The previous week the tech industry did a double take on hearing that GTAT, Apple’s partner in making sapphire screens, has filed for bankruptcy and has taken to court to settle the dust against Apple, which GTAT termed “oppressive and burdensome.” Moreover, the added spice to the news is that GTAT’s announcement came a few days after the unveiling of iPhone 6 and iPhone 6 Plus.
As is common with lawsuits that the details start to slowly and steadily emerge, one eye-popping detail worthy of attention is that according to Apple’s agreement with GTAT: “each breach of the confidentiality obligations will require GTAT Corp to pay liquidated damages to Apple in an amount of $50m per occurrence.” In addition, GTAT asserted that Apple’s withholding of the promised $139 million in payment led to GTAT’s filing for bankruptcy. The previously mentioned clauses made GTAT call the agreement with Apple “oppressive.”
Moreover, GTAT has so far won the right in court to reveal all clauses of the confidentiality agreement with Apple “in the interest of their creditors, equity holders and other stakeholders, as well as to ensure an open, transparent and fair process.” GTAT reasoned in its filed documents that it “also believes that Congress’s express desire for public access in bankruptcy cases outweighs contractual demands for secrecy. However, absent express direction from the court, GTAT will not risk exposing itself to potentially hundreds of millions of dollars in additional liabilities.”
However, GTAT is not exempt from lawsuits either as it will face a lawsuit from its shareholders who accuse that GTAT “misrepresented and/or concealed” its true financial standing and progress. Furthermore, GTAT’s stock dropped a whopping 90% the day after the bankruptcy proceedings had begun.
The ramifications of a lawsuit of such an intense and controversial nature can turn into a nightmare for Apple as the confidentiality agreements between Apple and GTAT will be revealed in full once the court proceedings start this Wednesday, and if any of the clauses is contested by the court, it might bring Apple’s other agreements into wider scrutiny.
Lastly, the revelations in court will bring Apple’s plans for sapphire screens to light, since till now Apple has confirmed sapphire screens only for the Apple Watch, but given the large scale investments Apple made in GTAT, the sapphire screens cannot possibly be used only for the Apple Watch. Which way this fiasco goes and what it holds for Apple and GTAT will soon be determined once the court proceedings start on Wednesday.