Last week, a Chinese intellectual property court issued an unusual ruling in favor of a pair of product injunctions by U.S. chipmaker Qualcomm against its largest customer, Apple. The court found that Apple had infringed two patents owned by Qualcomm in its iPhones and ruled in favor of banning the sale of affected iPhones in China.
The affected models include iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X. The newest iPhone XS, iPhone XS Plus and iPhone XR will be exempt from the ban because they were not available when Qualcomm filed the lawsuit. The patents allow users to edit and resize photos and manage apps by using a touchscreen, according to the lawsuit.
The ruling, which was made public Monday morning, caused Apple shares to plunge more than two percent in Monday’s early trading sessions. But most of the losses were recovered by the afternoon as investors found no hard signs that the court ruling would materially hurt iPhone sales.
As of Monday evening, all the iPhone models covered in the injunction order are still available on Apple’s China website.
“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 on Monday. The company has also filed a request for the court to reconsider the decision.
Qualcomm alleged that Apple should pay for the illegal use of the two patents involved. However, the court ruling specified no monetary terms on Apple.
“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,” Don Rosenberg, Qualcomm‘s general counsel, said in a statement. “Apple continues to benefit from our intellectual property while refusing to compensate us.”
Product injunctions are rarely granted in intellectual property lawsuits. In September, Qualcomm filed a similar injunction to a U.S. trade judge to ban certain iPhone models in the U.S. on the basis of patent infringement. The judge ruled that Apple had violated one Qualcomm patent related to battery technology, but denied the chipmaker’s request to block iPhones.
The Chinese court ruling, based on its timing, could be more than an international business affair, though. If China finds a way to actually enforce the iPhone ban, it will give Beijing a strong upper-hand in the upcoming trade talks with the U.S.
For now, President Trump and Chinese President Xi Jinping have agreed on a 90-day ceasefire before imposing new tariffs on each other’s imports. But the trade war seems to keep escalating on the sidelines.
On December 1, the U.S. ordered the unexpected arrest of Meng Wanzhou, the chief financial officer of Chinese tech giant Huawei, over sanction violation charges. Meng was detained in Vancouver by Canadian authorities at an extradition request from the U.S. Meng is the daughter of the Huawei’s founder, Ren Zhengfei, who was a former military officer in China’s Community Party.
Meng’s arrest sparked widespread fears that the trade truce between China and the U.S. could end before it even started. The U.S. stock market took a hard hit on Thursday in response to the news, and China has since urged Canada to release Meng from detention.