. Qualcomm even offered to arbitrate under the arbitration
28 procedures endorsed by the U.S. FTC in its consent order with Google in 2013.
1 Consistent with the U.S. FTCs framework, Qualcomms proposal did not mandate
2 any particular valuation methodology and permitted the parties to make whatever
3 arguments they wished to the arbitral panel. By contrast, Apple wanted to place
4 significant constraints on what arguments the parties could raise in arbitration.
5 185. Qualcomm was willing to arbitrate any license for any portfolio of
6 patents in which Apple was interested, including the portfolio of patents for which
7 Apple made a counteroffer.
8 186. But Apple refused every arbitration proposal and put forth an entirely
9 one-sided, unreasonable proposal of its own. Apples arbitration proposal, like its
10 negotiating position, required a patent-by-patent analysis and imposed other unfair
11 or unreasonable conditions that attempted to dictate how Qualcomm must present
12 its patents, always in ways that favored Apple. Apples repeated insistence on
13 imposing unfair conditions on an arbitration, which it knew Qualcomm could not
14 accept, demonstrates that Apple has been angling for litigation from the outset and
15 is, in fact, an unwilling licensee.
16 VII. Apple Has Engaged in a Multifaceted Attack on Qualcomms Business.
17 187. Apple has achieved unprecedented success in large part by using
18 Qualcomms innovative cellular technology. That technology was available to
19 Apple over the past decade because Apple has operated under the Contract
20 Manufacturers licensing agreements with Qualcomm. Apple now seeks to stop
21 paying fair value for Qualcomms intellectual property despite having used that
22 intellectual property to achieve its dominance and vast profits. To that end, Apple
23 has attacked Qualcomm in an attempt to upend the contractual arrangements in
24 place for the past decade. But, in doing so, Apple violated the law and its
25 agreements with Qualcomm.
26 188. Among other conduct, (i) Apple induced regulatory investigations
27 against Qualcomms chipset business and licensing business around the world by,
28
1 among other things, encouraging investigations of Qualcomm, making false

2 statements to regulators about Qualcomm, and advocating for worldwide penalties
3 against Qualcomm; (ii) Apple has interfered with Qualcomms agreements with the
4 Contract Manufacturers by obstructing Qualcomm from performing audits of the
5 Contract Manufacturers and blocking them from paying royalties owed to
6 Qualcomm; (iii) Apple threatened Qualcomm to prevent it from promoting the
7 performance of its own chipsets, and publicly denied the superior performance of
8 iPhones with Qualcomms chipsets; (iv) Apple withheld approximately
9 in chipset-related payments that Apple owes Qualcomm, which
10 includes approximately in payments that Apple has admitted it owes
11 Qualcomm but refuses to pay unless Qualcomm drops its claim to the remaining
12 amount owed; and (v) Apple
13
14 A. Apple Actively Induced Investigations of Qualcomm.
15 189. Apple released Qualcomm from its payment obligations under the
16 Cooperation Agreement by inciting and encouraging investigations by the KFTC,
17 among other regulatory agencies. Specifically, Apple has actively induced
18 regulatory investigations, which is conduct covered by Section 7 of the parties
19 Cooperation Agreement.
20 190. Among other things, (i) Apple induced government investigations of
21 Qualcomms chipset and licensing businesses; (ii) Apple knowingly made false
22 statements to government agencies; and (iii) Apple urged the imposition of
23 extraterritorial regulatory remedies against Qualcomm. In other words, Apple
24 breached the peacethe Cooperation Agreementthat the parties had agreed to
25 keep.
26 191. Apple Induced Regulatory Action Against Qualcomm. At a conference
27 in Idaho during the summer of 2015, a top Apple executive encouraged Samsung to
28
1 get aggressive in asking the KFTC to continue to pursue Qualcomm, explaining

2 that the KFTC investigation would be Samsungs best chance to try to force
3 Qualcomm to change its licensing model.
4 192. Samsung is the largest chaebol (a Korean term for a massive,
5 privately controlled business conglomerate) in Korea, accounting for about 20% of
6 Koreas GDP and wielding extraordinary political power. Although they compete
7 and have fought bitterly in many contexts, Apple and Samsung share a common
8 interest in diminishing Qualcomms ability to obtain fair value for its innovations.
9 Apple and Samsungs inducement of regulatory action had nothing to do with the
10 protection of competition. Instead, they saw an opportunity to try to avoid paying
11 fair value for Qualcomms intellectual property and to impede Qualcomms
12 licensing programand they acted.
13 193. Apple Made False and Misleading Statements to Government
14 Agencies. In a public KFTC hearing on August 17, 2016, Apple gave a lengthy
15 presentation to the KFTC titled [Apples] Views on Qualcomms Abuse of
16 Dominance. In this presentation, Apple made a number of misstatements
17 regarding Qualcomms licensing practices and its business dealings with Apple that
18 Apple knew were untrue.
19 194. For example, Apples August 17, 2016 KFTC presentation states that
20 Apple has yet to add a [second chipset] supplier because of Qualcomms
21 exclusionary conduct.
22 195. Apple knew this statement was false. When Apple made that
23 statement in August, it had already decided to incorporate Intel chipsets in the new
24 iPhone and had already started sourcing those chipsets. In fact, Apple was mere
25 weeks away from the September release of the iPhone 7, many of which use Intel
26 baseband chipsets, including all iPhone 7s sold in Korea. Apple follows an
27 exceptionally long launch timeline for its iPhones,
28
1 Thus, in August
2 2016, one month prior to launching the iPhone 7, Apple had already purchased (or
3 caused contract manufacturers to purchase) large numbers of Intel chipsets for the
4 iPhone.
5 196. Apple falsely asserted that it was not permitted to disclose publicly
6 that it had added Intel as a supplier. But Apples self-imposed confidentiality
7 restriction does not excuse an affirmative misrepresentation to the KFTC
8 specifically calculated to harm Qualcomm. Nor is there any reason why Apple
9 could not have provided this information to the KFTC in a closed session. Further,
10 the KFTCs request to Apple did not call for information about whether Apple had
11 added another chipset supplier. Rather, Apple volunteered this false information.
12 The only plausible explanation for Apples conduct is that it intended to mislead the
13 KFTC into believing that Qualcomms conduct had an exclusionary effect, when it
14 plainly did not.
15 197. Apple also told the KFTC that Qualcomm has never made a good
16 faith offer for an unbundled license for cellular SEPs only. Again, when Apple
17 made this statement to the KFTC on August 17, 2016, Apple knew it was false.
18 Just one month earlier, Qualcomm had provided Apple with a complete, written
19 offer to license Qualcomms cellular SEP portfolio.
20 198. Apple made additional misrepresentations in other submissions to the
21 KFTC. Qualcomm has had extremely limited access to statements Apple made to
22 the KFTC. For that reason, the full extent of Apples involvement in the KFTC
23 investigation has not yet been fully revealed.
24 199. Apple has also made untrue statements to other agencies around the
25 world on topics such as Apples license negotiations with Qualcomm and its
26 consideration and use of Qualcomms chipsets and other suppliers chipsets.
27 Qualcomm has had limited access (and in some case no access) to Apples
28
1 submissions to other regulatory agencies as well. For that reason, the full extent of
2 Apples involvement in other investigations has not yet been fully revealed.
3 200. By misleading regulators, Apple released Qualcomm from its payment
4 obligations under the parties Cooperation Agreement. Apple initially claimed that
5 its right to respond to regulators and collect payments under the Cooperation
6 Agreement was unconditionalarguing that it could say anything to agencies
7 about Qualcomm, truthful or not, and still demand Cooperation Agreement
8 payments. Apple later conceded, as it had to, that the Cooperation Agreements
9 protection for responses to regulatory inquiries is limited to truthful statements.
10 However, in its Complaint, Apple reversed itself again and reasserts the untenable
11 position that it can make false or misleading statements to regulators with impunity
12 and still be entitled to payments from Qualcomm under the Cooperation
13 Agreement. False statements are, by their very nature, not responsive to a
14 government inquiry. An untrue statement hinders, rather than facilitates, an
15 agencys investigation.
16 201. Apples Extortion Allegations Against Qualcomm Are Made in Bad
17 Faith. As the parties engaged in discussions that Qualcomm thought were an
18 attempt to resolve the Cooperation Agreement dispute, Apple asked Qualcomm to
19 propose ways in which Apple could address Qualcomms concerns, including
20 proposing clarifying statements that Apple could make to the KFTC to rectify the
21 situation. In a meeting in late 2016 between certain Qualcomm and Apple high-
22 level executives, an Apple executive first suggested that Qualcomm consider
23 whether Apple (even if it disagreed with Qualcomms position) could resolve the
24 dispute by making remedial statements to the KFTC.
25 202. In response, Qualcomm proposed specific remedial steps Apple could
26 take to cure its conduct, including identifying specific examples of Apples untrue
27 and misleading statements and providing the correct information relating to those
28
1 statements. Apple summarily rejected the proposal it had requested from

