How Apple will dodge an Imagination lawsuit

How Apple will dodge an Imagination lawsuit

Feature articles |
By Peter Clarke

The situation is that Apple has told Imagination Technologies Group plc (Kings Langley, England) that it will be dropping the use of its GPUs in about two years’ time and Imagination has said it reserves the right to sue Apple for unauthorised use of Imagination’s confidential information and Imagination’s intellectual property rights (see Apple dumping GPUs: Imagination in discussions).

It would seem that Imagination has little to lose and must sue but Apple has effectively invoked what one might call the “waiting” defence. Although it is Imagination that has gone public on the matter. And it seems unlikely that such big moves will not be without consequences for other IP players such as ARM.

But first some background.

Apple and Imagination used to be the best of friends with Apple using PowerVR graphics for all its wonderful iProducts and even bailing out Imagination with a cash injection back in 2008 and 2009. But over the last 12 months the relationship has soured.

In early 2016, when Imagination was changing management in response to yet another financial crisis, Apple said it didn’t want to buy out Imagination. To many observers a buy out had looked like a natural solution for the struggling UK company whose GPU cores appeared to be central to Apple’s home-designed processors.

The fact that Apple wouldn’t go there was a warning sign that PowerVR’s future at Apple might not be assured.

Then in the second half of 2016 Apple recruited numerous GPU engineers from the UK that had previously worked for Imagination (see Apple hires group of UK GPU engineers). That was warning sign number two.

Now Apple has told its processor intellectual property licensor Imagination that it won’t be using Imagination’s intellectual property or paying royalties after about 15 months to two years, presumably the time it takes to develop a new graphics architecture and implementations of it.

Next: Prove it

Imagination said that Apple had declined to give any evidence that it could be developing a separate, independent graphics design that would not violate Imagination’s patents, intellectual property and confidential information. Furthermore Imagination has said it doesn’t see how Apple could develop a separate, independent GPU that would not violate Imagination’s patents, intellectual property and confidential information.

Imagination also said it is in discussion with Apple about potential alternative commercial arrangements for the current license and royalty agreement.

Imagination is surely hoping that it can persuade Apple that it is less trouble to acknowledge that whatever it is creating – likely with former Imagination engineers – owes some sort of architectural debt to Imagination and pay something, anything. That could even be just a one-off payment of several million dollars, which would be pocket-change to Apple but obviously a royalty-based payment scheme would remain Imagination’s preference.

But less trouble than what? A lawsuit is usually the alternative in matters of IP.

One must assume that a lot of discussion took place before Imagination went public on this matter. Apple is unlikely to change a position it has taken in private because Imagination has gone public. So if Imagination cannot persuade Apple to pay this leaves the UK company with nothing to lose. It might as well sue. In its statement of April 3, Imagination said that it “reserved all its rights in respect of Apple’s unauthorised use of Imagination’s confidential information and Imagination’s intellectual property rights.”

Next: Where’s the evidence?

The only problem is that it may be two years before there is any evidence – by way of chips – for Imagination to sue over. All of the engineering detail of the design will no doubt be kept private and highly guarded. And in the intervening period Apple’s impending removal of support Imagination would be hanging over the company.

This would not serve to improve Imagination’s market appeal. Rather it would serve to drive other licensees and potential licensees to either do their own GPU designs or into the arms of another licensor of GPUs that might be thought of having a longer-term future. I am talking of ARM with its Mali graphics, but that is not the only one.

So Apple may just choose to wait it out. It will send such royalties as it owes on existing PowerVR cores designed into its processors over the next couple of years. Meanwhile as it loses out on customer signings Imagination will become more impoverished and less well-resourced to take the Californian giant to court. That is unless Imagination can produce a spectacular turn-around in its business fortunes.

But one always has to beware of the unintended consequences of making major waves in the market.

One way Apple could avoid a lawsuit might be to sign an architectural license with ARM on its Mali architecture. ARM might even provide substantial discount for such a big customer. Apple would thereby align its both its licensing approach and its supplier for CPUs and GPUs. Imagination has never, to my knowledge sued, to argue that anything complying to Mali architectures contravenes its IP or is not covered by cross-licensing agreements. I am not suggesting Apple is about to do this but it is one way it could seek to avoid a lawsuit from Imagination. On the other hand if Apple were to go down that route it might prompt Imagination to re-evaluate the legality of Mali GPUs.

More likely Apple will content itself with the waiting defence.

Next: ARM

Indeed ARM, now owned by Softbank Group may see Apple’s abandonment of Imagination as writing on the wall for its own licensing business with Apple. If Apple could do this to Imagination how much longer before Apple starts recruiting the best of engineers from around Cambridge and announces it is developing a processor architecture and cores that are free of any obligations to ARM?

There is an engineering trend towards open-source hardware such as RISC-V and trend at the high-end of consumer electronics by the likes of Apple, Samsung and others to bring chip design and intellectual property in-house. ARM may well be thinking that a bad outcome for Imagination is a bad result for ARM.

The players have about 15 months to two years to decide the fate of Imagination and its relationship with Apple and that will have implications for the IP licensing business as a whole.

Related links and articles:

News articles:

Apple hires group of UK GPU engineers

Apple dumping GPUs: Imagination in discussions

Imagination discloses Furian GPU architecture

Imagination’s CEO steps down

Imagination stock rises on report of Apple talks

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