Brilliant strategy by Apple's lawyer minimizes Qualcomm's contribution to the iPhone

Apple chief executive Tim Cook

Apple chief executive Tim Cook

It also includes a six-year licensing agreement that likely involves recurring payments to the mobile chip maker. This particular court battle was over unpaid royalty rebates, and was taking place in court in San Diego, California.

Apple had been seeking billions of dollars over what it claims are exorbitant fees Qualcomm allegedly charged for the use of Qualcomm chips in iPhones, while Qualcomm alleged that Apple breached its licensing agreements to use Qualcomm's intellectual property by refusing to pay billions in fairly charged royalties.

Over the last two years, Apple and Qualcomm, a company that makes communications chips and holds a number of critical patents, have been locked in a legal battle.

In addition to the federal lawsuit, the companies had lodged litigation in dozens of jurisdictions around the world, including Qualcomm efforts to ban iPhone sales in Germany and China and a state court case in San Diego where Qualcomm accused Apple of helping steal its chip secrets to benefit Intel.

The news sent Qualcomm's stock price soaring more than 23 percent on Wall Street, its best one-day performance in almost 20 years. This has been capped at $400 by Qualcomm, but still represents a much higher value than the $20 cost of a Snapdragon modem chip. Intel, which is now the sole supplier of 4G LTE modems for Apple's current generation of iPhones and iPads, just announced that it is throwing in the towel on 5G modem development for smartphones. Apple executives testified in January at a trial between the U.S. Federal Trade Commission and Qualcomm that Apple's policy is always seek several suppliers.

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Now that the dust has settled, Apple can start testing a 5G-enabled iPhone with Qualcomm's latest and faster modems.

Qualcomm and Apple have agreed to exit all litigation between themselves this afternoon. And the chip maker is still on pins and needles awaiting Judge Lucy Koh's decision related to the FTC v. Qualcomm case heard earlier this year. Apple's new agreement with Qualcomm accelerates the move off of Intel, and takes the pressure off of Apple's internal modem development group.

Apple had claimed that Qualcomm had abused its patent-driven dominance to charge excessive royalties. Apple was barely changed after hours.

The deal requires Apple to pay Qualcomm an undisclosed amount. Qualcomm typically doesn't allow customers to buy their chips unless they license their patent portfolio first. A separate chipset supply agreement has been inked; though the official announcement doesn't say for how long beyond the fact that it's a "multiyear" agreement.

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