2 Qualcomm.
3 203. Apples invitation to Qualcomm to propose remedies is an example of
4 Apple exploiting Qualcomms good faith efforts to negotiate. In its Complaint,
5 Apple repeatedly portrays Qualcomms response to Apples request as an attempt
6 by Qualcomm to extort Apple. That is plainly not true. What has become clear
7 is that Apple baited Qualcomm by asking Qualcomm to propose possible remedies
8 precisely so that Apple could later accuse Qualcomm of extortion in a lawsuit it
9 was already preparing to file.
10 204. Contrary to what Apple has alleged, as correspondence reveals,
11 Qualcomm has not tried to gag or censor Apple. Apple was and is free to
12 communicate with regulators. Qualcomm is in no way impeding Apple from
13 providing truthful information sought by agencies, regardless of whether that
14 information is critical of Qualcomm. Qualcomm, of course, cannot prevent Apple
15 from making untrue statements to agencies. But such conduct had contractual
16 consequencesnamely, it released Qualcomm from the obligation to make
17 Cooperation Agreement payments.
18 205. Apple Induced the KFTC To Impose Extraterritorial, Worldwide
19 Remedies Against Qualcomm. Apple also urged the KFTC to impose remedies
20 against Qualcomm around the worldoutside of Korea. Specifically, Apple
21 pleaded with the KFTC that its relief should not be limited to purchases or sales
22 only in Korea, arguing that this would [p]rotect Korean [c]onsumers and
23 restore competition. In other words, Apple urged the KFTC to regulate
24 Qualcomms licensing conduct in every country in the world, regardless of (i) those
25 countries respective intellectual property and competition laws, (ii) Qualcomms
26 due process rights in these jurisdictions, and (iii) whether the conduct had any
27 effect on Korea or Korean customers. This inducement of plainly extraterritorial,
28 worldwide regulatory remedies extinguished Qualcomms payment obligations
1 under the Cooperation Agreement. Inducing the KFTC to order Qualcomm to

2 modify its licensing practices in other countries is no different from Apple actively
3 inducing investigation or litigation in those countries.
4 206. By inducing governmental investigations, providing false and
5 misleading information to the agencies, and seeking extraterritorial, worldwide
6 remedies against Qualcomm, Apple directly denied Qualcomm the benefit of the
7 Cooperation Agreement. Apple also breached the covenant of good faith and fair
8 dealing implied in the Cooperation Agreement.
9 B. Apple Interfered with Qualcomms Agreements with the
10 Contract Manufacturers.
11 207. The Contract Manufacturers license agreements were entered into on
12 terms consistent with others in the industry, without Apples involvement. In an
13 effort to impose its own terms on Qualcomm, Apple has tortiously interfered with
14 Qualcomms contracts with the Contract Manufacturers.
15 208. Apple prevented, restricted, and discouraged the Contract
16 Manufacturers from complying fully with the terms of their license agreements,
17 which is prohibited by the Cooperation Agreement.
18 209. Accordingly, Apple (i) violated its obligations under Section 4 of the
19 parties Cooperation Agreement and extinguished Qualcomms payment
20 obligations under Section 7, and (ii) tortiously interfered with Qualcomms

21 contractual relationship with the Contract Manufacturers.
22 210. Audit Interference. Apple has tortiously interfered with each of the
23 Contract Manufacturers license agreements by forcing the Contract Manufacturers
24 to block Qualcomm from exercising its right to audit the Contract Manufacturers.
25 211. Qualcomm has the right to audit each of the Contract Manufacturers to
26 confirm that they are fully paying the royalties they owe Qualcomm under their
27 respective licenses agreements. The audits are conducted by independent royalty
28 auditors who enter into non-disclosure agreements with the Contract
1 Manufacturers, ensuring that no confidential information belonging to the Contract

2 Manufacturers or any of their customers will be provided to Qualcomm. The audit
3 is supposed to cover books and records concerning any devices the Contract
4 Manufacturers sell, including documents evidencing the number of devices sold and
5 the consideration charged by the Contract Manufacturer for such sales.
6 212. Apple has routinely obstructed these audits by prohibiting the Contract
7 Manufacturers from providing the independent royalty auditors with even basic
8 information about units sold to Apple.
9
10
11
12 213.
13
14
15
16
17
18
19 Apple is
20 seeking to obtain the benefits of relying on the Foxconn license agreement while at
21 the same time interfering with Qualcomms rights under that agreement.
22 214.
23
24
25 215. Due to Apples interference, Qualcomm is unable to exercise its audit
26 rights to determine whether it is receiving all the royalties that the Contract
27 Manufacturers owe Qualcomm on Apple products.
28
1 216. Interference with Contract Manufacturers Royalty Payments. Apple

2 also actively and intentionally interfered with the Contract Manufacturers payment
3 obligations to Qualcomm, causing certain Contract Manufacturers to withhold
4 royalties they owe Qualcomm. In so doing, Apple violated Section 4 of the
5 Cooperation Agreement, and tortiously interfered with Qualcomms agreements
6 with the Contract Manufacturers.
7 217. Although Apple is obliged to reimburse the Contract Manufacturers
8 for their royalty payments to Qualcomm, at some point in 2016, Apple began
9 refusing to reimburse the Contract Manufacturers for most of the amounts owed to
10 Qualcomm as royalties on devices sold to Apple.
11 218. Apple did this for the direct purpose, and with the effect, of causing
12 those manufacturers to breach their own agreements with Qualcomm and by failing
13 to make required royalty payments on devices sold to Apple.
14 219. For example, in late January 2017, Foxconn provided Qualcomm with
15 the iPhone royalty report for Q4 2016. The report specified a nearly
16 royalty due, but Foxconn requested that the invoice be issued for approximately
17 of that amount because that was the approval amount from its
18 customerApple.
19 220. Apple acknowledges as much in its Complaint, stating that it has
20 withheld an amount representing royalties owed to Qualcomm from the Contract
21 Manufacturers. Foxconn confirmed this was the case, informing Qualcomm that
22
23
24 221. Further confirming its interference, Apple informed Qualcomm in
25 writing that it is withholding royalty reimbursement payments from certain
26 Contract Manufacturers, payments of virtually the same amount as the Contract
27 Manufacturers have asked Qualcomm to carve out from their invoices and withheld
28 from their payments to Qualcomm.
1
2
3 C. Apple Misrepresented the Performance of Qualcomm-Based
4 iPhones and Threatened Qualcomm Not To Disclose the
Truth.
5
222. Apple deliberately chose not to utilize certain speed-increasing
6
features of Qualcomms chipsets in the iPhone 7 in an effort to match the slower
7
speeds of Intels chipsets in other models of the iPhone 7. Apple used threats to
8
prevent Qualcomm from making public comparisons of (i) the performance of the
9
Qualcomm-based iPhones and Intel-based iPhones, or (ii) the performance of the
10
Qualcomm chipsets in Qualcomm-based competitive devices and those in iPhones.
11
Having rejected Qualcomms chipset enhancements and prevented Qualcomm from
12
making public comparisons, Apple asserted, publicly and falsely, that there was
13
no discernible difference between iPhones with Intel chipsets and those with
14
Qualcomm chipsets.
15
223. Apple Chose Not to Utilize the Full Power of Qualcomms Chipsets.
16
On September 16, 2016, Apple released some iPhone 7 models with Qualcomm
17
chipsets on select networks, whereas other models of the iPhone 7 were released on
18
other networks using Intel chipsets.
19
224. Prior to the iPhone 7 launch, it had been five years since Apple
20
launched a new generation of the iPhone that used an Infineon or Intel chipset.
21
From 2011 until the fall of 2016, Qualcomm was Apples only cellular chipset
22
supplier for new (i.e., non-legacy) iPhones. Apple used only Qualcomms chipsets
23
for five years because, among other reasons, Qualcomms chipsets were better than
24
the competition, such as Intel, and Qualcomms chipsets (unlike its competitors)
25
were able to meet Apples rigid schedule demands. That has not changed
26
Qualcomms chipsets are still better than the competition.
27
28
1 225. The Qualcomm chipset used in the iPhone 7, which relies on

