A U.S. District Court has ruled that Qualcomm’s patent licensing practices violate U.S. antitrust laws by harming competition. The ruling is a victory for the Federal Trade Commission (FTC), which will now monitor Qualcomm for seven years.
“Qualcomm’s licensing practices have strangled competition in the CDMA and the premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process,” U.S. District Judge Lucy Koh wrote in her ruling, the public version of which is heavily redacted to protect trade secrets.
As you may know, Qualcomm is the dominant worldwide supplier of mobile microprocessors and chipsets, and it was sued by the FTC in 2017 for using anticompetitive practices to maintain this monopoly. The FTC charged that Qualcomm imposed “onerous” licensing terms on device makers that wished to use its patent-protected technologies. Among the complaints, Qualcomm had allegedly required Apple to enter into an exclusive contract for cellular modems. When Apple refused, Qualcomm simply refused to sell Apple the parts.
The Apple case is muddled by two inconvenient facts: Qualcomm’s chipsets were and still are demonstrably better than the competing parts Apple was able to obtain from Intel. And Apple ultimately settled its own lawsuits with Qualcomm, agreeing to pay about $4.5 billion in withheld licensing fees as part of the deal.
The District Court ruling won’t impact that agreement, but it should ease Apple’s—other others’—licensing costs moving forward. At issue is that Qualcomm’s technologies are covered by so-called standard essential patents, which must be licensed under fair, reasonable, and non-discriminatory (FRAND) terms.
But the Court found that Qualcomm did not meet that bar at all.
“Qualcomm must not condition the supply of modem chips on a customer’s patent license status and Qualcomm must negotiate or renegotiate license terms with customers in good faith under conditions free from the threat of lack of access to or discriminatory provision of modem chip supply or associated technical support or access to software,” the ruling explains. “Qualcomm must make exhaustive SEP licenses available to modem-chip suppliers on fair, reasonable, and non-discriminatory (‘FRAND’) terms and to submit, as necessary, to arbitral or judicial dispute resolution to determine such terms.”
Additionally, Qualcomm is barred from requiring licensees to exclusively license its cellular modems. And it cannot attempt to interfere when a licensee wishes to communicate with a governmental agency.
“In order to ensure Qualcomm’s compliance with the remedies, the Court orders Qualcomm to submit to compliance and monitoring procedures for a period of seven (7) years,” the ruling continues. “Specifically, Qualcomm shall report to the FTC on an annual basis Qualcomm’s compliance with the above remedies ordered by the Court.”
If you’re looking for a little light reading, the Court has issued a 223-page document outlining the facts of the case. As FOSS Patents notes, the document is damning for Qualcomm on a number of levels, including the fact that Judge Lucy Koh “largely discounted” the testimonies of Qualcomm executives because they differed so much from “these witnesses’ own contemporaneous emails, handwritten notes, and recorded statements to the IRS.” In other words, she found them to be dishonest.
Qualcomm can and will appeal the verdict.
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