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Everything You Need to Know About China’s iPhone Ban
by Olivier Blanchard | December 12, 2018
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Note: This article contains updates.

China just dropped a bomb on Apple in a patent infringement case pitting the iPhone maker against wireless innovation giant Qualcomm. On Monday, a Chinese court granted Qualcomm a preliminary injunction (or “PI” for short) against Apple, essentially banning the importation and sale of iPhones 6s through X in China indefinitely, and effective immediately.

I have been fielding a lot of questions about this already, and noticed quite a bit of inaccurate reporting and analysis about this ruling, so I thought this might be a good opportunity to provide some clarity on the matter. Every question I have received so far is asked and answered below:

What’s this all about?

If you have an hour to kill:

We have been following Apple vs. Qualcomm’s fairly complex global legal battle since it started, and have written extensively about it over the course of the last two years, so if you have time to kill, feel free to dig through some of our earlier posts to get a deep dive into what is going on.

If you only have a few minutes:

Qualcomm alleges that Apple has been infringing on dozens of Qualcomm patents, particularly in iPhones, and has naturally filed suit. A number of those lawsuits were filed in China (although be on the lookout for similar lawsuits awaiting trial in Germany). This week’s preliminary injunction, delivered by the Fuzhou Intermediate People’s Court, is part of this litigation. More complaints filed against Apple will come before Chinese courts soon, but let’s not worry about those just yet.

In this case, the trial has already concluded, and a verdict is pending. While both parties await that verdict, the court deemed that there was sufficient evidence that Apple indeed infringed two of Qualcomm’s patents to warrant a preliminary injunction – to force Apple to cease and desist (and stop selling patent-infringing phones).

Quick footnote: China has been strengthening its efforts to crack down on instances of patent infringement in recent years (which is a good thing). This case can’t be divorced from China’s new stance regarding the enforcement of IP rights and protections.

What does this preliminary injunction actually do?

This preliminary injunction targets four Apple subsidiaries in China and halts the sale in China and importation into China of the iPhones identified in the lawsuit. They range from the iPhone 6s to the iPhone X. The list includes the popular iPhone 8.

What about the iPhone Xs and newer models?

The iPhone Xs and newer models are not affected by this PI.

Why: The reason isn’t that they don’t infringe the same patents (they might), but rather because at the time that the complaint was filed (in 2017), the iPhone X was Apple’s latest iPhone model. Had the suit been filed later, more iPhone models might have been included in the complaint.

UPDATE (12/14/2018): Qualcomm is filing a separate but similar complaint to block the importation and sale of the iPhone XS, XS Max, and XR.

When does this preliminary injunction go into effect?

It went into effect immediately. It is in effect now. There is no interval or delay.

Can Apple appeal this ruling?

No. Despite several reports hinting at the possibility of an appeal, Apple cannot appeal this ruling.

Why: It is a preliminary injunction, not a verdict in a case. The court essentially ruled that it had ample enough evidence of infringement by Apple to preemptively block Apple from continuing to misuse Qualcomm’s intellectual property, at least until the court issues a final verdict on the matter. Apple may be able to appeal that verdict – if and when it does come – but Apple cannot appeal this preliminary injunction. There is no process for an appeal in this instance.

Note: Apple is allowed to plead with the same court that issued the order to rethink its decision after ten days, but throwing yourself at the mercy of the court a) does not qualify as an appeal, and b) is unlikely to change the court’ mind now that it has already made a decision. Apple’s “We will pursue all our legal options through the courts” talking point is not to be interpreted as an appeal since no process appears to exist for one in this phase of the case.

How long will this preliminary injunction last?

A better way to ask that question is how long could it last?  The answer is: Indefinitely.

Three options emerge, as we understand the case:

1) It can last until the patents expire. One expires in 2024 and the other in 2029.

2) Another possibility is that the court will eventually issue a final verdict that favors Apple, but I don’t think a date for that has been set yet. (More on that in a moment.)

3) A third possibility is that Apple could agree to settle its dispute with Qualcomm, and potentially make all of these patent infringement lawsuits go away. Since Qualcomm filed these complaints, in theory, Qualcomm could also withdraw them, thereby moving all cause for injunctions and trials.

What are these patents even about?

Without getting too technical, one patent enables users to modify the size and appearance of photos on a user’s device, and the other allows users to manage and navigate through applications using a touch screen. These are not obscure or otherwise easy-to-circumvent patents. Despite’s Apple’s contention that they are “minor” features, they enable pretty fundamental user features on smartphones.

So what happens now?

What happens now is the iPhone model listed in the preliminary injunction are prohibited from being imported into China or sold there.

Note: There could potentially be more of these types of injunctions on the way in China, Germany, and the United States. More on that very soon.

Why does this matter? Aren’t these “old” phones?

