Apple stole Qualcomm chip secrets and gave them to Intel, Qualcomm claims

Qualcomm has accused Apple of stealing modem-chip designs and giving them to Intel in order to help Intel make cellular chips that could be used in iPhones at lower prices than those charged by Qualcomm.

"Apple has engaged in a years-long campaign of false promises, stealth, and subterfuge designed to steal Qualcomm's confidential information and trade secrets for the purpose of improving the performance and accelerating time to market of lower-quality modem chipsets, including those developed by Intel Corporation, competitor of Qualcomm, to render such chipsets useable in Apple iPhones and other devices, with the ultimate goal of diverting Qualcomm's Apple-based business to Intel," Qualcomm wrote in a proposed amended complaint.

Apple started switching from Intel to Qualcomm modem chips in iPhones and other devices in 2011 when it launched the Verizon version of the iPhone 4, Qualcomm said. But Apple began switching back to Intel chips in some iPhone models in 2016, apparently to get lower prices despite the Intel chips' lower performance. Qualcomm alleges that the switch to Intel in 2016 and Intel chip improvements since then were aided by Apple's illegal actions.

"Apple has wrongfully acquired, failed to protect, wrongfully used, wrongfully disclosed, and outright stolen Qualcomm's confidential information and trade secrets, and Apple used that stolen technology to divert Qualcomm's Apple-based business to Intel," Qualcomm alleged.

The new iPhone XS and XS Max use Intel modem chips.

Qualcomm's amended complaint is available here, courtesy of Axios. It was filed in California Superior Court for the County of San Diego and becomes part of a lawsuit originally filed in November 2017.

Qualcomm's original complaint accused Apple of violating a software agreement by refusing to let Qualcomm audit Apple's compliance with that agreement. Qualcomm suspected Apple of sharing trade secrets with Intel at the time, but the company said the lack of an audit hampered its ability to investigate the matter.

Qualcomm's new complaint adds details that the company says it has learned since discovery in the case began. Qualcomm now alleges that Apple committed breach of contract and trade-secret misappropriation, and the company asked for damages covering "actual losses, unjust enrichment, lost profits, and/or imposition of a reasonable royalty," plus punitive and exemplary damages.

Apple says Qualcomm has no evidence

When contacted by Ars, an Apple spokesperson said that Qualcomm has repeatedly made allegations without evidence.

"In late August, Apple filed a Motion to Compel in this same case to get Qualcomm to show evidence for its allegations, since the company has continued to make claims without producing substantiation," Apple said.

Qualcomm's filing today also "does not include any evidence of [its] claims," Apple said.

Qualcomm says that the master software agreement signed by the two companies has a provision allowing Qualcomm to audit Apple's compliance but that Apple hasn't allowed such an audit.

"To date, despite Qualcomm's repeated requests, Apple has refused to permit Qualcomm to complete an audit of Apple's compliance with the terms and conditions of the [agreement]," Qualcomm wrote.

Qualcomm says it has gained further information since filing its lawsuit. "Discovery to date in this action indicates that Apple's theft of Qualcomm's protected information extends far beyond the breach" that led to the lawsuit's filing, Qualcomm's amended complaint said.

Discovery has included "Apple's chipset-supplier communications, as well as source code and related information in Apple's possession," Qualcomm said.

Qualcomm also pointed to an "Internet posting regarding Intel layoffs, which appears to have been made by a former Intel engineer working on an Intel modem chipset." According to Qualcomm, that post stated, "We were told to ignore intellectual property rights when designing the modem. There was even a conspiracy to copy Qualcomm's technology by hints from Apple about the 'reference device.'"

Qualcomm further wrote:

On information and belief, Apple long ago devised a plan to improve the performance of non‐Qualcomm chipset solutions, including Intel's, by stealing Qualcomm's technology and using it to establish a second source of chipsets in order to pressure Qualcomm in business negotiations over chipset supply and pricing, and ultimately to divert Qualcomm's Apple-based business to Intel, from which Apple could extract more favorable terms. Apple's illegal conduct was calculated and pervasive, particularly among its engineers working with Qualcomm and Intel chipsets.

Multi-pronged legal battle

The lawsuit is one of several involving the two companies. Apple sued Qualcomm in January 2017, alleging that the chip company charges billions in patent royalties "for technologies they have nothing to do with."

Apple also countersued Qualcomm in November 2017, alleging that Qualcomm chips infringe Apple patents.

Apple today referred us to a previous statement it made in June 2017 that accused Qualcomm of "illegal business practices."

"They supply us with a single connectivity component but for years have been demanding a percentage of the total cost of our products—effectively taxing Apple's innovation," Apple's statement from June 2017 said. "We believe deeply in the value of intellectual property, but we shouldn't have to pay them for technology breakthroughs they have nothing to do with. We've always been willing to pay a fair rate for standard technology used in our products, and since they've refused to negotiate reasonable terms, we're asking the courts for help."

Qualcomm’s claims

Starting in 2010, Qualcomm gave Apple "access to large portions of Qualcomm software, including the most sensitive and important layers of source code for Qualcomm's industry‐leading modem," Qualcomm's complaint said.

This was "unprecedented access," demanded by Apple, which said it needed the source code "to modify and integrate the code to enable Qualcomm chipsets to work in Apple devices, including iPhones," Qualcomm said. To get the code, Apple agreed "to take a number of steps to ensure and maintain the confidentiality and security of Qualcomm's software, including source code," pursuant to the master software agreement, Qualcomm wrote.

Qualcomm alleges that Apple violated the terms of this agreement and a separate agreement that let Apple use Qualcomm software development tools.

Apple breached the master agreement when "Apple engineers working to incorporate Intel chipsets into Apple devices" gained access to Qualcomm trade secrets, Qualcomm alleged.

"[A]fter becoming aware of certain performance deficiencies with Intel's chipset solutions," the Apple engineers "repeatedly accessed, used, and provided to Intel engineers Qualcomm software and confidential information, including source code, for the purpose of improving the performance of Intel's chipset solutions," Qualcomm alleged.

Qualcomm said that "Apple's covert misappropriation of Qualcomm's trade secrets and other protected information" helped Intel partially close the technology gap between its own modem chips and Qualcomm's.

"In fact, it apparently improved Intel chipsets to the point where Apple decided to divert some of Qualcomm's Apple-based business to Intel," Qualcomm wrote. "On information and belief, Apple created and executed this scheme in part to reduce its cost of goods and increase its commercial leverage over Qualcomm but at the cost to Qualcomm of its valuable trade secrets and Apple-based business."