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Qualcomm Sues to Ban iPhones in China, but Here's Why Apple Might Come Out Ahead

This column has been updated from Oct. 12 to noted Qualcomm's request for a Chinese iPhone ban.

As Apple Inc. (AAPL - Get Report) and Qualcomm Inc. (QCOM - Get Report) dig in and maneuver for what could be a lengthy legal fight over iPhone royalty payments -- in its latest salvo, Qualcomm has petitioned Chinese courts to ban the sale and manufacture of iPhones in China, after having previously requested a partial U.S. ban -- it's worth remembering what happened the last time Apple was involved in a major patent fight. That was a battle in which Apple failed to achieve its goals, on the surface. but from a big-picture perspective managed to accomplish some valuable things.

As most readers probably are aware, it was just a few years ago that Apple was mired in high-profile patent lawsuits (and countersuits) against Samsung (SSNLF) and several other Android OEMs over the alleged infringement of its software and design patents. Apple scored some tactical victories in the U.S. and elsewhere, with perhaps the largest being a $1 billion jury award (lowered to $548 million following appeals) it won in a San Jose court in 2012.

But gradually, the battle petered out. Apple, which at one point pursued injunctions against high-end Samsung devices such as the Galaxy S III phone and Galaxy Tab tablet, stopped seeking moves against new Samsung devices after they launched. It settled its disputes with HTC and Motorola Mobility via patent-licensing deals, and agreed in 2014 to drop all its battles with Samsung outside the U.S. Some old lawsuits are still outstanding, but it's clear that this fight is no longer an Apple priority.

Nonetheless, Apple's suits did arguably make Android OEMs more cautious about conspicuously imitating its iPhone and iPad designs -- some imitation still goes on, but compared with how much the Galaxy S III looked like the iPhone 4 and 4S, things have changed. Likewise, while Alphabet Inc./Google (GOOGL - Get Report) still "borrows" software ideas from Apple for new Android releases -- to be fair here, Apple borrows from Google and others as well now -- iOS and Android's user interfaces are more meaningfully different than they were a few years ago.

This end-game could be a sign of things to come for Apple's fight against Qualcomm. Especially in light of what was shared in an Oct. 4 Bloomberg report about the dispute.

Bloomberg notes that Qualcomm -- per analyst estimates -- had been getting a royalty of about $10 per iPhone (after accounting for rebates) before Apple instructed its contract manufacturers to stop making payments earlier this year. And it says that Apple legal chief Bruce Sewell remarked that his company thinks it should pay "$4 or so" per phone.

Jim Cramer and the AAP team hold positions in Apple and Alphabet for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL or GOOGL? Learn more now.


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