2 Qualcomms X12 modem, is capable of downloading data at speeds up to 600
3 megabits per second. By contrast, the modems in Intels chipsets are capable of
4 downloading data at speeds of only 450 megabits per second.
5 226. To create artificial parity between the Qualcomm-based iPhone 7 and
6 the Intel-based iPhone 7, Apple decided not to use certain capabilities of the
7 Qualcomm chipset for the Qualcomm-based iPhone 7, so that they would run at
8 speeds closer to those of the inferior Intel-based iPhone 7. For example, Apple
9 decided not to use Qualcomm software that increases download rates, even though
10 that technology is enabled by other commercial devices launched in 2016, such as
11 the Samsung Galaxy S7.
12 227. Apples decision not to use certain enhanced features of Qualcomms
13 chipset prevented a more capable version of the iPhone 7 from reaching the market.
14 In addition, Apples decision potentially could impede efficiency of other users on
15 the entire network. The inefficient allocation of bandwidth to iPhones has a
16 potential ripple effect across a whole network.
17 228. Apple Concealed the Superiority of the Qualcomm-Based iPhone 7
18 and Threatened Qualcomm Not to Disclose It. Apple made clear to Qualcomm that
19 if Qualcomm disclosed the iPhones chipset speed disparity to the public, it would
20 jeopardize Qualcomms business and prospects of supplying any chipsets to Apple
21 in the future. On an August 2016 phone call, an Apple executive told a Qualcomm
22 executive that Apple would use its marketing organization to retaliate against
23 Qualcomm if Qualcomm publicly compared the performance of Qualcomm-based
24 iPhones to Intel-based iPhones. Apples executive also warned that such a
25 comparison would severely impact Qualcomms standing as a supplier to Apple.
26 229. Apple Publicly Denied the iPhone Performance Disparity. By
27 choosing not to take advantage of speed-increasing features in Qualcomms
28 chipsets, Apple tried to ensure that iPhones using Qualcomm chipsets were as slow
1 as iPhones using Intel chipsets. But when the iPhone 7 was launched on September
2 16, 2016, the Qualcomm-based iPhones were still outperforming the Intel-based
3 iPhones.
4 230. Within weeks of the iPhone 7s launch, independent studies showed
5 huge performance differences between Intel and Qualcomm versions of [the]
6 iPhone 7. (Forbes, Aaron Tilley, Oct. 20, 2016.) As a specific example, LTE
7 connectivity studies conducted by Cellular Insights revealed that Qualcomm
8 modems outperformed Intel modems by 30% overall and by 75% when the cellular
9 signal is weakest. Again, this was after Apple had chosen not to use the more
10 advanced features of the Qualcomm chipsets.
11 231. Analyst reports also made clear that, even though iPhones using
12 Qualcomm chipsets were outperforming iPhones using Intel chipsets, the
13 Qualcomm-based iPhones had the potential to perform even faster. In other words,
14 but for Apples choice to deprive consumers of speed and value, the performance
15 gap between iPhones using Qualcomm chipsets and iPhones using Intel chipsets
16 would have been even wider. For example, Bloomberg reported that the Verizon
17 version of the iPhone 7 using Qualcomms chipset was faster than its AT&T
18 version of the iPhone 7 using Intels chipset, but still not as fast as it could be.
19 (Ian King and Scott Moritz. Bloomberg. Apples Chip Choices May Leave Some
20 iPhone Users in Slow Lane, November 18, 2016, available at:
21 https://www.bloomberg.com/news/articles/2016-11-18/apple-chip-choices-may-
22 leave-some-iphone-users-in-slow-lane.)
23 232. The impact of Apples choice not to use enhancements of the
24 Qualcomm chipset for Qualcomm-based iPhones was further reflected by studies
25 comparing iPhones with non-Apple phones that used the same Qualcomm modem.
26 For instance, based on comparisons between the Qualcomm-based iPhone 7 and a
27 Qualcomm-based Samsung Galaxy S7 (which used the same Qualcomm X12
28 modem as the Verizon iPhone 7), Bloomberg reported that [t]he S7 was about
1 twice as fast as the iPhone 7 running on the same network with the same modem
2 chip. Other studies even indicated that Apples Intel-based iPhone 7 operates with
3 slower modem performance than the Qualcomm-based, prior generation iPhone 6S.
4 233. Apple publicly denied the findings of these independent studies,
5 harming consumers in the process. For example, in response to reports suggesting
6 that (i) Apple had chosen not to enhance the speeds of iPhones using Qualcomm
7 chipsets, and (ii) the iPhones using Qualcomm chipsets were still outperforming the
8 iPhones using Intel chipsets, an Apple spokesperson falsely claimed that there was
9 no difference between the Qualcomm-based iPhones and the Intel-based iPhones.
10 The spokesperson told Bloomberg: In all of our rigorous lab tests based on
11 wireless industry standards, in thousands of hours of real-world field testing, and in
12 extensive carrier partner testing, the data shows there is no discernible difference in
13 the wireless performance of any of the models. Apple publicly claimed that there
14 was no discernible difference between iPhones using Intel chipsets and iPhones
15 using Qualcomm chipsets when it knew the opposite to be true.
16 234. Apples comment that there was no discernible difference was
17 designed to rebut the findings of these third-party studies and to imply, falsely, that
18 Qualcomms chipsets and Intels chipsets were indistinguishable.
19 235. Apples Misstatements About the Relative Performance of the
20 Qualcomm Versus Intel Modems in iPhone 7 and Its Threat Have Harmed
21 Qualcomm and Consumers. Absent Apples conduct, Qualcomms chipsets would
22 be in higher demand, and Qualcomm would be able to sell more chips to Apple to
23 meet that demand. Apples decision not to use Qualcomms enhanced chipsets
24 denied consumers access to higher-performing devices, and Apples threats and
25 other efforts to hide the truth deprived consumers of meaningful choice. And, as
26 noted above, by choosing not to utilize the higher data rates that Qualcomms
27 chipsets can reach for the Qualcomm-based iPhones, Apple reduces the data
28 download resources available to other smartphones operating on the network.
1 236. By choosing not to use the best performing Qualcomm-based iPhones

