1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

David A. Nelson (Pro Hac Vice Forthcoming)(Ill. Bar No. 6209623)
davenelson@quinnemanuel.com
Stephen A. Swedlow (Pro Hac Vice Forthcoming)(Ill. Bar No. 6234550)
Stephenswedlow@quinnemanuel.com
QUINN EMANUEL URQUHART & SULLIVAN, LLP
500 West Madison St., Suite 2450
Chicago, Illinois 60661
Telephone: (312) 705-7400
Facsimile: (312) 705-7401
Karen P. Hewitt (SBN 145309)
kphewitt@jonesday.com
Randall E. Kay (SBN 149369)
rekay@jonesday.com
JONES DAY4655 Executive Drive, Suite 1500
San Diego, California 92121
Telephone: (858) 314-1200
Facsimile: (844) 345-3178
Evan R. Chesler (Pro Hac Vice Forthcoming)(N.Y. Bar No. 1475722)
echesler@Cravath.Com
CRAVATH, SWAINE & MOORE LLPWorldwide Plaza, 825 Eighth Avenue
New York, New York 10019
Telephone: (212) 474-1000
Facsimile: (212) 474-3700
Attorneys for Plaintiff
QUALCOMM INCORPORATED

18
19

SUPERIOR COURT OF THE STATE OF CALIFORNIA

20

SAN DIEGO COUNTY, NORTH COUNTY DIVISION

21
22

QUALCOMM INCORPORATED,
Plaintiff,

23
24
25

COMPLAINT FOR BREACH OF
CONTRACTv.
APPLE INC. and DOES 1 through 25,
inclusive,

26

CASE NO.

[DEMAND FOR A JURY TRIAL]

Defendants.

27
28
NAI-1503164488v1

COMPLAINT FOR BREACH OF CONTRACT

1

Plaintiff Qualcomm Incorporated (“Qualcomm”), by its undersigned attorneys, alleges,2with knowledge with respect to its own acts and on information and belief as to other matters, as

3

follows:

4
5

NATURE OF THE ACTION
1.

This action arises from Apple Inc.’s (“Apple”) breach of a Master Software

6

Agreement For Limited Use entered into between Apple and Qualcomm on September 20, 2010,7

as amended (“MSA” or “Agreement”).

82.

Qualcomm is one of the world’s leading technology companies and a pioneer in the9mobile phone industry. Its inventions form the very core of mobile communications and enable

10

modern consumer experiences on mobile devices and cellular networks.

11

3.

Since its founding in 1985, Qualcomm has been designing, developing, and12

improving mobile communication devices, systems, networks, and products. It has invented

13

technologies that transform how the world communicates. Qualcomm developed fundamental

14

technologies at the heart of 2G, 3G, and 4G cellular communications, is leading the industry to 5G

15

cellular communications, and has developed numerous innovative features used in virtually every

16

modern cell phone.

17

4.

Apple is the world’s most profitable seller of mobile devices, and has enormous

18

commercial leverage over its suppliers, including Qualcomm. Apple manufactures and markets

19phones, including phones that utilize Qualcomm’s baseband modem chips, which process received

20

voice and data information and prepare the same for transmission.

21

5.

During negotiations with Qualcomm, Apple exercised its commercial leverage and22demanded unprecedented access to Qualcomm’s very valuable and highly confidential software,

23

including source code. Pursuant to the MSA, Qualcomm has provided Apple with a limited license

24

that grants restricted access to large portions of that Qualcomm software and source code because

25

Apple said that it needed this access to customize the code for Apple’s own devices. Upon

26

information and belief, Apple has failed to comply with the restrictions on access and use that27

Qualcomm required in exchange for Apple’s unprecedented access to software and source code.

28
NAI-1503164488v1

2
COMPLAINT FOR BREACH OF CONTRACT

1

6.

Apple agreed, as a condition of Qualcomm providing the above-described software2

to Apple under the MSA, to take a number of steps to maintain the confidentiality and security of3

Qualcomm’s software. The MSA provides Qualcomm broad audit and inspection rights in order4

to provide Qualcomm the ability, among other things, to confirm that Apple has at all times

5complied with its obligation to handle such software per the terms of the MSA including the6

obligation that such software “shall only be stored, viewed, and used by Authorized Engineers on

7

Restricted Computers in Authorized Locations[.]” For example, only Apple engineers who have a8need to access certain source code and have signed a written agreement to abide by the terms of the9

MSA can have access to such source code. Similarly, the MSA obligates Apple to maintain10

information as to which Apple engineers are accessing such software and what actions the engineers

11

take with that access. Furthermore, Apple’s engineers with access to certain of Qualcomm’s

12software may only do so through specific designated computers that restrict access to such software

13

only to those authorized engineers. And those computers storing such Qualcomm software may

14

only be housed in specific designated locations.

