Why Apple Is Threatening To Quit UK Market

In an unexpected turn of events, Apple, Inc. AAPL has issued an ultimatum that could end iPhone sales in the U.K.

What Happened: Apple, through its lawyers, have signaled that the tech giant is mulling exiting the U.K. market if a domestic court imposed hefty fines on the company in a patent infringement lawsuit brought up by U.K. patent company Optis Cellular Technology, according to U.K. financial website This Is Money.

Optis has initiated legal proceedings against Apple accusing Cupertino of infringing on patents related to "standardized" smartphone technology in its products. The lawsuit is claiming damages as high as $7 billion, the report said.

A U.K. High Court ruling announced in June found Apple infringing two Optis patents that deal with how smartphones connect to 3G and 4G networks. The U.K. company has also reportedly brought several similar claims over patents related to other technologies Apple uses.

A trial scheduled to be held in 2022 will determine how much Apple is liable to pay, the report said. The U.K. Supreme Court ruled last year a U.K. court can decide the rate Apple has to pay for patents.

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High Court judge Justice Richard Meade said in a hearing in January that Apple may be disappointed by the rate set by the court and the only way to avoid a sanction is to exit the U.K. market.

"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 U.K. market. There may be terms that are set by the court which are just commercially unacceptable," Apple's lawyer Marie Demetriou reportedly said.

Why It's Important: An exit from the U.K. is a highly improbable scenario given that it is a key market for Apple.

Apple does not break down U.K. revenues; it is reported as part of the contribution from Europe. In the fiscal year second quarter that ended March 31, Europe fetched revenues of $22.26 billion for Apple, or roughly 25% of the total.

Big techs such as Apple are being investigated globally by antitrust regulators for their dominant market positioning.

Related Link: Why This Apple Stock Analyst Says It's Time To Buy