What If the iPhone Cannot Be Sold in the US?

It seems to be a stretch, but Qualcomm Inc. (NASDAQ: QCOM) has asked the U.S. International Trade Commission (ITC) to block the import of Apple Inc. (NASDAQ: AAPL) iPhones, which the chip company says rely on six of its patents, into the United States. The case will be heard next year. It is not out of the question that Qualcomm could win it, setting up a likely series of negotiations between the two companies. There is no guarantee those talks will bring a rapid resolution.

The chip company’s management disclosed on July 6:

Qualcomm Incorporated (Nasdaq: QCOM) today announced that it is filing a complaint with the United States International Trade Commission (ITC) alleging that Apple has engaged in the unlawful importation and sale of iPhones that infringe one or more claims of six Qualcomm patents covering key technologies that enable important features and functions in iPhones. Qualcomm is requesting that the ITC institute an investigation into Apple’s infringing imports and ultimately issue a Limited Exclusion Order (LEO) to bar importation of those iPhones and other products into the United States to stop Apple’s unlawful and unfair use of Qualcomm’s technology. The Company is seeking the LEO against iPhones that use cellular baseband processors other than those supplied by Qualcomm’s affiliates. Additionally, Qualcomm is seeking a Cease and Desist Order barring further sales of infringing Apple products that have already been imported and to halt the marketing, advertising, demonstration, warehousing of inventory for distribution and use of those imported products in the United States.

Qualcomm filed a related suit in the U.S. Court for the Southern District of California.

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Legal experts and the media have pointed out that the cases will take many months to unfold, and that the companies each have an incentive to work toward a truce. However, Qualcomm cannot afford to lose a case to a company of Apple’s size, and one that makes tens of millions of what it says are offending products.

Qualcomm has another reason to press its position aggressively. Investors have turned their backs on the company, to some extent because of its battle with Apple and competition from Intel. Qualcomm’s shares trade near the bottom of the 52-week range, at $54.45 against a high of $71.62 and a low of $51.05 for the period. The stock traded around $81 in June 2014.

While it is unimaginable that some iPhones could be blocked from sales in the United States, the legal case against Apple has drawn enough attention to prove that it has merit. And merit can turn into a winning case for Qualcomm.

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