15

7.

The MSA also contains restrictions on Apple engineers working on certain non-16

Qualcomm baseband modem chipsets and related software solutions during (and after) the time

17

period those Apple engineers have access to certain Qualcomm software. One of the primary18

purposes of the confidentiality and use restrictions of the MSA (and the concomitant compliance

19

audit rights) is to prevent Apple (and any Qualcomm competitor working with Apple) from20

unlawfully and inappropriately using Qualcomm’s software.

21

8.

Several years after the MSA was first executed by Apple and Qualcomm, Apple22

began to work with Intel to design and develop a baseband modem chipset solution for Apple’s

23

iPhone. Beginning in 2017, Apple began selling iPhones using a competitive baseband modem and24

associated software designed by Apple and/or Intel in competition with Qualcomm’s baseband

25modem and software.

26

9.

The restrictions in the MSA are designed to maintain the confidentiality of27

Qualcomm’s source code and related proprietary information. Upon information and belief, Apple28

has violated the confidentiality and restricted use provisions of the MSA. For example, in July
NAI-1503164488v1

3
COMPLAINT FOR BREACH OF CONTRACT

1

2017, Apple requested that Qualcomm provide details about how Qualcomm's implementation of2

a particular interprocessor communication was designed to meet a certain wireless carrier’s

3requirements. Qualcomm’s proprietary implementation of this communication protocol is not

4

dictated by any standard and it contains Qualcomm’s highly confidential trade secrets. Apple,

5

however, included in the “CC’d Persons” distribution list for this request an engineer from Intel (a6competitive vendor) and an Apple engineer working with that competitive vendor. In a separate

7

incident, Qualcomm received correspondence indicating that rather than preventing information

8

regarding Qualcomm’s proprietary implementations from being shared with Apple engineers

9

working with competitive vendors, Apple appears to have merely redacted the code name that

10Apple uses for Qualcomm on that correspondence. As another example, an Apple engineer

11

working on a competitive vendor’s product asked an Apple engineer working on Qualcomm’s

12product to request assistance from Qualcomm relating to a downlink decoding summary for carrier

13

aggregation.

14

10.

The MSA provides Qualcomm the right to, at least once per year and in Qualcomm’s

15sole discretion, audit Apple to ensure Apple’s compliance with its obligations under the MSA. On

16

February 28, 2017, Qualcomm requested an audit under the MSA. To date, despite Qualcomm’s

17

repeated requests, Apple has refused to permit Qualcomm to audit Apple’s compliance with the18

provisions of the MSA. Qualcomm seeks specific performance of Apple’s obligations under the19

MSA to provide sufficient information to Qualcomm to confirm that Apple has at all times

20complied with its obligations related to Qualcomm’s software. Qualcomm also seeks compensation

21

for Apple’s breach of the MSA and its failure to adhere to the use restrictions placed on the

22

Qualcomm code by the MSA.

23
24

PARTIES
11.

Qualcomm is a Delaware corporation with its principal place of business at 5775

25

Morehouse Drive, San Diego, California. Since 1989, when Qualcomm publicly introduced Code26

Division Multiple Access (“CDMA”) as a commercially successful digital cellular communications

27

standard, Qualcomm has been recognized as an industry leader and innovator in the field of mobile

28

devices and cellular communications. Qualcomm is a world leader in the sale of chips, chipsets,
NAI-1503164488v1

4
COMPLAINT FOR BREACH OF CONTRACT

1

and associated software for mobile phones and other wireless devices. It also derives revenues and2

profits from licensing its intellectual property.

312.

Apple is a corporation organized and existing under the laws of the State of4

California, with its principal place of business at 1 Infinite Loop, Cupertino, California. Apple5

maintains a retail store within the venue for the North County Division of San Diego Superior Court

6

at 1923 Calle Barcelona, Carlsbad, California 92009. Apple designs, manufactures, and sells

7throughout the world a wide range of products, including mobile devices that incorporate

8

Qualcomm’s software.

