A California district court has ruled that the way Qualcomm licensed its modem chips for handsets was anticompetitive--siding with the Federal Trade Commission, which had sued the company for having "harmed competition in two markets for baseband processors [modem chips]."
Judge Lucy Koh concluded in a 200-plus-page opinion that Qualcomm's anticompetitive conduct was ongoing and likely to continue, so barred it from various practices the FTC had cited.
"[W]ith practices that result in exclusivity and eliminate opportunities to compete for OEM business, Qualcomm undermines rivals in every facet," the judge wrote. "Qualcomm attempts to eliminate competition in certain markets; eliminates competing standards; deprives rivals of revenues to invest in research and development and acquisitions; forecloses rivals from establishing technical and business relationships with OEMs; prevents rivals from field testing with OEMs, network vendors, and operators; and ensures that Qualcomm retains influence in SSOs, so that Qualcomm can maintain its time-to-market advantage and its unlawful monopoly. By so hobbling rivals, Qualcomm’s practices “unfairly tend to destroy competition itself.”
The decision means the company must license its chips to other suppliers on on fair,
reasonable, and nondiscriminatory (FRAND) terms.
In January 2017, the FTC charged Qualcomm with using anticompetitive tactics to monopolize the supply of a key technology for cell phones and other devices.
On the specific issue of its essential patents, the FTC said that Qualcomm's essential patents were adopted by a standards-setting body--of which Qualcomm was a member--in exchange for which participants "typically commit" to license the patents on those FRAND terms. But the FTC concluded that "despite its commitment to license standard-essential patents on FRAND terms, Qualcomm has consistently refused to license those patents to competing suppliers of baseband processors."
The FTC had asked the court to make Qualcomm "cease its anticompetitive conduct and take actions to restore competitive conditions." Which the court has done.
Qualcomm had said the FTC charges were baseless.
“Judge Koh's ruling is not only a rebuke of anticompetitive and discriminatory licensing practices, but it’s also a clear victory for innovation, consumers, and America’s 5G ambitions,” said Morgan Reed, president of the App Association, which had filed an amicus brief in support of the FTC suit. “We appreciate the FTC’s commitment to fight this case to the end and to establish this precedent for all stakeholders.”
A FRAND promise is a promise, Reed suggested.
"Most importantly, the ruling forces Qualcomm to finally live up to its voluntary fair, reasonable, and non-discriminatory (FRAND) licensing commitments, and they will no longer be able to refuse to license its standard-essential patents (SEPs) to competitors," he said. "Additionally, the court banned Qualcomm’s harmful ‘no license, no chips’ practices."
“CCIA has long led in supporting vigorous government action to prevent and stop harmful anti-competitive behavior," said Computer & Communications Industry Association president Ed Black. "At a time when there are many poorly conceived attacks on tech rivals under the cloak of monopoly abuse, this case re-validates the importance and effectiveness of the US competition authorities in preserving a competitive digital ecosystem.
“This ruling shows the FTC is using its antitrust authority to crack down on anti-competitive practices and that the court system is upholding the law as well. Qualcomm improperly benefits from its use of standard essential patents that other companies use to build compatible products. We support the court’s determination that Qualcomm used anti-competitive tactics to harm competitors and consumers. This ruling is a win for wireless technology and American competitiveness in 5G.”
Qualcomm won't be going down without a fight.
“We strongly disagree with the judge’s conclusions, her interpretation of the facts and her application of the law,” said Don Rosenberg, Qualcomm EVP and general counsel.
The company is seeking an immediate stay of the district court decision as well as expedited appeal to a federal appeals court (the Ninth Circuit).