2 (and risking that consumers would find out), Apple faced a potential backlash from
3 its customers. It avoided that backlash by concealing the truth, at the expense of
4 Qualcomm and consumers alike.
5 D. Apple Is Withholding Approximately in
6 Chipset Payments That It Owes Qualcomm.
7 237. Apple has refused to pay approximately that it owes
8 Qualcomm for an LTE chipset feature related to carrier aggregation (or CA) in
9 certain chipsets. The carrier aggregation feature enables smartphones operating on
10 LTE networks to send and receive data at much faster rates than they otherwise
11 could. Apple itself has said that this feature allows the iPhone to run faster than
12 ever. But Apple refuses to honor its contractual commitment to pay Qualcomm
13 for the carrier aggregation feature in the chipsets and related software it designed
14 for Apple.
15 238. In Apple and Qualcomms Statement of Work, dated
16 February 28, 2013, as amended (the 2013 SOW), Apple promised to pay
17 Qualcomm a set rate, called an for Apple products that included
18 Qualcomms MDM9625 chipset3 and met any one of the four criteria under
19 Section 4.2, enumerated below:
20
21
22
23
24
25
26
27 3
The MDM9625 chipset was included in certain models of the iPhone and the
28 iPad that Apple launched in 2014 and 2015.
1
2
3
4
239. Apple has admitted that it owes Qualcomm approximately
5
relating to carrier aggregation, but it has refused to pay even that
6
amount. In fact, Apple owes Qualcomm substantially more.
7
240.
8
9
For example, one of the
10
events in question took place at Apples iPhone 6 and iPhone 6 Plus (together, the
11
iPhone 6) launch eventa major press event. As Apple put it, Its not just
12
another day in Cupertino. September 9, 2014 was an important day in Apples
13
history. Following the opening remarks, Apples Senior Vice President of
14
Worldwide Marketing, Phil Schiller, took the stage to tell the world about
15
iPhone 6. One of the differentiating features of the iPhone 6 that Mr. Schiller
16
touted was carrier aggregation. He stated:
17
18 Theres new advanced wireless capabilities. The LTE in
iPhone 6 and 6 Plus is faster than ever, 150 Mb per
19 second as compared to 100 in the previous products. It
does that with a technology called carrier aggregation and
20 there is now 20 LTE bands compared to 13 previously.
Thats the most in any smartphone in the world. It means
21 we are working now with over 200 carriers around the
world to support LTE on iPhone 6.
22
23 241. Media coverage of the launch event included Mr. Schillers promotion
24 of the iPhone 6s carrier aggregation capability. For example, one publication
25 reported that Apple is boasting the implementation of a new technology called
26 carrier aggregation to boost your wireless LTE speeds. Michael Learmonth,
27 Apples New iPhones: Everything You Need To Know About iPhone 6, iPhone 6
28
1 Plus, International Business Times (Sept. 9, 2014), http://www.ibtimes.com/apples-

2 new-iphones-everything-you-need-know-about-iphone-6-iphone-6-plus-1682936.
3 242.
4
5 , Apple similarly advertised the carrier aggregation feature for
6 its iPads containing Qualcomms MDM9625 chipset. At the October 16, 2014
7 launch event for the iPad Air 2 (another Apple Special Event), Mr. Schiller
8 stated that the device has faster LTE with more bands. It has up to 150 Mb per
9 secondthats using carrier aggregation. And it has 20 LTE bands. Thats more
10 than any other tablet. So it connects at high LTE speeds on more networks around
11 the world.
12
13
14
15
16 243.
17
18
19
20
21
22
23
24 244.
25
26
27
28
1 245.
2
3
4 246.
5
6
7 .
8 247.
9
10
11 248.
12 .
13 E. Apple Materially Breached the Master Software Agreement.
14 249. Apple has materially breached the MSA
15
16
17
18 250.
19
20
21
22
23
24
25
26
27
28
1 251.
2
3
4
5
6
7
8
9
10 252.
11
12
13 Qualcomm provides Apple with its software, which is then loaded onto an iPhone
14 or iPad (by the Contract Manufacturers);
15
16
17
18
19
20 253.
21
22
23 COUNT I
24 Tortious Interference with Qualcomms License Agreements
with the Contract Manufacturers
25
254. Qualcomm restates, re-alleges, and incorporates by reference each of
26
the allegations set forth above as if fully set forth herein.
27
28
1 255. Qualcomms license agreements with Foxconn, Pegatron, Wistron, and

2 Compal are valid, enforceable and binding agreements.
3 256. Qualcomm entered into a license agreement with Compal on
4 February 10, 2000. The parties have executed six amendments to the license
5 agreement.
6 257. Qualcomm entered into a license agreement with Foxconn on
7 October 18, 2005. The parties have executed four amendments to the license
8 agreement.
9 258. Qualcomm entered into a license agreement with Wistron on May 23,
10 2007. The parties have executed one amendment to the license agreement.
11 259. Qualcomm entered into a license agreement with Pegatron on April 29,
12 2010. The parties have executed four amendments to the license agreement.
13 260. Each license agreement and amendment is the result of arms-length
14 negotiation by sophisticated parties.
15 261. At all relevant times, Apple has been aware of Qualcomms license
16 agreements with each Contract Manufacturer.
17 262. Apple has intentionally interfered with, and continues to intentionally
18 interfere with, Qualcomms license agreements with Foxconn, Pegatron, and
19 Wistron, by purposefully inducing these Contract Manufacturers not to pay
20 royalties due to Qualcomm under the license agreements.
21 263. Two weeks after Apple filed its Complaint, a senior Apple executive
22 confirmed that Apple had interfered in the Contract Manufacturers license
23 agreements with Qualcomm. On February 3, 2017, in a letter sent on behalf of
24 Apple,
25
26
27
28
1 264. Specifically, in the February 3 letter, Apple admitted to Qualcomm

2 that
3
4 265. Apple knew that by withholding these payments Apple would cause
5 the Contract Manufacturers to stop paying royalties to Qualcomm, in breach of their
6 respective license agreements. And in its Complaint, Apple explicitly
7 acknowledged its intent to withhold payments from the Contract Manufacturers,
8 which are Qualcomm licensees.
9 266. Apple specifically intended that the Contract Manufacturers would
10 withhold payments and motivated them to do so
11 267. As a result of Apples interference, certain Contract Manufacturers
12 have reduced their royalty payments to Qualcomm. For the fourth quarter of 2016,
13 Foxconn withheld more than in royalties that it owes to Qualcomm,
14 which it did as a direct result of Apples interference.
15 268. For the fourth quarter of 2016, Pegatron withheld more than
16 in royalties that it owes to Qualcomm, which it did as a direct result of
17 Apples interference.
18 269. For the fourth quarter of 2016, Wistron also failed to pay royalties it
19 owed Qualcomm, an action that occurred as a direct result of Apples interference.
20 270. In addition, Apple has tortiously interfered with, and continues to
21 tortiously interfere with, the Contract Manufacturers license agreements by
22 intentionally obstructing Qualcomms right to audit the Contract Manufacturers.
23 Apple has prohibited the Contract Manufacturers from fully complying with
24 independent royalty auditors, which Apple was and is certain or substantially
25 certain would result in the obstruction of Qualcomms audit rights. As a result,
26 Qualcomm has been and will continue to be unable to close a number of such
27 audits. Qualcomms repeated attempts to resolve these outstanding audits have
28 been unsuccessful.
1 271. Independent royalty auditors attempt to conduct audits of each of the

2 Contract Manufacturers every two years. Since each Contract Manufacturer began
3 producing Apple products, independent royalty auditors have conducted (or
4 attempted to conduct) multiple audits of the Contract Manufacturers. Because
5 Apple has instructed the Contract Manufacturers not to comply fully with
6 independent royalty auditors as required under their license agreements, Qualcomm
7 has been unable to close multiple audits, including the most recent audit of each
8 Contract Manufacturer. Every day that Apple prevents Qualcomm from closing
9 these audits or otherwise interferes with Qualcomms audit rights, Apple is
10 tortiously interfering with Qualcomms business relationships with the Contract
11 Manufacturers.
12 272. By interfering with Qualcomms contractual right to audit the Contract
13 Manufacturers, Apple has caused, and continues to cause, the Contract
14 Manufacturers to breach their license agreements and has significantly disrupted
15 and continues to significantly disrupt Qualcomms ability to conduct its business
16 with the Contract Manufacturers.
17 273. Apple has also directed the Contract Manufacturers to
18
19
20 Apples interference with the
21 Contract Manufacturers payment obligations has significantly disrupted
22 Qualcomms ability to conduct its business with the Contract Manufacturers.
23 274. Apples actions were, and continue to be, intentionally malicious and
24 oppressive toward Qualcomm. Not only does Apple intend to injure Qualcomms
25 economic interests and its relationships with the Contract Manufacturers, but Apple
26 has consciously and repeatedly disregarded Qualcomms independent business
27 relationships with the Contract Manufacturers, and continues to do so.
28
1 275. Qualcomm has been damaged, and continues to be damaged by,