913.

The true names and capacities of Defendant Does 1 through 25, whether individual,

10

corporate, associate, or otherwise, are unknown to Qualcomm. Therefore, Qualcomm sues the Doe

11

Defendants under fictitious names pursuant to California Code of Civil Procedure section 474.

12

When Qualcomm learns their true names and capacities, it will seek permission from this Court to13

amend this Complaint to insert the true name and capacity of each fictitiously named Defendant.

14

Qualcomm alleges that each fictitiously named Defendant is legally responsible in some manner

15

for the occurrences alleged in this Complaint, and that each Defendant directly and proximately

16

caused Qualcomm’s damages.

17
18
19
20
21
22

JURISDICTION AND VENUE
14.

This Court has jurisdiction over the subject matter of this action pursuant to Cal.

Civ. Proc. Code § 410.10.
15.

This Court has personal jurisdiction over Apple because it is organized and exists

under the laws of California.
16.

Venue is proper in San Diego County pursuant to Cal. Civ. Proc. Code § 395 because23

the MSA was entered into and negotiated, in part, in this County. Moreover, the MSA in a section

24

titled “JURISDICTION AND VENUE” provides that claims for breach of the MSA “shall be

25

adjudicated only by a court of competent jurisdiction in either the county of San Diego or the county

26

of Santa Clara, State of California, and each Party hereby consents to the personal jurisdiction of

27

such courts for that purpose.” MSA, § 11.

28
NAI-1503164488v1

5
COMPLAINT FOR BREACH OF CONTRACT

1

STATEMENT OF FACTS

2

The MSA

3

17.

The MSA was executed by the parties on September 20, 2010 and remains in effect4

today. The MSA governs Apple’s use of Qualcomm’s software (including software in source code5form) pursuant to a limited software license granted to Apple by Qualcomm.

618.

The Qualcomm software licensed pursuant to the terms and conditions of the MSA

7

may be used by Apple in connection with the development of Apple Products containing

8

Qualcomm chipsets and may be provided by Apple in binary form only to third parties who are

9“Authorized Purchasers” of Qualcomm chipsets who in turn have their own valid software

10

agreements with Qualcomm for use and distribution of Qualcomm’s code. Such Authorized

11

Purchasers may ultimately incorporate the Qualcomm code provided to it by Apple into Apple12

Products (those that include Qualcomm chipsets) manufactured by the Authorized Purchaser for

13

Apple and subsequently sold to Apple.

14

19.

The MSA refers to one category of software licensed under the MSA as “Restricted

15

Software.” “Restricted Software” refers to software delivered to Apple in source code format and16

identified in a “Software Addendum” as Restricted Software. MSA, § 1. Qualcomm and Apple

17

entered into Software Addenda for each model of Qualcomm ASIC for which Qualcomm provides

18

software to Apple. Id.

19

20.

The MSA requires that Apple take several measures to maintain the security and20

confidentiality of certain Qualcomm software. For instance, MSA § 3.1(iv) requires that Apple use

21

the same security infrastructure to protect compiled copies of Qualcomm’s software that Apple22

uses for its own iOS software when it distributes software to its customers. As another example,

23

MSA § 3.3(a) requires that certain software be stored, viewed, and used only on “Restricted

24

Computers” in “Authorized Locations,” as those terms are defined in MSA § 3.3. MSA § 3.3(d)25requires that Apple “maintain a list of the names of the Authorized Engineers who have accessed26[certain] Software, the purpose for such access and any actions taken as a result of such access.”

27

MSA § 3.5.1 sets forth the requirements for storing and accessing the software, while MSA § 3.5.2

28

requires that Apple maintain and review certain information, such as password logs showing access
NAI-1503164488v1

6
COMPLAINT FOR BREACH OF CONTRACT

1

to the software. Upon information and belief, Apple has failed to comply with the use and access2

restrictions set forth in the MSA, including but not limited to SECTION 3 (referenced above) and3

Section 10 (RESTRICTIONS ON DISCLOSURE AND USE).

4

21.

