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Apple and Qualcomm drop all lawsuits in surprise settlement

Apple and leading chipmaker Qualcomm have agreed to drop all litigation between them, ending a web of legal battles the tech giants have fought on multiple continents for two years.

The surprise settlement was announced Tuesday, just as the companies were gearing up for a significant court battle in San Diego.

As part of the settlement, Apple is paying an undisclosed amount to Qualcomm. The settlement also includes a six-year patent licensing agreement, effective at the beginning of April, Apple said in a statement. The agreement can be extended for two years.

Apple and Qualcomm have been fighting over Qualcomm’s patent licensing practices for the last two years. Apple contended that Qualcomm was charging unreasonably high fees for essential patents and using its position as the dominant supplier of smartphone modems to demand those exorbitant prices. For Qualcomm, there was a lot at stake, including patent licensing accounts for the vast majority of its profits.

The lawsuit began in January 2017, and the two companies just entered court this week. Word of the settlement came while the two companies were still reading their opening arguments.

Qualcomm has been sued over licensing practices and monopolistic behavior by regulators across the globe. In the US, it’s still waiting on the results of the lawsuit it fought against the Federal Trade Commission in January, which was filed just days before Apple’s. The company has been fined hundreds of millions of dollars over those practices, which initially suggested that Apple may have the upper hand.

But in recent months, Qualcomm has managed to put pressure on Apple. It managed to win iPhone bans in Germany and China over patent violations, and it won a lawsuit in the US that put a high price on just a small number of its patents. More wins for Qualcomm could have ended up raising the price for Apple, which may have made the company more inclined to settle.

Apple and Qualcomm’s legal battle had the potential to reshape pricing around modems as a critical time in the mobile phone market just as 5G is starting to take shape. If Apple had won, it could have secured lower prices for itself and potentially made it easier for competitors to Qualcomm to build their own alternatives. If Apple had lost, Qualcomm may have been able to secure even higher fees going forward, further taking hold of the modem market amid a generational change.

For both sides, the stakes may just have been too high to keep fighting.

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