2 Apples tortious interference with the Contract Manufacturers payment of
3 royalties, their calculation of royalties, and their compliance with Qualcomms
4 audits.
5 276. Accordingly, Qualcomm is entitled to its economic damages, punitive
6 damages, attorneys fees, and injunctive relief necessary to prevent future
7 threatened injury (including loss of profits, loss of customers and potential
8 customers, loss of goodwill and product image, and loss of business relationships)
9 and to prevent a multiplicity of judicial proceedings.
10 COUNT II
Manufacturers Do Not Violate Qualcomms FRAND Commitments to ETSI
12
13
14
278. An actual controversy has arisen and now exists between Qualcomm
15
and Apple, which have adverse legal interests, regarding whether Qualcomms
16
license agreements with the Contract Manufacturers violate Qualcomms FRAND
17
commitments to ETSI. There is a case or controversy of sufficient immediacy,
18
reality, and ripeness to warrant the issuance of a declaratory judgment.
19
279. Qualcomm entered into a license agreement with Compal on February
20
10, 2000. The parties have executed six amendments to the license agreement.
21
280. Qualcomm entered into a license agreement with Foxconn on October
22
18, 2005. The parties have executed four amendments to the license agreement.
23
281. Qualcomm entered into a license agreement with Wistron on May 23,
24
2007. The parties have executed one amendment to the license agreement.
25
282. Qualcomm entered into a license agreement with Pegatron on April 29,
26
2010. The parties have executed four amendments to the license agreement.
27
28
1 283. Each license agreement and amendment is the result of arms-length

2 negotiation by two sophisticated parties.
3 284. Each of the Contract Manufacturers chose to sign an agreement with
4 Qualcomm that grants it rights to various categories of Qualcomms intellectual
5 property, including broad licenses to Qualcomms portfolio of patents.
6 285. Each of the Contract Manufacturers license agreements grants rights
7 to practice Qualcomms cellular SEPs for the specified standards at any time during
8 the term of the agreement, plus many other patents and applications owned by
9 Qualcomm as of an agreed-upon date.
10
11 Each of the license agreements grants a
12 license to thousands of Qualcomms SEPs and NEPs.
15 entire device sold by the Contract Manufacturer.
16 287. Each of the Contract Manufacturers license agreements is consistent
17 with the license agreements Qualcomm has entered into with many other companies
18 on broadly similar terms.
19 288. Each Contract Manufacturer began paying Qualcomm royalties under
20 the terms of its license agreement for non-Apple products before paying royalties
21 for Apple products.
22 289. Until recently, each of the Contract Manufacturers had consistently
23 paid Qualcomm royalties under its license agreement for manufacturing both non-
24 Apple products and Apple products, regardless of whether those products also used
25 Qualcomms components or software.
26 290. This course of conduct and the allegations set forth above show that
27 Qualcomms license agreements with the Contract Manufacturers are consistent
28 with ETSIs IPR policy.
1 291. Qualcomm seeks a declaratory judgment that Qualcomms license

2 agreements with Compal, Foxconn, Wistron, and Pegatron do not violate
3 Qualcomms FRAND commitments to ETSI.
4 COUNT III
Manufacturers Do Not Violate Competition Law
6
7
8
293. Apple has failed to plead viable Sherman Act and California Business
9
and Professions Code claims.
10
11
and Apple, which have adverse legal interests, regarding whether Qualcomms
12
license agreements with the Contract Manufacturers are lawful and abide by
13
Section 2 of the Sherman Act, 15 U.S.C. 2, and California Business and
14
Professions Code 17200. As Apples lawsuit demonstrates, there is a case or
15
controversy of sufficient immediacy, reality, and ripeness to warrant the issuance of
16
a declaratory judgment.
17
295. Qualcomm entered into a license agreement with Compal on
18
February 10, 2000. The parties have executed six amendments to the license
19
agreement.
20
296. Qualcomm entered into a license agreement with Foxconn on October
21
18, 2005. The parties have executed four amendments to the license agreement.
22
297. Qualcomm entered into a license agreement with Wistron on May 23,
23
2007. The parties have executed one amendment to the license agreement.
24
298. Qualcomm entered into a license agreement with Pegatron on April 29,
25
2010. The parties have executed four amendments to the license agreement.
26
27
28
1 299. Each of the Contract Manufacturers chose to sign an agreement with

2 Qualcomm that grants it rights to various categories of Qualcomms intellectual
3 property, including broad licenses to Qualcomms portfolio of patents.
4 300. Each of the Contract Manufacturers license agreements grants rights
5 to practice Qualcomms cellular SEPs for the specified standards at any time during
6 the term of the agreement, plus many other patents and applications owned by
7 Qualcomm as of an agreed-upon date.
8
9 Each of the license agreements grants a
10 license to thousands of Qualcomms SEPs and NEPs.
13 entire device sold by the Contract Manufacturer.
14 302. Each of the Contract Manufacturers license agreements is consistent
15 with the license agreements Qualcomm has entered into with many other companies
16 on broadly similar terms.
17 303. Each of Qualcomms license agreements with the Contract
18 Manufacturers was entered into before Apple ever used a single Qualcomm chipset
19 in its products. The terms of the Contract Manufacturers license agreements with
20 Qualcomm have never depended on whether Apple used Qualcomm or non-
21 Qualcomm chipsets in its iPhones.
22 304. Each Contract Manufacturer began paying Qualcomm royalties under
23 the terms of its license agreement for non-Apple products before paying royalties
24 for Apple products. Until recently, each of the Contract Manufacturers had
25 consistently paid Qualcomm royalties under its license agreement for
26 manufacturing both non-Apple products and Apple products, regardless of whether
27 those products also used Qualcomms components or software.
28
1 305. This course of conduct and the allegations set forth above show that
2 Qualcomms license agreements with the Contract Manufacturers are consistent
3 with the Sherman Act and the California Business and Professions Code.
4 306. Qualcomm seeks a declaratory judgment that Qualcomms license
5 agreements with Compal, Foxconn, Wistron, and Pegatron do not violate Section 2
6 of the Sherman Act, 15 U.S.C. 2, and California Business and Professions Code
7 17200.
8 COUNT IV
9 Declaration That Qualcomm Has Satisfied Its FRAND Commitments
to ETSI with Respect to Apple
10
11
12
13
and Apple, which have adverse legal interests, regarding whether Qualcomm has
14
satisfied its FRAND commitments during its licensing negotiations with Apple.
15
There is a case or controversy of sufficient immediacy, reality, and ripeness to
16
warrant the issuance of a declaratory judgment.
17
309. From 2015 into 2017, Qualcomm and Apple engaged in negotiations
18
about Apples taking a direct license to Qualcomms cellular SEP portfolio.
19
310. At Apples request, Qualcomm provided extensive information
20
regarding the strength of its cellular SEP portfolio (as well as NEPs) and the
21
applicability of Qualcomms patents to Apples devices.
22
311. At Apples request, Qualcomm has made a complete, written license
23
offer to Apple for Qualcomms cellular SEP portfolio on FRAND terms.
24
312. On June 15, 2016, Qualcomm offered to license Qualcomms Chinese
25
3G and 4G cellular SEPs on the same terms agreed to by many Chinese cellular
26
industry players in the last 18 months, and noted that an offer for the rest of
27
Qualcomms cellular SEPs would follow shortly.
28
1 313. On July 15, 2016, as promised, Qualcomm provided Apple with an

