Key Lessons from the Apple/Qualcomm Settlement

In All, Technology by lowndestech

By: Jonathan Pickett

The surprising settlement between tech giants Apple Inc. and Qualcomm Inc. sealed Intel’s fate as a producer of the wireless chips used in smartphones, such as Apple’s iPhone. Hours after the parties announced the settlement, Intel CEO, Bob Swan, stated in a press release, “In the smartphone modem business it has become apparent that there is no clear path to profitability and positive returns.” Although it is unclear whether problems with Intel’s performance led to the Apple/Qualcomm settlement or whether the impending settlement caused Intel’s withdrawal from this industry, Mr. Swan’s press release marked a sharp turn from what had been a fairly profitable product for Intel.

Throughout the two years of litigation between Apple and Qualcomm, Intel was the primary producer of chips for the new iPhone models. Although many of the terms of the Apple/Qualcomm settlement have been kept confidential, we know that Apple agreed to a six-year deal making Qualcomm Apple’s supplier for wireless smartphone chips. Moreover, likely eager to reduce or eliminate its reliance on a third-party suppliers, Apple is projected to begin producing its own chips in the near future, perhaps as early as 2021. Either way, Apple will likely not be returning to Intel for its wireless chip needs and Intel is ceasing its chip production.

Here’s What You Need To Know:

Intel’s abrupt cessation of producing smartphone chips due to the Apple/Qualcomm settlement highlight the potential impact of litigation on third parties. Unfortunately, third parties often do not have many rights that allow them to protect their business interests related to the litigation. The primary method a party may use to protect its rights related to existing litigation is to join the lawsuit through a process called intervention. In Florida, intervention is a two-step process.

First, the court must determine whether the third party’s interest in the lawsuit is sufficient such that intervention is proper. Second, the court exercises its discretion as to whether it will allow a third party to intervene. In doing so, the court considers “the derivation of the [third party’s] interest, any pertinent contractual language, the magnitude of the [third party’s] interest, the potential for conflicts or new issues, and any other relevant circumstance.”

This being the case, often a third party’s best option for protecting its interests is to negotiate with the litigating parties outside of court. Of course, these parties are not obligated to enter into negotiations with any third party, but acting quickly and assertively at the outset of litigation amongst one’s competitors, customers, and/or suppliers is likely to lead to the best outcome. Exploring discussions with either or both litigants early in the litigation process may allow a third party to reach a better business solution than what the third party could achieve through intervention. The third party’s position is bolstered if it has enforceable agreements with one or both of the litigants. The third party can negotiate based on the presence of such agreements, or bring its own suit for breach of contract or tortious interference if the facts permit.