“Old” is a subjective term. It isn’t really relevant to iPhone models if consumers are still buying them in droves. The iPhone 8 is still doing well in some markets, for example. Apple reportedly even brought the iPhone X back from the brink of extinction, presumably to address low sales of newer models. (Newer models like the XS and the XR haven’t exactly met expectations, highlighting the fact that “old” and “new” don’t necessarily mean much in the smartphone business.) All of this to say that while these are not the latest iPhones, they are still very important products for Apple. Popularity is a better measure of an iPhone model’s value than how new or old it is.

Note that it isn’t easy to zero-in on the exact number of each iPhone model sold anywhere, not just in China, since Apple no longer makes unit sales numbers available. Still, we estimate that these “old” phones could potentially account for somewhere between half and 60% of iPhones sold in China. Apple’s attempts to minimize the importance of this ban is understandable, but in my view, it doesn’t reflect the reality of iPhone sales on the ground.

If you aren’t convinced that I am right on this point, ask yourself this: If these were just “old phones,” would Apple be fighting this hard to appeal the ruling?

To give you even more perspective, China is Apple’s second largest iPhone market (or third, depending on how you interpret the numbers) – behind North America but roughly equal to Western Europe – and accounts for nearly 1/5 of its global iPhone sales (about 17%-18%), so a ban like this is a BIG deal.

UPDATE (12/14/2018): Qualcomm is filing separate but similar complaints focused on the iPhone XS, XS Max, and XR.

Can Apple get this iPhone ban reversed by a Chinese court sometime in the future?

It is possible but unlikely. Here is why:

1) Given the preponderance of evidence that already convinced the court to issue this injunction, the trajectory of the final verdict in this case doesn’t look all that great for Apple right now. The facts of the case will still be the facts of the case six months or a year or a year and half from now… or whenever the verdict finally comes.

2) As far as I can tell (at least as I write this), no date has yet been set for a final verdict regarding either patent infringement complaint. As the PI could technically remain in effect until the patents run out, Apple could be looking at this ban lasting months and perhaps even years if it doesn’t find some way to resolve this.

Caveat: If Apple does eventually provide a remedy (through a hypothetical software update, for instance), Apple will have to successfully demonstrate to the court that its hypothetical remedy gets around the infringement issue before these new phones can be imported and sold in China. This will not lift or reverse the PI but could allow the phones that do not infringe the two patents fall outside of the ban. This is purely hypothetical, however. Until Apple does this, it is in violation of the court order if it continues to sell banned iPhones in China.

Could a separate complaint alleging the same patent infringements on newer iPhones be filed by Qualcomm?

I suppose it is possible, but it depends on whether or not newer iPhones also infringe those patents, and if so, whether or not Qualcomm will decide to do something about it.

UPDATE (12/14/2018): Qualcomm now plans to file a separate but similar complaint that will target the iPhone XS, XS Max, and XR.

What should I make of Apple’s response to this ruling?

Here is Apple’s statement:

“Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” Apple said in a statement. “All iPhone models remain available for our customers in China. Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated. We will pursue all our legal options through the courts.”

Here are my first impressions:

Re: “Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world.” 

Companies fighting to defend their patents is never a “desperate move.” It’s the right move. Apple should know this since it engages in similar litigation when its patents are infringed upon by other companies, as well it should.

Being under investigation by regulators around the world is par for the course. Every major tech company is, has been, or will be. It isn’t something that Qualcomm is uniquely defined by.

It is customary to add the word “alleged” or “suspected” before the words “illegal activities” when talking about ongoing investigations and unresolved court cases.

Not to put too fine a point on this, but with regard to this case, Apple appears to have run afoul of the law, not Qualcomm.

A Chinese court issued the preliminary injunction, not Qualcomm. Perhaps Apple should focus on winning its case in court instead of trying to cast aspersions against the company whose intellectual property it appears to have been using illegally. If the court sided with Qualcomm on this, the court must have a good reason for doing so.

Re: “All iPhone models remain available for our customers in China.”

Note the absence of the phrase “for sale” or “for purchase.” If the affected iPhones are indeed “available for sale” in China, the court will have something to say about that. If they are merely “available,” your guess is as good as mine as to what that statement actually means, which may be the point.

Re:Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated.”

The suit was filed in 2017, not last week.

Moreover, it would not matter when the issue was raised. What matters is whether or not patents were and/or are being infringed.

The patent that was invalidated has no bearing on the two patents that haven’t been, and which form the basis of the court’s ruling. The preliminary injunction is predicated on two valid patents. Invalid patents are immaterial. I am not sure why anyone would even bring this up.

 Re:We will pursue all our legal options through the courts.”

We already covered this point. This is a preliminary injunction, not a verdict. There are no “legal options (appeals) through the courts.” The injunction is in effect.

What should I make of Qualcomm’s response to this ruling?