2 offer for a license covering Qualcomms rest of world (i.e., other than China)
3 3G and 4G cellular SEPs.
4 314. In response, Apple rejected Qualcomms cellular SEP-only offer,
5 accused Qualcomm of breaching its FRAND commitment, and proposed instead
6 unreasonable terms with respect to a license for a portfolio of SEPs and NEPs,
7 insisting on paying substantially less than the royalties Qualcomm currently
8 receives from the Contract Manufacturers.
9 315. From the outset of the parties licensing negotiations, Qualcomm tried
10 to negotiate a framework to arbitrate some or all of the terms of a license
11 agreement.
12 316. Qualcomm first proposed arbitration several months before the
13 licensing negotiations began in earnest and then made a series of offers in an
14 attempt to find a mutually agreeable arbitration framework. Qualcomm even
15 offered to arbitrate under the arbitration procedures endorsed by the U.S. FTC in its
16 consent order with Google in 2013.
17 317. Qualcomm was willing to arbitrate any license for any portfolio of
18 patents in which Apple was interested, including the portfolio of patents for which
19 Apple made a counteroffer.
20 318. Apple refused each of Qualcomms arbitration proposals. Instead,
21 Apple put forth an unreasonable proposal of its own. Apples arbitration proposal
22 sought to impose unreasonable and unfair conditions on Qualcomm.
23 319. Apples insistence on imposing unreasonable and unfair conditions on
24 an arbitration process demonstrates Apples preference from the outset for patent-
25 by-patent litigation. Apples behavior shows that Apple was never interested in
26 entering into a direct cellular SEP license with Qualcomm on FRAND terms.
27 320. While Qualcomm complied with its FRAND commitments, Apple
28 demonstrated itself to be an unwilling licensee.
1 321. Qualcomm, therefore, seeks a declaratory judgment that it has satisfied

2 its FRAND commitments during its negotiations with Apple.
3 COUNT V
4 Breach of the Statement of Work, dated February 28, 2013
5 322. Qualcomm restates, re-alleges, and incorporates by reference each of
6 the allegations set forth above as if fully set forth herein.
7 323. The Statement of Work between Qualcomm and Apple, dated
8 February 28, 2013, as amended, (the 2013 SOW), constitutes a valid and
9 enforceable agreement between the parties.
10 324. Qualcomm has performed all of its obligations under the 2013 SOW,
11 whereas Apple has breached at least Section 4.2 of the 2013 SOW.
12 325. On February 10, 2017, Qualcomm notified Apple that it was invoking
13 the 2013 SOWs dispute resolution procedures, outlined in Attachment 2 of the
14 ASTA, due to Apples breach of Section 4.2 of the 2013 SOW. The parties
15 engaged in certain discussions under the terms of the ASTAs dispute resolution
16 process.
17 326. Pursuant to Section 4.2, Apple promised to pay Qualcomm a set rate,
18 called an , for Apple products that included Qualcomms MDM9625
19 chipset and met any one of the following four criteria:
20
21
22
23
24
25
26
27
28
1
2
3 327. Apple is refusing to honor its commitment to make carrier aggregation
4 payments under at least Section 4.2(A) and Section 4.2(D).
5 328. Apple admits that it owes Qualcomm approximately
6 pursuant to Section 4.2 of the 2013 SOW. But Apple has refused to pay even that
7 amount in an attempt to force Qualcomm to give up its rights to the rest of the
8 money Apple owes.
9 329. In total, Apple is withholding approximately in payments
10 it owes Qualcomm.
11 330. Qualcomm has been damaged by Apples breach of the 2013 SOW in
12 an amount to be proven at trial.
13 COUNT VI
14
Breach of the Business Cooperation and Patent Agreement
17 332. The Cooperation Agreement between Qualcomm and Apple
18 constitutes a valid and enforceable agreement between the parties.
19 333. Qualcomm has performed all of its obligations under the Cooperation
20 Agreement.
21 334. On October 9, 2016, Qualcomm notified Apple that it was invoking
22 the Cooperation Agreements dispute resolution procedures, and that it would not
23 make any further Cooperation Agreement payments to Apple. The parties engaged
24 in escalation discussions pursuant to the terms of the Cooperation Agreements
25 dispute resolution process.
26
27
28
1 335. Breach of Section 7 of the Cooperation Agreement

2 a.
3
4
5
6
7
8
9
10 b.
11
12
13
14
15
16
17
18 c. Apple breached Section 7 of the Cooperation Agreement by
19 accepting payments from Qualcomm, fully aware that Apple had not fulfilled the
20 necessary conditions under Section 7 to be entitled to such payments.
21 d. Apple has been waging a worldwide campaign against
22 Qualcomm with the goal of causing regulatory agencies to pursue investigations
23 that would harm Qualcomm and benefit Apple. Qualcomm became aware of
24 specific Apple conduct that constitutes active inducement under the Cooperation
25 Agreement. For example: (i) Apple induced Samsung to suggest to the KFTC that
26 it should broaden its investigation into Qualcomm; (ii) Apple made untrue
27 statements to the KFTC and other government agencies about Qualcomm; and
28
1 (iii) Apple urged the KFTC to impose extraterritorial, worldwide remedies against
2 Qualcomm. Apple has engaged in similar conduct with other regulatory agencies.
3 e. These investigations concern Qualcomms licensing business
4 and its component and software supply businesses. For example, the KFTC
5 investigated both (i) whether Qualcomm offered a license on FRAND terms and
6 conditions, and (ii) Qualcomms chipset business.
7 f. Because Qualcomm only recently became aware of the extent of
8 Apples campaign against Qualcomm, Qualcomm has made payments to Apple
9 under the Cooperation Agreement, unaware that Apple had failed to satisfy the
10 necessary conditions to be entitled to such payments. Apple accepted such
11 payments, despite knowing that it had failed to meet the necessary conditions for
12 payment under Section 7.
13 g. Apple breached the Cooperation Agreement by accepting
14 hundreds of millions of dollars in payments to which it was not entitled under the
15 terms of Section 7.
16 336. Breach of Section 4 of the Cooperation Agreement
17 a.
18
19
20
21
22 b. Apple has breached Section 4 of the Cooperation Agreement by,
23 for example, (i) deliberately inducing the Contract Manufacturers to reduce royalty
24 payments to Qualcomm, (ii) interfering with the audit procedures provided for in
25 the license agreements between the Contract Manufacturers and Qualcomm, and
26 (iii) directing the Contract Manufacturers to misstate or manipulate the net selling
27 price of the devices they sell to Apple.
28
1 c. Section 4 bars Apple from knowingly taking any action that

2 prevents, restricts, or discourages the Contract Manufacturers from complying fully
3 with the terms of their agreements with Qualcomm.
4 d. Apple breached Section 4 by discouraging the Contract
5 Manufacturers from making full royalty payments to Qualcomm, as required under
6 their agreements with Qualcomm.
7 e. Apple also breached Section 4 by interfering with the
8 independent royalty audit procedures provided for in the agreements between the
9 Contract Manufacturers and Qualcomm. Specifically, Apple prevented, restricted,
10 and discouraged the Contract Manufacturers from complying fully with Section 14
11 of their respective license agreements.
12 f. Apple breached Section 4 by directing the Contract
13 Manufacturers to misstate or manipulate the net selling price of the devices they sell
14 to Apple, thereby causing the Contract Manufacturers not to pay the full amount of
15 royalties owed to Qualcomm under their respective license agreements.
16 337. Qualcomm has been damaged by Apples breaches of the Cooperation
17 Agreement in an amount to be proven at trial.
18 COUNT VII
19 Breach of Implied Covenant of Good Faith and Fair Dealing
22 339. The Cooperation Agreement between Qualcomm and Apple
23 constitutes a valid and enforceable agreement between the parties.
24 340. Qualcomm has performed all of its obligations under the Cooperation
25 Agreement, and any conditions required for Apples performance have occurred.
26 341. Both Apple and Qualcomms purpose in entering into the Cooperation
27 Agreement was to allow the parties to continue to work together to explore
28
1 mutually beneficial business opportunities that could deepen their business

