Trial that could force Qualcomm to change its business model has begun

Trial that could force Qualcomm to change its business model has begun
As noted by Reuters, a trial that could change the way chip designer Qualcomm does business kicked off on Friday with opening statements from both the U.S. Federal Trade Commission (FTC) and Qualcomm. The FTC is suing the chip designer and claims that Qualcomm's current licensing policy is anti-competitive. The non-jury trial is being presided over by Judge Lucy Koh (who was behind the bench during the first Apple v. Samsung trial) and will run for ten days.

If the government wins the trial, Qualcomm could be forced to change the way it licenses its patents. Apple has a similar suit pending against Qualcomm, so it is watching this trial closely. Qualcomm asks phone manufacturers for a percentage of the retail price of any phone sold with a patented Qualcomm component or software on board. The manufacturers say that they should only pay a percentage of the cost of any component that uses a Qualcomm patented part or software. In addition, the manufacturers say that Qualcomm's patents are standard essential, which means that they are required for a manufacturer to build a product that meets industry standards. Licenses for such patents are supposed to be based on Fair, Reasonable and Non-Discriminatory (FRAND) rates.

During opening arguments, FTC attorney Jennifer Milici said, "Qualcomm says you will pay our rates if you want our chips. The only way to arrive at a market rate [for Qualcomm’s patents] is to negotiate without that threat." In addition, the FTC accused Qualcomm of paying off Apple with rebates if the company promised to use only Qualcomm's modem chips for the iPhone. From 2011-2016, Apple used Qualcomm's modem chips on the iPhone exclusively. In 2017, it used such chips from both Qualcomm and Intel. In 2018, with Apple and Qualcomm filing multiple suits against each other, Apple purchased modem chips for the iPhone from Intel only. Last January, Qualcomm was fined $1.2 billion by the European Commission for paying Apple to use only its modem chips on the iPhone.

During its opening arguments yesterday, the attorney representing Qualcomm, Bob Van Nest, tried to point out that Qualcomm is not a dominant player in the modem chip market and shouldn't be under such intense scrutiny. Using the top two smartphone manufacturers as examples, Van Nest said that Huawei sources 54% of its modem chips internally, buying just 22% from Qualcomm and the remainder from other chip suppliers. The attorney added that Samsung internally produces 52% of the modem chips used on its phones, with 38% coming from Qualcomm, and the remainder coming from other sources.

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25 Comments

1. Derekjeter

Posts: 1427; Member since: Oct 27, 2011

If Qualcomm invented something why should they run their business under someone else rules?? If they want a large percentage and you want to use their product then pay up. That’s like employees complaining about companies not paying higher wages even though the company has made millions. It’s not your product!!! It’s not your company!!! If you don’t like what Qualcomm is charging then run to Intel so you can have the same issues Apple is having with the s**tty iPhone Max. There’s no software update that will fix that overpriced piece of s**t.

3. monkeyb

Posts: 336; Member since: Jan 17, 2018

You really do not bother to read the article. - This article is FTC vs QC but you happily scolded Apple. Also, I do not think you care about the below statement from this article: Licenses for such patents are supposed to be based on Fair, Reasonable and Non-Discriminatory (FRAND) rates.

6. mootu

Posts: 1254; Member since: Mar 16, 2017

Maybe he scolded Apple because they reported QC to the FTC hence this court case. Strange that Apple only decided to report them to the FTC when their lucrative rebate ended.

7. monkeyb

Posts: 336; Member since: Jan 17, 2018

So you are saying the FTC is run by Apple?? You do realize QC is also a US company. Its not some Chinese company .

11. mootu

Posts: 1254; Member since: Mar 16, 2017

Where did i say that?, stop making assumptions. What i did say is that Apple were perfectly happy with QC's FRAND terms when they were receiving a big rebate (paying less than others). As soon as the rebate ended and they had to pay the same as everyone else Apple reported QC to the FTC hence this court case.

22. monkeyb

Posts: 336; Member since: Jan 17, 2018

@mootu, I am not trying to pick a fight or assume anything. This is what you wrote: "they reported QC to the FTC""" hence""" this court case". I said what I said because you used the word "hence", meaning the FTC did it only because Apple filed a case. We really do not know when these fights started exactly, except listen to what tech sites are showing to us. Please understand the following: - QC was awarded some patents as FRAND: This means QC was breaking the law from the start by going against the rules of FRAND. - Imagine you taking a government contract to sell some product by signing a rule stating you won't sell it beyond $10. Now you go out and see that there is no competition for that product so you will sell it for $15. No one is saying that you did not invent this product but you received a license to sell it only after signing a contract with the government. This is exactly what is happening with QC. I DO NOT SUPPORT APPLE. But you cannot deny that QC was breaking rules from the start. LET BOTH OF THEM PAY FINES :P

10. tangbunna

Posts: 426; Member since: Sep 29, 2016

Qualcomm's business license is fair. you buy my 1$ cake and sell 1000$, who's happy? why not just say, ok i get only 1$+1% if you sell 1000$ just pay 11$ , fair enough? now Apple's corruption: just pay FTC and make the deal cheaper cost. let say FTC eat 5millions dollars. if FTC win, the deal to pay Qualcomm multi-billions will come down to multi-millions. who say USA does not have corruption?

