The U.S International Trade Commission (ITC) announced on Tuesday that it has voted to investigate Qualcomm's (NASDAQ: QCOM) complaints of patent infringement by Apple (NASDAQ: AAPL). The mobile chip giant filed a complaint in July, following reports in May that Qualcomm would seek an import ban. There are six patents at the heart of the complaint, none of which are deemed to be standards-essential patents (SEPs), which would require that Qualcomm license them to other companies.
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The ITC makes it clear that it "has not yet made any decision on the merits of the case," but within 45 days will set a target date to complete the investigation.
A small but expected step
The news is a small token win for Qualcomm, but also unsurprising. Given the broad implications of the complaint due to the sheer size of the two companies involved, it would be silly for the ITC not to investigate the complaint. Voting to investigate is merely procedural, and quite a different thing from what the ITC ultimately decides. Qualcomm had previously said that it expected the ITC investigation to commence in August and that the case would be tried next year.
If the ITC rules in Qualcomm's favor and blocks iPhone imports, it could be absolutely devastating to Apple's business. The U.S. accounted for 39% of revenue last quarter, while separately the iPhone comprised 55% of all sales.
Everyone v. Qualcomm
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It's worth noting that a wide range of companies have come out of the woodwork to side with Apple, most notably including rival baseband modem supplier Intel (NASDAQ: INTC). Chipzilla filed a Public Interest Statement with the ITC regarding the case, arguing that Qualcomm is attempting to leverage the ITC process to support its anti-competitive behavior in what it calls a "twisted use."
Key to that argument is the fact that Qualcomm is only seeking to block the import of iPhones with Intel modems, while iPhones with Qualcomm modems would be allowed entry even though they still allegedly infringe on the underlying patents. If Qualcomm were truly only concerned about patent infringement, it would seek an import ban on all iPhones, including those with Qualcomm modems. But that would obviously amount to self-inflicted pain if it were to materialize.
An industry trade group that represents a handful of other prominent tech giants has also voiced its opposition against Qualcomm.
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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.