2 relationship.
3 342. Qualcomm has gone to great lengths to assist Apple. As discussed
4 above, Qualcomms engineers have responded to countless requests and demands
5 from Apple to create innovative solutions for Apples technical problems. By
6 contrast, Apple unfairly has taken advantage of Qualcomms cooperation efforts
7 and actively sought to harm Qualcomms business.
8 343. By deliberately making false statements to government agencies about
9 Qualcomms licensing practices and chipset businessin an effort to obtain a
10 discount to Qualcomms intellectual propertyApple has evaded the clear intent of
11 Section 7 and denied Qualcomm the benefit of its bargain.
12 344. By inducing and inciting governmental agencies to attack Qualcomms
13 business, serving its own interests at the expense of Qualcomm, Apple has evaded
14 the clear intent of Section 7 and denied Qualcomm the benefit of its bargain.
15 345. By partially disclosing confidential terms from its agreements with
16 Qualcommand by deliberately mischaracterizing those termsApple sought to
17 incite a backlash against Qualcomm from its other business partners and to further
18 harm Qualcomm.
19 346. Apples conduct is expressly covered by the text of Section 7; but even
20 if it were not, Apple has violated the fundamental understanding between the
21 parties and frustrated the purpose behind Section 7.
22 347. Apple has breached the covenant of good faith and fair dealing implied
23 in every contract governed by California law.
24 348. Qualcomm has been damaged by Apples conduct in an amount to be
25 proven at trial.
26
27
28
1 COUNT VIII
2 Unjust Enrichment
5 350. In the alternative only, if there was no meeting of the minds on the
6 meaning of Section 7 of the Cooperation Agreement, then:
7 a. No contract was formed and the Cooperation Agreement is
8 unenforceable.
9 b. Section 7 is ambiguous and reasonably capable of different
10 interpretations.
11 c. Qualcomm and Apple apparently attached materially different,
12 irreconcilable meanings to Section 7 when the parties signed the Cooperation
13 Agreement. See Letter from Apple to Qualcomm, dated November 16, 2016
14
15
16
17 d. Section 7 is a material term of the Cooperation Agreement.
18 e. Neither Qualcomm nor Apple knew or had reason to know the
19 conflicting interpretation that the other party had applied to Section 7 when the
20 parties entered into the Cooperation Agreement.
21 f. Because no contract was formed and the Cooperation
22 Agreement is unenforceable, Apple received and unjustly retained the benefit of
23 substantial payments from Qualcomm.
24 351. Qualcomm is therefore entitled to restitution of the value of all
25 unjustly retained payments, in an amount to be proven at trial.
26
27
28
1 COUNT IX
2 Declaration That Qualcomm Is Released from Any Obligation To Make
3 Further Payments Under the Cooperation Agreement
4
5
6
and Apple, which have adverse legal interests, regarding whether Qualcomm is
7
released from any obligation to make further payments under the Cooperation
8
Agreement, including those for the second, third, and fourth quarters of 2016.
9
There is a case or controversy of sufficient immediacy, reality, and ripeness to
10
warrant the issuance of a declaratory judgment.
11
354. As alleged above, Qualcomms payment obligations under the
12
Cooperation Agreement were extinguished when Apple failed to satisfy the
13
necessary conditions for receipt of payment under the Cooperation Agreement.
14
355. Further, under Section 7 of the Cooperation Agreement, Qualcomms
15
payment obligations apply only so long as Apple does not, inter alia, file a lawsuit
16
against Qualcomm that includes any claim that Qualcomm failed to offer a license
17
on FRAND terms and conditions, or any claim that the sale of a Qualcomm chipset
18
exhausts any Qualcomm patents. By filing this lawsuit and others in the United
19
Kingdom, China, and Japan, all of which include such claims, Apple relieved
20
Qualcomm of its obligation to make further payments under the Cooperation
21
Agreement.
22
356. In addition, under Section 10.4 of the Cooperation Agreement,
23
Qualcomm is released from any payment obligations, including already accrued
24
obligations, if Apple, inter alia, files a lawsuit against Qualcomm that includes any
25
claim that Qualcomm failed to offer a license on FRAND terms and conditions, or
26
any claim that the sale of a Qualcomm chipset exhausts any Qualcomm patents. By
27
filing this lawsuit and others in the United Kingdom, China, and Japan, all of which
28
1 include such claims, Apple relieved Qualcomm of its obligation to make further
2 payments under the Cooperation Agreement.
3 357. Therefore, Qualcomm seeks a declaratory judgment that Qualcomm is
4 released from any obligation to make further payments under the Cooperation
5 Agreement, including those for the second, third, and fourth quarters of 2016.
6 COUNT X
7 Violations of California Unfair Competition Law
10 359. Apple has engaged, and continues to engage, in unfair business acts
11 and practices in violation of California Business and Professions Code 17200.
12 360. Apple has engaged in unfair business practices, including by
13 (i) attempting to cover up the performance differences between Qualcomm and
14 Intel-based iPhone 7s; (ii) publicly claiming there was no discernible difference
15 between those phone models; and (iii) threatening Qualcomm to prevent it from
16 disclosing information regarding the superior performance of Qualcomm-based
17 iPhones over Intel-based iPhones. Apples conduct was designed to prevent
18 consumers from insisting on the superior Qualcomm-based iPhones. Apples
19 conduct has harmed Qualcomms chipset business. Absent Apples conduct,
20 Qualcomms chipsets would be in higher demand, and Qualcomm would be able to
21 sell more chipsets to meet that demand.
22 361. Apples conduct also reduces incentives for Qualcomm to innovate
23 superior products, knowing that the Apple may try to prevent consumers from
24 learning about their capabilities.
25 362. As a result of Apples unfair conduct, Qualcomm has lost both money
26 and property, including loss of profits, loss of customers and potential customers,
27 loss of goodwill and product image, and loss of business relationships.
28
1 363. There is no utility to any of Apples unfair acts. In fact, Apples

2 business practices have harmed everyone who depends on the cellular industry,
3 including Qualcomm and consumers.
4 364. Under California Business and Professions Code 17203, Qualcomm
5 is entitled to an injunction enjoining Apple from continuing to engage in the unfair
6 business acts and practices enumerated above in order to prevent threatened injury
7 to Qualcomm, as well as restitution of any amount Apple received as a result of
8 Apples conduct in violation of 17200.
9 COUNT XI
10 Breach of the Master Software Agreement
13 366. The MSA between Qualcomm and Apple constitutes a valid and
14 enforceable agreement between the parties.
15 367. Qualcomm has performed all of its obligations under the MSA.
16 368. Apple has materially breached the MSA
17
18
19
20 369.
21
22
23
24
25
26
27
28
1
2
3 370.
4
5
6
7
8
9
10
11 371.
12
13 Qualcomm
14 provides Apple with its software, which is then loaded onto an iPhone or iPad
15 (by the Contract Manufacturers);
16
17
18
19
20
21 372.
22
23
24 373. Qualcomm has been damaged by each of Apples material breaches of
25 the MSA in an amount to be proven at trial. Qualcomm also is entitled to an
26 injunction enjoining Apple from continuing to breach the MSA,
27
28
1 DEMAND FOR JURY TRIAL

2 Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Qualcomm
3 demands a jury trial on all issues triable by jury.
4 PRAYER FOR RELIEF
5 WHEREFORE, Qualcomm respectfully requests that the Court dismiss
6 Apples Complaint with prejudice and enter judgment as follows:
7 (a) Award compensatory and punitive damages, as provided by California
8 Civil Code 3294, for Apples tortious interference with Qualcomms contractual
9 relationships with the Contract Manufacturers in an amount to be proven at trial and
10 enjoin Apple from further tortious interference;
11 (b) Award damages for Apples breach of the Statement of Work, dated
12 February 28, 2013, as amended, in an amount to be proven at trial;
13 (c) Award damages, including but not limited to restitutionary damages,
14 for breaches of Sections 4 and 7 of the Cooperation Agreement in an amount to be
15 proven at trial; or alternately, award damages, including but not limited to
16 restitutionary damages, for breach of the Cooperation Agreements implied
17 covenant of good faith and fair dealing in an amount to be proven at trial;
18 (d) Award restitution for the value of unjustly retained payments made by
19 Qualcomm under the Cooperation Agreement in an amount to be proven at trial;
20 (e) Declare that Qualcomm is released from any obligation to make
21 further payments under the Cooperation Agreement;
22 (f) Declare that each of Qualcomms license agreements with the Contract
23 Manufacturers, listed below, does not violate Qualcomms FRAND commitments
24 to ETSI;
25 i. Compal Subscriber Unit Licensing Agreement, dated
26 February 10, 2000, as amended;
27 ii. Foxconn Subscriber Unit License Agreement, dated October 18,
28 2005, as amended;
1 iii. Wistron Subscriber Unit License Agreement, dated May 23,

