Setting up shares of the battered gizmo giant for a post-open ramp on a day when the broader market is still reeling from a batch of disappointing Chinese and European economic data, Apple said it's planning to push a software update to Chinese iPhone users next week that will modify functions that a local Chinese court ruled violated patents held by Qualcomm, according to Bloomberg.
Despite filing an appeal against a ruling that represented the latest victory for Qualcomm in the US chipmaker's global battle over licensing fees, Apple said that, in the meantime, it would take steps to fully comply with the ruling. The modifications would involve adjusting photographs and managing apps via the smartphone's touchscreen - two of the features challenged by the patent.
In the lawsuit, Apple argued that the San Diego-based company had abused its position as the biggest supplier of smartphone chips, while Qualcomm has countered that Apple is using its intellectual property without paying for it. Apple hasn't withdrawn its appeal, and its phones remain on store shelves - for now, at least.
"Based on the iPhone models we offer today in China, we believe we are in compliance," Apple said in a messaged statement. "To address any possible concern about our compliance with the order, early next week we will deliver a software update for iPhone users in China addressing the minor functionality of the two patents at issue in the case."
In another lawsuit filed in California, Qualcomm alleged that Apple was violating an agreement it signed with Qualcomm when it began work to use Qualcomm's chips in the iPhone.
Earlier this week, the Fuzhou Intermediate People’s Court ruled that Apple is infringing on two Qualcomm patents and issued injunctions against the sale of the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X, in a decision that curiously followed the arrest of Huawei CFO Meng Wanzhou in Vancouver, sparking concerns that China could seek to retaliate against the US.
"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," said Don Rosenberg, executive vice president and general counsel, Qualcomm Incorporated.
"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."
Given that Apple generates one-fifth of its revenue in China, and sees the world's second-largest economy as a crucial growth market at a time when smartphone sales growth appears to have peaked, the company warned that a legal defeat in China would essentially force it to concede in its battle against Qualcomm at a time when their relationship has already been strained by Apple's decision to explore bringing the manufacturing of more of its chips in-house.
It's unclear what specific features these updates will modify - or if they will even satisfy the Chinese court's ruling. IPhones will remain on store shelves as Apple's appeal is adjudicated. But a decision against Apple could add to concerns about how the company will combat "saturated" iPhone interest.