Apple Threatens to Leave UK Market Over £5bn Patent Dispute

Apple, manufacturer of the UK’s most popular smartphones, has threatened to withdraw from the British market if a court forces it to pay a “commercial unacceptable” fee for technology used in its iPhones.

The threat comes amid a legal battle between the $2 trillion tech giant and Optis Cellular Technology, which is alleging Apple has infringed on patents it holds. Last month a High Court judge ruled that Apple had infringed two Optis patents related to the way iPhones connect to 3G and 4G mobile networks. Optis is seeking $7 billion (£5 billion) in licensing fees from Apple.

Optis has been characterised by some as a patent troll, a firm that snaps up patents to win court judgments for profit. However, the judgments have also been seen as an attempt by courts to rein in tech giants accustomed to slipping past regulation and tax codes.

A US court last year ruled that Apple would have to pay $500 million to Optis, but a judge later tossed the settlement, earning Apple a new trial in which to argue Optis has made unfair royalty demands.

But a decision by the UK Supreme Court that a UK court is able to set the rate Apple should pay for all iPhone patents worldwide means this settlement, to be decided in 2022, could be far higher. In January, Mr Justice Meade warned Apple that “it might be disappointed” by the rate a judge sets.

Apple could dodge the fees by exiting the UK market, where in 2019 it held a 43% share of all smartphone sales. Mr Justice Meade suggested at a hearing in January such an exit was unlikely: “There is no evidence Apple is really going to say no [to paying the rate set by the judge], is there? There is no evidence it is even remotely possible Apple will leave the UK market?”

Apple’s lawyer Marie Demetriou returned that an exit is possible. “I am not sure that is right... Apple's position is it should indeed be able to reflect on the terms and decide whether commercially it is right to accept them or to leave the UK market. There may be terms that are set by the court which are just commercially unacceptable.”

A withdrawal from the UK would meet British consumers would be unable to purchase the now-ubiquitous iPhone and existing users wouldn’t be able to access upgrades and servicing. But most market watchers believe Apple’s threat is a bluff.

Meanwhile, Apple moved £720 million from its UK operations into its Irish holding company last year to avoid higher UK taxes. 

In 2019, Apple turned over £1.37 billion in the UK but claimed it owed just £6.2 million in tax, which it planned to defer and likely not pay after the next years’ results showed a loss.