Update 3 (8/11/20 @ 3:00 PM ET): A federal appeals court has reversed a lower court’s ruling that Qualcomm must stop bundling its patent licenses with its chip sales. More details at the bottom.
Update 2 (8/23/19 @ 2:10 PM ET): Qualcomm’s ordering to license patents to rival chipmakers has been put on hold.
Update 1 (5/22/19 @ 9:50 AM ET): A US judge has ruled in favor of the FTC and now Qualcomm must stop bundling patent licensing deals with its hardware. The article, as originally published on November 7, 2018, is as follows.
Qualcomm has been facing legal battles these last two years. Regulatory bodies such as the FTC have filed lawsuits against the company. Qualcomm has been targeted by South Korea, Taiwan, China, and the European Union over anti-competitive patent licensing. Separately, the company has been battling Apple with respect to a wide range of intellectual property issues. Now, a federal court has ruled that Qualcomm must license its modem patents to other chip makers, a decision which has the potential to have many ramifications in the market.
The ruling was with respect to the FTC lawsuit against Qualcomm, which was filed in early 2017. The crux of the lawsuit was related to the issue of whether Qualcomm was using anti-competitive practices to maintain a monopoly over smartphone modems. That wasn’t judged upon in this ruling. However, the court did role upon whether Qualcomm has to license standard essential patents to competitors. The company does have to do that.
Qualcomm agreed to two separate policies that said it would offer select patents on a non-discriminatory basis. These patents are essential to wireless standards and are only accepted into the standards because of Qualcomm’s agreement to license to other chip makers. The court stated that it was unambiguous that Qualcomm was wrong in this issue.
The court wrote that if Qualcomm was allowed to keep its standard essential patents to itself, it would enable the company to “achieve a monopoly in the modem chip market and limit competing implementations of those components.” This hints that the US-based chip maker is, indeed, in the danger zone of being held guilty for using anti-competitive practices.
The effect of the ruling is that Qualcomm will now have to license patents necessary for building a smartphone modem to competing companies like Intel. The difference will be that until now, Qualcomm has only offered those licenses to companies that directly manufacture smartphones, and it only offered those modems when it was directly selling chips to these companies.
Intel, therefore, has had to work around Qualcomm’s patents to sell its own modems. Giants like Apple and Samsung have largely relied on Qualcomm’s chips in their phones. This is the reason why Samsung sells Snapdragon versions of its flagship phones in the US. Most phones sold in the US market feature Qualcomm modems to ensure compatibility with the legacy CDMA standard. (Recent developments include Apple switching to Intel’s modems in the newer iPhones. Samsung, meanwhile, uses its own Exynos modem for the international variants of its flagship phones.)
One potential effect of this ruling is that it can enable other companies’ modems to be more competitive than they are today. Intel is one of Qualcomm’s most high-profile competitors, but the company traditionally has been a step or two behind when it comes to cutting-edge wireless technology. On the other hand, Samsung’s Exynos modems have traditionally matched or even bettered the Qualcomm modems in terms of specifications in recent Samsung flagship phones.
Another related issue was the issue of how much Qualcomm can charge for these essential patents. In its lawsuit, the FTC has also accused Qualcomm of charging excessively high fees for its patents, a claim mirrored by Apple. This comes despite the fact that the agreements require the company to impose “reasonable” fees. The courts are yet to issue a ruling on this matter.
Via: The Verge
Update 1: Ruled anti-competitive
After the federal court ruling in favor of the FTC last year, Qualcomm was ordered to license patents to competing chipmakers. Now, a US judge has ruled in favor of the FTC again, and Qualcomm must stop bundling patent licensing deals with its hardware. The ruling also means they must agree to grant patents to competitors on fair terms. The previous ruling did not change how much Qualcomm could charge for patents and the judge said their practices have “strangled competition.”
Qualcomm will be monitored for 7 years to ensure it complies with this new ruling. The company said it will appeal the ruling and “we strongly disagree with the judge’s conclusions.” They claim the phone market is healthy and competitive, but the judge pointed to competitors such as MediaTek who have been harmed by Qualcomm’s practices. We will continue monitoring this story.
Source: FOSS Patents / Via: The Verge
Update 2: Paused
Qualcomm was ordered to license patents to rival chipmakers and to stop bundling licenses with chip sales nearly a year ago. Now, Qualcomm has won a partial stay in the ruling, reports Reuters. The US 9th Circuit Court of Appeals put the previous provisions on hold today.
“The government itself is divided about the propriety of the judgement and its impact on the public interest.”
The pause will remain in effect while the appeals process plays out, which could take over a year.
Source: Reuters
Update 3: Qualcomm Wins on Appeal
The Federal Trade Commission has suffered another loss in its ongoing case against American chip design company Qualcomm. The FTC is suing Qualcomm over the company’s patent licensing practices, which saw that companies had to pay patent licensing fees to Qualcomm before being allowed to purchase the company’s Snapdragon chips. The FTC believed this was anticompetitive and thus filed an antitrust suit against Qualcomm. In November of 2018, a U.S. federal court ruled against Qualcomm and ordered that the company stop bundling licenses with chip sales. This ruling was reaffirmed by a U.S. federal judge in May of 2019 but was put on hold in August of 2019 pending an appeal to the U.S. 9th Circuit Court of Appeals.
Today, the federal appeals court sided with Qualcomm (Federal Trade Commission v. Qualcomm Inc., 19-16122, U.S. Court of Appeals for the Ninth Circuit), rejecting an earlier ruling that ordered Qualcomm to redo its licensing agreements with smartphone makers. As reported by Bloomberg, these licensing agreements generated $4.6 billion in revenue for Qualcomm last year. Today’s ruling may not be the end of the FTC’s suit, though, as the agency can ask for the suit to be reconsidered by the full appeals court.
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