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Qualcomm loses FTC antitrust case, ordered to renegotiate patent licenses

Qualcomm
Qualcomm (Image credit: Android Central)

The Federal Trade Commission has prevailed in its antitrust case against Qualcomm, with the verdict impacting how Qualcomm negotiates patent licenses from phone manufacturers going forward. The FTC filed the lawsuit back in 2017, alleging that Qualcomm resorted to anti-competitive tactics to maintain its dominant position in the cellular modem space.

Qualcomm has an effective monopoly when it comes to baseband modems, with the company licensing its tech to everyone from Apple, Samsung, Huawei, LG, Sony, Lenovo, and others. Basically, if you're using a phone that connects to a 4G network, chances are it's using a Qualcomm modem. Qualcomm also has a trove of networking patents around 2G, 3G, and 4G, and software features including Wi-Fi power management and airplane mode. To use any of these features, phone makers had to shell out a license fee.

The FTC took issue with the way Qualcomm licensed its technology — the chip vendor charged a license fee as a percentage of the overall cost of the handset. As such, Apple and Samsung had to shell out more to use the same modem versus Motorola or other budget players.

Saying that Qualcomm's royalty rates are "unreasonably high," Judge Lucy H. Koh of the United States District Court for the Northern District of California has found the chip vendor guilty of violating the FTC's antitrust laws. From FOSS Patents:

In combination, Qualcomm's licensing practices have strangled competition in the CDMA and premium LTE modem chip markets for years, and harmed rivals, OEMs, and end consumers in the process. Qualcomm's conduct 'unfairly tends to destroy competition itself.'Thus, the Court concludes that Qualcomm's licensing practices are an unreasonable restraint of trade under § 1 of the Sherman Act and exclusionary conduct under § 2 of the Sherman Act.Therefore, Qualcomm's practices violate § 1 and § 2 of the Sherman Act, and that Qualcomm is liable under the FTC Act, as "unfair methods of competition" under the FTC Act include 'violations of the Sherman Act.'

What the ruling effectively means is that Qualcomm now has to license its modems and underlying baseband tech. It will also have to make its standard-essentials patents available to rival chip vendors:

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.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.Qualcomm may not enter express or de facto exclusive dealing agreements for the supply of modem chips.Qualcomm may not interfere with the ability of any customer to communicate with a government agency about a potential law enforcement or regulatory matter.

The ruling opens up the potential for the likes of Samsung to make a more dominant play in the wireless space. Samsung will be able to market its Exynos chipsets to rival phone manufacturers, although whether anyone will take up Samsung on the offer is another matter entirely. For now, this is a step in the right direction for the industry as a whole.

Harish Jonnalagadda
Harish Jonnalagadda

Harish Jonnalagadda is a Senior Editor overseeing Asia at Android Central. He leads the site's coverage of Chinese phone brands, contributing to reviews, features, and buying guides. He also writes about storage servers, audio products, and the semiconductor industry. Contact him on Twitter at @chunkynerd.

5 Comments
  • About time, it took Apple to help put a stop to Qualcomm's double dipping. This is what I said when Apple settled all cases with them a couple of weeks ago. They may have won the battle, but they lost the war. This is what Apple was always after and they got it at the end. Every oem should be celebrating right now and give a big thanks to Apple. A lot of folks never cared about this nor educate themselves about it, they cared about Apple losing instead of realizing the bad or abuse Qualcomm was doing to the entire mobile world.
  • Exactly! Well said! Everyone was saying that Apple was being greedy and didn't want to pay. When they stopped paying the royalties it was all because of these high royalties that Qualcomm was over charging. Apple knew it would have to pay for the royalties but not in the amount from the double dipping. That's why at the end both decided to settle outside of court. Apple needed a realiable 5G modem supplier, didn't pay the full amount in royalties and got a new better licensing deal. Qualcomm got paid for it's royalties (not from over the charging), plus won an amount, got back a huge customer and was hopping by settling this case with Apple this would make them good against the FTC anti-trust lawsuit case and maybe it get dropped.
  • Apple paid Qualcomm 5 billion to end that fight.
  • That was payments they withheld for 18 months. Besides, everyone will renegotiate once this whole thing gets settled. Qualcomm was double dipping and it's about time someone put an end to it. This will benefit the entire mobile industry. Samsung will now be able to offer their Exynos chip in North America.
  • The payment they originally were withhelding was somewhere between 7 - 8 Billion. The fact they ending up only paying between 4.5 - 5 Billion for the royalties and the 1 Billion for infringing or something is proof that Qualcomm was over charging (double dipping) them.