UK chip designer ditched by Apple may consider legal action

Possibly the most well-known technology company in the world, Apple, plans to discontinue the use of its current graphics technology supplier, Imagination Technologies (Imagination). The UK firm provides Apple with chip technology used in products including iPhones, iPads and iPods, under a licensing agreement.

It has been reported that Apple wants to create its own graphics technology for use in its products. However, it may face difficulty with ongoing plans because of a potential legal battle with Imagination over its patents, intellectual property and confidential information. Imagination has suggested that it would be extremely challenging for Apple to design its own new visual architecture without infringing Imagination's intellectual property rights in the currently licensed technology.

Apple used the graphic technology company to create new and more advanced products, incorporating high quality retina displays, which are sold worldwide. Apple want to reduce its future reliance on Imagination, having attempted unsuccessfully to buy Imagination last year, and have rumoured expanding its expertise into the field of its technology supplier.

Investec, a specialist banking and asset Management Company, have claimed that it would have expected Apple to account for around 50 to 60 percent of Imagination's sales this year. Following Apple's statement, Imagination reportedly experienced a fall in share price of 70%, having already faced several  profit warnings last year, resulting in a costs review, slashing of 350 jobs, and a restructuring of its business.

If Apple continues its plans to cease using its supplier, it could have a knock in effect and result in other businesses not entering agreements with Imagination, which could weaken its business finances further. On the other hand, Imagination may yet be able to use its intellectual property rights to patch up its relationship with Apple, or seek legal recourse. It will be interesting to keep an eye on this story as it develops.

If you have any questions on the above, please do not hesitate to contact the team at McDaniel & Co. on 0191 281 4000 or legal@mcdanielslaw.com.