QCOM QUALCOMM Inc

By Tripp Mickle and Asa Fitch 

SAN DIEGO -- Apple Inc. and Qualcomm Inc. agreed to dismiss all litigation between the two companies world-wide, ending a long-brewing legal battle over how royalties are collected on innovations in smartphone technology.

Financial terms of the agreement weren't disclosed.

The settlement to the patent dispute includes an undisclosed payment from Apple to Qualcomm and settles all litigation involving the contract manufacturers Apple enlists to make iPhones and iPads.

Apple and Qualcomm, whose chief executives were expected to testify in the trial, reached a six-year license agreement effective April 1, including the option for a two-year extension and a multiyear chipset-supply agreement. The companies didn't disclose the financial terms of what Apple will pay in patent licensing fees over the course of their six-year agreement.

Qualcomm said the agreement will add about $2 earnings per share as modem chip shipments begin. Its stock surged in afternoon trading following the announcement, jumping more than 20%. Apple shares rose slightly.

The dramatic turn of events came as Qualcomm's lawyers were preparing to wrap up their opening arguments, portraying Apple as a bully who was forcing the chip maker to accept less money than it deserves for its contributions to its smartphones. Earlier, Apple had accused Qualcomm of forcing customers to pay twice to gain access to its chips, as trial arguments got under way.

The agreement will "allow these tech companies to get back to business and you to return to their everyday affairs," Judge Gonzalo Curiel told the jurors.

The two-year feud started as global smartphone sales slowed, pressuring both companies' businesses. Apple had paid Qualcomm $7.50 in royalties on every iPhone it sold since 2007 -- a price the parties reached with complex agreements that lowered Qualcomm's standard royalty rate through rebate and incentive payments. Apple also agreed to make Qualcomm the exclusive provider of modem chips for iPhones from 2011 to 2016.

Apple added chips from Intel Corp. to some iPhone models in 2016, as its most recent contract with Qualcomm concluded. It then slapped Qualcomm with a lawsuit in January 2017.

Other issues have heightened the distrust. For example, Qualcomm executives suspected Apple of supporting a hostile takeover bid by Broadcom Inc., and Apple executives were angered that Qualcomm hired an opposition-research firm with ties to a news outlet that published articles calling the iPhone maker Silicon Valley's biggest bully.

Apple's legal challenge has left it without access to Qualcomm's market-leading 5G modem chips, putting its most important product, the iPhone, a step behind Android competitors in the race to the next big advance in wireless.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Asa Fitch at asa.fitch@wsj.com

(END) Dow Jones Newswires

April 16, 2019 16:07 ET (20:07 GMT)

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