Chinese court bans sale of most iPhones

Apple falls after Chinese court bans sale of most iPhones

·        A Chinese court ordered a ban on most iPhone sales in the country as part of two preliminary injunctions.
·        Qualcomm sought the injunctions, alleging Apple violated two of its patents.
·        Apple denies violating the patents and says the scope of the iPhone ban in China goes beyond what the injunction calls for.

By Lauren Feiner December 10, 2018

Apple was down about 2 percent Monday morning after a Chinese court banned the import and sale of most iPhone models in the country as part of an injunction. Qualcomm requested the injunction for alleged patent violation and announced the news in a statement Monday morning.

Qualcomm alleged that Apple violated two patents it holds on features that lets users reformat the size and appearance of photos and manage applications on a touch screen when navigating through phone apps. The two preliminary injunctions were granted by the Fuzhou Intermediate People's Court in China. Apple says it did not violate these patents and that the ban goes beyond the scope of the injunction itself.

Apple says the injunction only applies to patents that apply to iOS 11, the operating system for iPhone and iPad Apple launched in 2017. This predates the system that runs on the newest iPhones, iOS 12. Apple said it is still selling iPhones in China, one of its largest and most important markets for the iPhone.

"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. "All iPhone models remain available for our customers in China. Qualcomm is asserting three patents they had never raised before, including one which has already been invalidated. We will pursue all our legal options through the courts."

Qualcomm said in a statement, "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."

Despite the ban, Apple analyst Dan Ives gave the stock a market outperform rating with a 12-month price target of $275. Ives reiterated Apple's argument that the ban should apply only to products with the older version of iOS, which he estimated would impact only 10 to 15 percent of sales in the region.

"We continue to believe today's news is more noise than a fundamental impact, although it will add to the black clouds over Cupertino until investors hear from the company in January," Ives said in a note on Monday.

Another analyst, Toni Sacconaghi, agreed that the injunctions will likely have little effect on Apple. If Apple's claim that the injunction should only apply to its older operating system are true, "then the commercial impact [on Apple] is minimal to none at this point," Sacconaghi said on CNBC's Squawk Alley.

-CNBC's David Faber contributed to this report.


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