2 2007, as amended; and
3 iv. Pegatron Subscriber Unit License Agreement, dated April 29,

2010, as amended.
4
(g) Declare that each of Qualcomms license agreements with the Contract
5
Manufacturers, listed below, does not violate competition law;
6
7 i. Compal Subscriber Unit Licensing Agreement, dated
February 10, 2000, as amended;
8
ii. Foxconn Subscriber Unit License Agreement, dated October 18,
9
2005, as amended;
10
iii. Wistron Subscriber Unit License Agreement, dated May 23,
11 2007, as amended; and
12
iv. Pegatron Subscriber Unit License Agreement, dated April 29,
13 2010, as amended.
14 (h) Declare that Qualcomm satisfied its FRAND commitments to ETSI
15 during negotiations with Apple;
16 (i) Enjoin Apple from engaging in its unfair business acts and practices in
17 violation of California Business and Professions Code 17200;
18 (j) Award Qualcomm restitution of the money Apple extracted from
19 Qualcomm as part of its unfair business acts and practices in violation of 17200;
20 (k) Award damages and attorneys fees, pursuant to Section 11 of the
21 MSA, for Apples material breach of Section 5 of the MSA in an amount to be
22 proven at trial;
23 (l) Enjoin Apple from continuing to breach the MSA,
24
25 ;
26
27
28
1 (m) Award reasonable attorneys fees to Qualcomm;

2 (n) Award expenses, costs, and disbursements in this action, including
3 prejudgment interest; and
4 (o) Award such other and further relief as the Court deems just and proper.
5
6 Dated: April 10, 2017 Respectfully submitted,
7
8 By: /s/ Evan R. Chesler
9 CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (pro hac vice)
10 (N.Y. Bar No. 1475722)
[email protected]
11 Keith R. Hummel (pro hac vice)
(N.Y. Bar No. 2430668)
12 [email protected]
Richard J. Stark (pro hac vice)
13 (N.Y. Bar No. 2472603)
[email protected]
14 Gary A. Bornstein (pro hac vice)
(N.Y. Bar No. 2916815)
J. Wesley Earnhardt (pro hac vice)
16 (N.Y. Bar No. 4331609)
[email protected]
17 Yonatan Even (pro hac vice)
(N.Y. Bar No. 4339651 )
Vanessa A. Lavely (pro hac vice)
19 (N.Y. Bar No. 4867412)
[email protected]
20 Worldwide Plaza, 825 Eighth Avenue
New York, NY 10019
21 Telephone: (212) 474-1000
Facsimile: (212) 474-3700
22
23
24
25
26
27
28
1 QUINN EMANUEL URQUHART &

SULLIVAN, LLP
2 David A. Nelson (pro hac vice)
(Ill. Bar No. 6209623)
3 [email protected]
Stephen Swedlow (pro hac vice)
4 (Ill. Bar No. 6234550)
[email protected]
5 500 West Madison St., Suite 2450
Chicago, Illinois 60661
6 Telephone: (312) 705-7400
Facsimile: (312) 705-7401
7
8 Alexander Rudis (pro hac vice)
(N.Y. Bar No. 4232591)
9 [email protected]
51 Madison Ave., 22nd Floor
10 New York, New York 10010
Telephone: (212) 849-7000
11 Facsimile: (212) 849-7100
12 Sean S. Pak (SBN 219032)

[email protected]
13 50 California St., 22nd Floor
San Francisco, CA 94111
14 Telephone: (415) 875-6600
Facsimile: (415) 875-6700
15
16 JONES DAY
Karen P. Hewitt (SBN 145309)
4655 Executive Drive, Suite 1500
18 San Diego, California 92121
Telephone: (858) 314-1200
19 Facsimile: (858) 345-3178
20 Attorneys for Defendant and
Counterclaim Plaintiff
21 QUALCOMM INCORPORATED
22
23
24
25
26
27
28

17-04-10 Qualcomm Answer To Apple Complaint

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17-04-10 Qualcomm Answer To Apple Complaint

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Case 3:17-cv-00108-GPC-MDD Document 61 Filed 04/10/17 PageID.

636 Page 1 of 139

1 Evan R. Chesler (N.Y. Bar No. 1475722; pro hac vice)

18 SOUTHERN DISTRICT OF CALIFORNIA

19 APPLE INC., No. 17-cv-0108-GPC-MDD

QUALCOMMS ANSWER & COUNTERCLAIMS Case No. 17-cv-0108 GPC MDD

QUALCOMMS ANSWER & COUNTERCLAIMS Case No. 17-cv-0108 GPC MDD

1 IV. Qualcomms Chipset and Software Relationship with Apple. ...................... 78

1 17. Qualcomm denies the allegations in Paragraph 17.

1 Apple has not provided Qualcomm an unredacted version of the allegations in

1 119. Qualcomm denies the allegations in Paragraph 119 and footnote 2,

1 215. Qualcomm denies the allegations in Paragraph 215.

1 229. Qualcomm repeats and realleges its responses to the preceding

1 291. Qualcomm denies the allegations in Paragraph 291.

1 384. Qualcomm denies the allegations in Paragraph 384.

1 successful consumer products in history by relying significantly on cellular

1 with Intels chipsets, and (ii) acted to prevent Qualcomm from

1 8. Qualcomms technologies enable the cellular ecosystem that allows

1 the Cooperation Agreement provided meaningful value to the other. In particular,

1 34. Third, Apple misrepresented the performance of iPhones with

1 28 U.S.C. 1391(b)-(d). Additionally, venue is proper in this District pursuant to

1 invisible, physical resource, and the steadily increasing use of wireless

10 approximately 20,000 engineers in more than 40 countries. Qualcomm also has

1 engineering challenges. Standard-development organizations (SDOs) are at the

1 (TD-SCDMA) standard (developed primarily for use in China). Although these

1 75. Finding ways to substantially increase data transfer on a limited

1 make standard-compliant products, on the other hand. Patent licensingand the

1 C. Qualcomms Intellectual Property Provides Tremendous

3 110. Apple needs some form of access to Qualcomms patent portfolio

5 intellectual property. Without such access, Apple would infringe Qualcomms

6 patents. Apple itself has acknowledged that Qualcomms intellectual property

7 enables cellular devices downstream function and value.

8 111. Qualcomms inventions are not limited to technologies in modem

9 chipsets or even cell phones. Qualcomms intellectual property reads on everything

11 value to the entire device.

12 112. Qualcomms contributions to the system level of cellular

13 communications have been game-changing: Qualcomm vastly improved data

17 accommodate more consumers and demand on their networks; Qualcomm made it

21 efficient radio access techniques. The list goes on.

22 113. Qualcomms intellectual property also enables numerous important

23 features on the iPhone. To name a few examples, thanks to Qualcomms

25 The iPhone can be used as a WiFi hotspot and stream ultra-high-

26 definition (4K) videos.

1 The iPhone benefits from longer battery life, an auto-lock

1 117. Similarly, on an October 2016 earnings call, Tim Cook again

1 122. As a result, Apple has continued to rely on the Contract

1 technology for future releases. During lengthy negotiations, Apple threatened to

1 141. While Qualcomm was forced to give supply commitments and

1 146. In its Complaint, Apple misstates the nature of the Transition

1 A. Qualcomm Provided Extensive Information About Its

3 165. In February 2016, Apple requested that Qualcomm provide to Apple,

5 explanation as to why [Qualcomm] think[s] Apples products infringe that patent,

7 arrive at the royalty rate sought.

8 166. Apples request for patent-by-patent information is inconsistent with

9 industry practice for negotiating portfolio licenses. Such information is also

10 impossible to provide as a practical matter, which Apple well knows. In

12 patents as potentially essential to one or more cellular standards. Demanding that

16 while exchanging information concerning a representative set of the patents in the

18 167. Nevertheless, Qualcomm did provide Apple with a wealth of