Qualcomm and Apple are embroiled in legal feuds all over the world, including multiple separate litigations in the United States. Although there are several suits, both sides are probably coordinating these myriad efforts to create a unified front.
Late October 2018, San Diego Superior Court Judge Jacqueline Stern issued a tentative ruling that granted Qualcomm’s request to amend its breach of contract countersuit against Apple to include claims of misappropriation of trade secrets. Specifically, Qualcomm alleged that Apple stole its broadband chipset source code and other software tools, sharing them with Qualcomm’s competitor Intel.
This one slice of the feud between Apple and Qualcomm can be traced back nearly two years. Apple accused Qualcomm of unfair royalties and eventually added “double-dipping” on patents by charging both a royalty for Qualcomm’s chipsets and a licensing fee for the patented technology. Qualcomm countersued when Apple and its Asian manufacturers stopped paying royalties. Qualcomm recently asserted that Apple owes it $7 billion in royalties already.
In September 2018, Qualcomm moved to amend its original countersuit to add the allegation of trade secret violation. Since 2011, Qualcomm shared its trade-secreted source code with Apple to help Apple engineers optimize the integration of Qualcomm’s broadband chipset in iPhones for high-speed connection to cellular networks. In 2016, Apple started using Intel broadband chipsets in some of its iPhones while continuing to use Qualcomm’s as well. However, Qualcomm’s chips allowed for higher connection speeds including next-generation gigabit-per-second speeds while Intel’s lagged behind; some speculate that Intel may even be a full generation behind. In the past, Apple addressed this discrepancy by throttling Qualcomm’s chips to ensure uniform performance across its iPhones.
To support its allegation of trade secret violation, Qualcomm referenced emails by Apple engineers providing Intel engineers with Qualcomm’s source code to help Intel overcome engineering flaws in its chips that led to their poor performance in iPhones. Some sources have hinted that the evidence included not only emails, but also Apple’s own source code development history and the code being used in phones using Intel’s chips. Qualcomm asserts that it had been attempting to audit Apple’s protection of its source code as agreed since 2011 when Qualcomm first began selling its chipset to Apple, but was repeatedly rebuffed by Apple.
Although both sides have raised valid claims against the other’s seemingly unethical behavior across their many legal disputes, the inability for Qualcomm to monitor how Apple has protected its trade-secreted source code seems especially dire. Many companies that base much of their value in computer code rely on trade secret protection because patent protection for software has been greatly weakened since 2014’s infamous Alice Corp. v. CLS Bank International.
The Defend Trade Secret Act of 2016 created a federal jurisdiction for trade secret litigation offering similar remedies to state law. But that might not be enough, especially in cases where trade-secreted, lucrative code is shared with another corporation. The sharing of such code benefits the end-user who sees better, more efficient, optimized performance from their devices, and in turn these devices can be developed more easily and quickly. These benefits are worthy of protection.
When it comes to code, current trade secret law is too passive. Trade secrets are protected by contract and are usually remedied in the same ways as other contracts, namely monetary relief for compensatory damages and equitable relief in the form of injunctions. Maybe more powerful non-contractual remedies are required for not permitting reasonable auditing of trade-secreted code being shared with other companies. Contract law puts a price on compliance and pricing trade secrets seems inadequate to encourage protection especially when tech mega-corporations are involved, like the first trillion dollar-valued company.
Not only does code have value, but it is often a company’s “secret sauce.”. However, code is easier to misappropriate than the secret recipe for a best-selling soft drink; all it takes is a couple mouse clicks. By incentivizing reasonable auditing of trade-secrets shared with other companies, the public can reap the benefits of the collaboration and have fewer messy legal battles.*
*Benjamin Black is an associate editor on the Michigan Technology Law review.