Here is the core of Qualcomm’s statement:

“We deeply value our relationships with customers, rarely resorting to the courts for assistance, but we also have an abiding belief in the need to protect intellectual property rights. Apple continues to benefit from our intellectual property while refusing to compensate us. These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio.”

As far as I can tell, that statement is accurate, with one small caveat – Re: “These Court orders are further confirmation of the strength of Qualcomm’s vast patent portfolio.”

I would only say that these court orders are technically more indicative of Apple’s pattern of patent infringement than a testament to the strength of Qualcomm’s vast patent portfolio, but yes, clearly, Qualcomm’s patent portfolio can be characterized as being both vast and strong. No question.

I heard that this only affected iOS11 phones. Does this mean iOS12 phones are unaffected by this ban?

The injunction makes no mention iOS11 or iOS12, as far as I can tell, so that claim doesn’t really make sense. The matter of iOS11 vs iOS12 appears to be irrelevant to the court and immaterial to the injunction, which are the only two arguments that matter in this entire discussion.

Could Apple theoretically get around this ban by updating all of the affected phones to iOS12?

I don’t know for certain, as future versions of iOS12 haven’t been made public yet, but it doesn’t appear to be the case at present.

For starters, I haven’t seen any evidence that iOS12 gets around those patents. (There even appears to be evidence that it does not.) Per Qualcomm, iPhones sold in China this week with iOS12.0.1 (which rolled out in early December) still have these two features, and therefore still violate the PI. Moreover, regardless of what version of iOS12 a phone is running, the features aren’t cosmetic. I don’t yet see how an OS update will somehow get around fundamental functionality.

Bear in mind that the burden falls on Apple to prove to the court that it is in compliance with its order. This means that if iOS12 does eventually get around the PI, Apple will have to demonstrate that to the court before these new “updated” phones can be deemed exempt from the PI.

Second, if some version of iOS12 does eventually solve this issue, and the court accepts accepts it as a remedy, iPhones using this feature will likely have to be sold with that update already preloaded on the phones. This is mostly a logistics issue, but it matters.

In other words, in my view, the “iOS12 update will solve this” argument isn’t credible (at least not at this time).

Can this ban actually be enforced?

This is China we’re talking about. The answer to that question is most definitely yes. Of course it can. China does what China wants, and doesn’t look kindly on companies or individuals who defy Chinese judicial authority.

In the current political climate, especially given Chinese technology giant Huawei’s treatment by the US government recently, I doubt very much that China will be inclined to give an American company operating in China a pass if it dares to defy Chinese court or break Chinese law, especially with the entire world looking on. If nothing else, China understands optics.

Quick footnote on that point: Based on my understanding of the court system in China, if an individual or company defies a court order, even in civil litigation, that court has the ability to bring criminal penalties into the mix to enforce its ruling. Something to keep in mind as the story progresses.

Reframing the question: A better question may be Will China enforce its own ban? I don’t see why it wouldn’t, but we will have to wait and see to find out if and how it will. There is a process to this, and the court may require a number of filings and hearings before it might be moved to act.

Are any iPhones being sold in China today?

Yes. iPhones not affected by the PI currently face no import ban or sales ban in China.

As for iPhones affected by the PI, it’s hard to say from one day to the next what is being sold, what isn’t, and where. If Apple decides to take its chances with the court and play this one fast and loose to get as many sales as it can before the end of the year, some may still be available for sale in China today. If so, Apple is playing with fire: Hypothetically, if it were happening, the moment the court caught wind of it, those activities would come to a very abrupt end, and Apple could incur additional penalties. Let’s see where this goes.

UPDATE (12/14/2018): Qualcomm reports that a motion for sanctions and enforcement is being filed with the court, along with evidence that Apple is violating the order.

Could this be retaliation by China against the US resulting from the two countries’ ongoing trade disputes?

I don’t think so. Both Qualcomm and Apple are American companies. If the complaint against Apple had been filed by ZTE or Huawei, we could speculate about that, but I don’t see any evidence of that here. The court appears to be genuinely convinced that there is sufficient evidence against Apple to warrant this PI. I wouldn’t read much more into it. As I mentioned early in this article, China has been cracking down on instances of patent infringement lately.

On the other hand, should no date be set for a final verdict until US-China trade disputes are resolved, one could interpret that delay as China deliberately inflicting a subtle form of administrative punishment against a major American company. And whether or not China decides to make an example of Apple if Apple defies the PI could also be impacted by the trade dispute. That is a possibility.

As to the substance of the ruling itself, tough? No. The PI doesn’t appear to have anything to do with US-China trade disputes.

 

I hope that helps shed some light on this. There is a lot of bad information and spin out there, and it can be difficult to tell what is real and what isn’t. Lucky for you, we have been following this closely, so we can sort through the noise. We will update this article as new information becomes available and the story progresses.

Cheers,

Olivier

 

 

 

 

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