FTC sues Qualcomm for unfair licensing deals

Article By : Rick Merritt

Qualcomm described the U.S. complaint as a politically opportunistic move that got the facts wrong and is based on flawed legal theory.

The U.S. Federal Trade Commission has sued Qualcomm, seeking a court order against unfair licensing practices for its cellular baseband patents. FTC's complaint alleges the company “precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016.”

The commission has also accused Qualcomm coercing handset makers to agree to Qualcomm’s licensing terms to get supplies of its baseband chips by of maintaining a “no license, no chips” policy. The company refuses to license standard-essential patents to competitors, the FTC said.

In its complaint, the FTC charged, "Qualcomm is unique in requiring an OEM, as a condition of sale, to secure a separate patent license requiring royalty payments for handsets that use a competitor’s components."

Qualcomm calls it politically opportunistic

Qualcomm said it will appeal both cases. It described the U.S. complaint as a politically opportunistic move that got the facts wrong and is based on flawed legal theory. “Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms,” it said in a statement.

"This is an extremely disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez's departure and the transition to a new Administration, which reflects a sharp break from FTC practice," said Don Rosenberg, Qualcomm’s general counsel.

FTC Commissioner Maureen Ohlhausen voted against the filing that passed in a 2-1 decision. In dissenting comments she said the decision was “based on a flawed legal theory…that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide."

Last year Apple started using Intel baseband processors in its iPhone 7, teardown reports showed in September, a fact the FTC complaint notes. “Samsung and Huawei have recently self-supplied some premium LTE baseband processors for [their] handsets, respectively, but this has not provided Qualcomm with meaningful competition in the merchant market,” the complaint said.

Qualcomm dominated the 1.3 billion unit smartphone baseband market in 2015 with a 57% share, followed by Mediatek at 25% and Spreadtrum at 6%, according to figures from market watcher Forward Concepts. Samsung was in fourth place at 3% and Huawei’s had a 2% share with a chip from its HiSilicon division used only in its own phones and not for sale in the merchant market. Before it got the deal to supply an estimated 20 million LTE basebands to Apple, Intel shared last place at 1% with Leadcore and Marvell.

Trouble in Asia

The FTC’s action comes less than a month after the Korea Fair Trade Commission (KFTC) fined Qualcomm ₹5,851.87 crore (nearly $1 billion), charging unfair patent licensing practices. The KTFC levied similar charges of failing to license standards-essential patents to competitors and forcing customers to agree to unfair terms including “making them provide [the customer’s] patents for free.”

In February 2015, Qualcomm paid $975 million as part of a settlement over patent disputes in China. The deal also cut royalty rates Qualcomm was charging in China.

Regulators in other jurisdictions, including Taiwan, are also investigating Qualcomm, a Reuters report said. Qualcomm made as much as a third of its revenues on patent licensing in 2016.

First seen on EE Times.