MSA § 3.5.4 provides a mechanism for Qualcomm to audit Apple’s compliance5with these and other provisions. Specifically, it provides that “QUALCOMM shall have the right6

to inspect LICENSEE’s and LICENSEE’s Affiliates’ facilities, network connectivity and practices,7

upon reasonable advanced notice and not more than one time per year. . . to verify LICENSEE’s

8compliance with these obligations [e.g., those of MSA § 3.5] and the obligations set forth in Section

9

3.1 (iv) and Section 3.3 (Additional Limitations on Restricted Software) above.” Qualcomm’s

10contractual discretionary right to audit Apple at least once per year does not require any reason or11

justification.

12
13

Apple’s Breach Of The MSA
22.

On February 28, 2017 Qualcomm requested an audit pursuant to the MSA, stating

14

that it would commence the audit beginning on March 20, 2017. Apple responded, claiming that15

three weeks’ notice was not “reasonable,” and refusing to let the audit proceed on that date. Apple16

also admitted that it had not maintained the list of Authorized Engineers who had accessed the17software, the purpose for such access and any actions taken as a result of such access, which Apple18

was required to maintain under MSA § 3.3(d).

19

23.

In subsequent correspondence, Apple provided some information requested by20

Qualcomm, such as what Apple claimed to be a list of Authorized Engineers pursuant to MSA

21§ 3.3(d) and certain transactional records from Apple repositories hosting certain Qualcomm

22

software. The information provided by Apple was incomplete and insufficient for Qualcomm to23

audit Apple’s compliance or lack thereof with its obligations under the MSA, including but not

24

limited to the requirement that certain software “shall only be stored, viewed, and used by

25

Authorized Engineers on Restricted Computers in Authorized Locations[.]” MSA 3.3(a). Apple26

has failed to provide additional information in response to Qualcomm’s follow-up requests for

27

information that would allow Qualcomm to meaningfully exercise its audit rights.

28
NAI-1503164488v1

7
COMPLAINT FOR BREACH OF CONTRACT

1

24.

In other respects, Apple flatly refused to permit Qualcomm to proceed with the2

audit. For example, Qualcomm requested to inspect “Restricted Computers, Approved Machines,

3and Authorized Locations.” Apple refused to permit this inspection, stating that doing so would be4“unworkable.” Similarly, Qualcomm sought to audit Apple’s compliance with the MSA with5

respect to “additional debug messages and log packets” added by Apple pursuant to MSA § 3.3(b),6but Apple has refused to permit that inspection.

7

25.

Subsequent to Apple’s refusal to permit audit and inspection under the MSA,

8

Qualcomm became aware of a posting regarding Intel Corp. layoffs that appears to have been

9

posted by a former modem design engineer, and which contains several statements of concern that

10

on August 14, 2017 Qualcomm specifically requested Apple investigate. The post references a11

CNBC article reporting on the ITC action filed by Qualcomm against Apple and goes on to say:12

“We were told to ignore intellectual property rights when designing the modem. There was even a

13

conspiracy to copy Qualcomm’s technology by hints from Apple about the ‘reference device’.”14This statement appears to be made by an Intel engineer working on the Apple (Intel branded)

15

modem.

16

26.

Qualcomm requested in writing that Apple investigate whether and to what extent

17

any engineers working on the Intel branded modem for use in the Apple iPhone were provided

18

Qualcomm intellectual property and/or conﬁdential information in any form. Qualcomm also19

requested that Apple investigate whether and to what extent Qualcomm’s modem hardware or20

software was ever referred to by Apple as the “reference device”, or other similar descriptions in21

the context of modem design.

22

27.

On August 24, 2017, Apple responded to Qualcomm’s request by refusing to23

conduct any investigation. Apple specifically responded as follows: “Apple does not plan to24

conduct an investigation [].”

25

FIRST CAUSE OF ACTION

26(BREACH OF CONTRACT)

27

28.

28

fully set forth herein.
NAI-1503164488v1

Qualcomm repeats and re-alleges the allegations of all of the above paragraphs as if

8
COMPLAINT FOR BREACH OF CONTRACT

1

29.

The MSA is a written, valid, enforceable, and binding agreement, supported by2

adequate consideration, for the grant of a limited software license from Qualcomm to Apple. The

3

MSA was in effect at all relevant times, from September 20, 2010 through the present.

430.

Qualcomm has performed all of its obligations under the MSA.

5

31.

