In a temporary victory for chip maker Qualcomm, a federal court is letting it continue to condition chip sales on buying a patent license, saying the company had made a good case for why its conduct did not violate antitrust.
Saying that Qualcomm has demonstrated "serious questions" about about a district court's decision that the chip maker must license its patents to rivals, the U.S. Court of Appeals for the Ninth Circuit has stayed that decision, the latest twist in years-long legal battle.
That means, for now, Qualcomm does not have to make its licenses available to rival modem chip suppliers, at least until sometime next year.
In May, a California district court 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 enjoined it from various practices the FTC had cited.
Qualcomm had refused to license standard essential patents for smart phone technology in contravision of promises it made to standards-setting bodies and charged excessive royalty rates, Koh concluded. The effect of that, said the FTC, had been that Qualcomm was preserving its monopoly of the LTE chip market, effectively levying a surcharge on competitor's chips.
The ruling required Qualcomm to license its chips to competitors, prohibited it from conditioning chip sales on the purchase of a patent license, and required Qualcomm to renegotiate its agreements to conform with the decision,
To grant a stay, Qualcomm also had to show that its chip sales practices do not violate antitrust and that absent a stay, it would suffer "irreparable harm."
The court said Qualcomm met both those standards. "The fundamental business changes that the injunction imposes cannot be easily undone should Qualcomm prevail on appeal," the court said.
The court also pointed out that though the FTC sought the injunction, the Department of Justice and Department of Energy do not support the injunction against Qualcomm, saying it threatens national security.
"Whether the district court’s order and injunction represent a trailblazing application of the antitrust laws, or instead an improper excursion beyond the outer limits of the Sherman Act, is a matter for another day. For now, weighing all relevant factors, we conclude that the requested stay is warranted." the court said.
The court will hear Qualcomm's appeal beginning in January 2020.