Apple loses a $5.7 billion patent case involving haptic technology used in iPhones and Apple Watches

Apple (NASDAQ: AAPL) has lost a $5.7 billion patent case tied to the vibration hardware used inside millions of iPhones and Apple Watches. A federal jury in San Diego ruled Friday that Apple infringed parts of two patents owned by Taction Technology.

The controversy involves tactile technology that generates physical feedback upon touch on the controls of a device. The compensation for damages was awarded following a long period of litigation between the two companies.

The litigation was initiated by Taction against Apple in 2021 at the United States District Court for the Southern District of California.

The company claimed that the defendant earned profits from its patented technologies without its consent. The dismissal of the case was achieved by Apple in 2023, but this victory did not hold. The matter was revived by the Federal Circuit.

Taction wins its case as jurors rule against Apple’s Taptic Engine

This was related to two U.S. patents that were patent numbers 10,659,885 and 10,820,117. This was because both patents involved tactile transducers. The tactile transducer is a small system that converts electrical signals into controlled movement, which is sensed physically.

Taction argued that the technology used by Apple for its Taptic Engine infringed upon their patents. Apple Taptic Engine is used in all Apple iPhones and watches and generates vibrations during taps, notifications, and other similar functions.

The trial began on September 14. Seven jurors were selected to hear the case. They deliberated for two days, and at 1:15 p.m. Pacific Time on Friday, gave the judgment to Taction.

The amount of the award given to Taction is $5.7 billion.

It did not, however, find that Apple’s infringement was willful. That means the verdict did not say Apple deliberately violated the patents while knowing it was doing so.

Taction’s lead lawyer, Lance Yang, a partner at Quinn Emanuel, said:

“We’re happy the jury found for Taction and vindicated its patent rights. Taction waited five and a half years for this case to get to trial, so it was a long time coming. While we thank the jury for their consideration, we strongly disagree with today’s verdict and the damages awarded, which are entirely unsupported by the facts.”

The company also argued this:

“Apple’s Taptic Engine is fundamentally different from Taction’s technology, which Taction’s own testing of Apple’s products confirmed during trial,” the company said. “Apple does not use Taction’s technology, and we will appeal.”

Qualcomm continues to earn iPhone royalties

The case places Apple on one end of a huge legal battle related to patents, whereas simultaneously, Apple is securing another of its patent relationships with Qualcomm (NASDAQ: QCOM).

The companies have informed that they have reached a new agreement for the renewal of their worldwide patent license agreement. The agreement will come into effect from April 1, 2027. No details of the financial agreement have been made public yet.

Renegotiation of the deal will allow Qualcomm to collect royalties on all iPhones that use their patents without supplying the modem used in them.

Apple has been working for years to become independent of external modem suppliers. It finally succeeded in doing that as it designed its own baseband hardware.

The iPhone 18 Pro, which came out just last month as part of Apple’s “Surprise and Shine” event, is using Apple’s proprietary C2 modem in some models. It is the first time that a model of the iPhone series comes with baseband silicon designed by Apple.

In its U.S. model, the iPhone 18 Pro Max continues to use Qualcomm’s Snapdragon X80 modem and will probably continue doing so in the next product cycle.

However, switching modem suppliers does not take Qualcomm out of the equation in an iPhone’s economics.

The reason is that both phones still need to pay Qualcomm for the cellular patents it has created and contributed to the 3GPP wireless standards used in today’s modern networks. Such patents come with FRAND licensing terms, and so the manufacturer still owes royalties even if someone else’s modem is responsible for establishing the 5G connection.

But there is one crucial number left undisclosed.

Neither Apple nor Qualcomm has disclosed whether the royalty per unit under their new deal differs from the terms of their 2019 settlement agreement.

This amount becomes important in making estimations regarding Qualcomm’s licensing revenue in 2027 and 2028. So far, the payment has been modeled on a range as it has not been disclosed.

A previous report had indicated that the new agreement includes an option for extending the deal by an additional two years to 2029. Apple and Qualcomm have yet to confirm this aspect.

Qualcomm’s licensing arm, Qualcomm Technology Licensing, has traditionally produced higher operating margins than its chip unit. Its patent customers include manufacturers around the world that build products using current cellular standards.

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