Apple Inc. (AAPL) Picks A Fight With Ericsson (ADR) (ERIC) Over LTE Patents

Apple Inc. (NASDAQ:AAPL) has started another legal battle against Ericsson (ADR) (NASDAQ:ERIC) over royalty payments for Long-Term Evolution (LTE) or 4G technology.

Apple Inc. (NASDAQ:AAPL) is alleging that Ericsson (ADR) (NASDAQ:ERIC) is overcharging for royalties over wireless technology patents it owns, a report from Reuters reveals.

Furthermore, Apple Inc. (NASDAQ:AAPL) is arguing that it does not owe Ericsson (ADR) (NASDAQ:ERIC) royalties on certain patents as the company is not infringing on these technologies.

The iPhone-maker is also arguing that some of the telecommunications hardware manufacturer’s patents are non-essential. Essential patents are patents that must be used by a product to comply with a technical standard.

In the case of smartphones and communications devices, all devices that comply with LTE standard incurs royalties for LTE-essential patents. Hence, Apple is paying Ericsson some forms of royalties.

The iPhone-maker is also arguing, according to Reuters and the case papers filed at a federal court in California, that Ericsson’s method of computing for royalties is wrong. Ericsson should base its computation for royalties on the cost of the certain chip involved and not the cost of the whole device, Apple argues.

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Basing on the report from Reuters, a number of scenarios may happen. Ericsson (ADR) (NASDAQ:ERIC) patents may be deemed essential or non-essential. The court must also determine whether Apple Inc. (NASDAQ:AAPL) infringes on these patents and whether the way royalties are computed is fair.

Both companies, Reuters notes, have an agreement signed soon after the first iPhone was launched covering these patents.

Rob Citrone’s Discovery Capital Management owned about 8.55 million Apple Inc. (NASDAQ:AAPL) shares by the end of the third quarter of 2014. Also by that time, Jim Simons’ Renaissance Technologies owned ab0out 1.2 million Ericsson (ADR) (NASDAQ:ERIC) shares.