By its actions set forth herein, Apple breached its duties under the MSA. Those6

breaches include, without limitation, Apple’s refusal to permit Qualcomm to exercise its audit

7

rights under MSA § 3.5.4 and Apple’s violation of the restrictions on disclosure and use under8

Sections 3 and 10 of the MSA.

932.

As the direct and proximate result of Apple’s conduct, Qualcomm has suffered10

significant damages in an amount to be proven at trial. Qualcomm is entitled to recover damages

11

flowing from Apple’s breach of the MSA, and any other remedy available under law.

12
13

33.

Qualcomm is also entitled to specific performance under the MSA, permitting

Qualcomm to proceed with the audit to which it is entitled pursuant to MSA § 3.5.4.

14

34.

The language of the MSA is sufficiently definite for this Court to enforce.

15

Moreover, the specific performance requested by Qualcomm mirrors Apple’s existing obligations

16

under the MSA.

17

35.

Absent specific performance, Qualcomm will suffer substantial, irreparable, and18

incalculable injury for which monetary damages will not provide adequate compensation. Without

19

enforcement of its audit rights, Qualcomm will be unable to monitor whether the confidentiality

20

and security of its software has been maintained by Apple in compliance with the MSA.

21

Qualcomm’s audit rights under the MSA constitute a critical safeguard without which Qualcomm

22would not have shared its highly confidential source code with Apple.

23

36.

Indeed, in the MSA, Apple acknowledged that “any breach or threatened breach of

24

this

25

QUALCOMM . . . irreparable harm for which money damages alone will not be an appropriate or26

sufficient remedy.” MSA § 3.4. Apple agreed that Qualcomm would be entitled to injunctive or27

equitable relief to remedy any such breach, in addition to all other remedies. Id.

Agreement

relating

toanySourceCodeprovided28
NAI-1503164488v1

9COMPLAINT FOR BREACH OF CONTRACT

hereunder

would

cause

1

37.

The MSA provides that the prevailing party in a proceeding to enforce the provisions

2of the MSA shall be entitled to recover reasonable attorneys' fees. Qualcomm is therefore entitled3

to recover its reasonable attorneys' fees incurred in connection with this lawsuit. MSA § 11.
PRAYER FOR RELIEF

45

WHEREFORE, Qualcomm respectfully requests that the Court enter judgment as follows:6(a)Declaring that Apple has breached the MSA;

7(b)Awarding damages in an amount to be proven at trial;

8(c)Ordering an award of reasonable attorneys' fees to Qualcomm;9(d)Awarding expenses, costs, and disbursements in this action, including prejudgment

10

interest;

11(e)Ordering specific performance;

12

(f)

Injunctive or equitable relief; and

13

(g)

Awarding such other and further relief as the Court deems just and proper.

14

Dated: October 31, 2017
By:

15
16

JONES DAY
Karen P. Hewitt (SBN 145309)
kphewitt@Jonesday.Com
Randall E. Kay (SBN 149369)
rekay@Jonesday.Com
4655 Executive Drive, Suite 1500
San Diego, California 92121
Telephone: (858) 314-1200
Facsimile: (844) 345-3178

17
18
19
20
21

QUINN EMANUEL URQUHART &SULLIVAN, LLP
David A. Nelson (pro hac vice forthcoming)(Ill. Bar No. 6209623)
davenelson@quinnemanuel.com
Stephen A. Swedlow (pro hac vice forthcoming)(Ill. Bar No. 6234550)
stephenswedlow@quinnemanuel.com
191 N. Wacker Drive, Suite 2700
Chicago, Illinois 60606
Telephone: (312) 705-7400
Facsimile: (312) 705-7401

22
23
24
25
26
27
28
NAI- 1503164488vl

10
COMPLAINT FOR BREACH OF CONTRACT1

CRAVATH, SWAINE & MOORE LLP
Evan R. Chesler (pro hac vice forthcoming)(N.Y. Bar No. 1475722)
echesler@cravath.com
J. Wesley Earnhardt (pro hac vice forthcoming)(N.Y. Bar No. 4331609)
wearnhardt@cravath.com
Worldwide Plaza, 825 Eighth Avenue
New York, New York 10019
Telephone: (212) 474-1000
Facsimile: (212) 474-3700

2
3
4
5
6
7

Attorneys for Plaintiff
QUALCOMM INCORPORATED

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
NAI-1503164488v1

11
COMPLAINT FOR BREACH OF CONTRACT