12. Vokilam

Posts: 930; Member since: Mar 15, 2018

I absolutely agree with you. But did you have to go at Apple with that jobberish? You contradicted yourself by calling Apple overpriced - it’s apples product, they charged whatever they want, and if you do t like it - no one forcing you to buy. But I 100% agree with you on the qualcomm thing - I don’t care if Apple has to pay what Apple agree on initially. It wouldn’t matter - Qualcomm invented it - worked hard to make it essential, and now they have to lower prices - that’s not fair.

14. Leo_MC

Posts: 5884; Member since: Dec 02, 2011

The problem is that, if you want to build a new modem, having a high compatibility with and performances within the existing networks in the USA, you have no choice but to use QC patents and that's how the competition is being destroyed. In EU, companies don't have that problem just like they don't have it in Asia.

15. Well-Manicured-Man

Posts: 639; Member since: Jun 16, 2015

Just out of curiosity: Why are manufacturers dependent on QC for American networks? I understand it has to do with patents but what exactly is patented so that only Qualcomm has it.

17. Subie

Posts: 2223; Member since: Aug 01, 2015

CDMA technology that Sprint and Verizon use.

20. Leo_MC

Posts: 5884; Member since: Dec 02, 2011

Verizon (which is "America" when it comes to communications, because is the daughter of Alexander Bell - the father of the telephone) - (and Sprint, but that's secondary) uses CDMA developed by QC; the other daughter - AT&T - uses GSM and, when 3G came uppon us, QC decided to create and build for her a version of UMTS (3G), filled with its own patents. And now - because someone was stupid enough to destroy the competition in USA - QC owes core patents in both CDMA and UMTS (both 3 and 4G) which are very hard to avoid (Intel has managed to do so with its modems for the iPhone, but you can clearly see it still has to troubleshoot some problems that have arouse - why do you think that XS almost never had a problem with maintaining the connection anywhere outside USA?) and it was able to keep them off FRAND, because "there are 2 different technologies a carrier can use". I do not know all the subtleties, so take everything you read in my story with a huge chunk of salt.

23. Vokilam

Posts: 930; Member since: Mar 15, 2018

I see. Well it is a tough one for others to swallow, I get it. But if Qualcomm built the infrastructure - isn’t it theirs to command. Why can’t the FTC (it whomever) just implement a different standard to give others a competitive edge. Why go after the one that made it all possible. Well, I guess I digress, but only if qualcomm KNEW that eventually they’ll be in this FRAND situation once they establish their innovations as nations standard. (I hope you’ve understand what I meant Leo, and appreciate you taking your time schooling me on this, I do.)

24. Leo_MC

Posts: 5884; Member since: Dec 02, 2011

“But if Qualcomm built the infrastructure - isn’t it theirs to command” Not so much; qc managed to keep core patents out of frand (which must have been legal to do, but not fair) and, because all the the existing networks use them, a new player (modems manufacturer) is forced to use them too, in order for its products to be fully compatible (or do as Intel did and adapt new technologies to the existing standards). The problem is that, having core patents out of frand system, the patent holder can charge whatever he wants (which qc did) and the beneficiaries cannot negotiate, because they don’t have an alternative (where are you going to buy tech from, when only one owns the product?). I’m not saying qc is guilty of anything, it just uses the system to make money - which is what it should do - and this trial it’s not about Apple (and whatever reason the minions invent to display a new batch of hate against it) but about fixing something that is broken in USA. Ps: implementing a different standard means the carriers should change all their infrastructure, which is never going to happen. Again, this is just a story, an opinion, an editorial, if you will. Cheers!

18. Peaceboy

Posts: 640; Member since: Oct 11, 2018

Android users are really dump! Read and be informed.

19. Vancetastic

Posts: 541; Member since: May 17, 2017

“Dump”? When insulting someone else’s intelligence, it helps to use the right word.

21. Venom

Posts: 2683; Member since: Dec 14, 2017

Can't insult what you don't have.

2. Tech-shake

Posts: 195; Member since: Nov 14, 2016

Really hope this trail succeed. Qualcomm is an awesome company with awesome engineers, but their business model is forcing competition out!

4. kryme

Posts: 462; Member since: Oct 24, 2013

Shouldn’t be a win for me if I created something that later become an industry standard... why it seem like they telling QC to give up the patent so all can use the tech without paying...

5. Tech-shake

Posts: 195; Member since: Nov 14, 2016

no one is telling them to license it without payment, but it is stupid (imo) to license a technology based on the price of a product(that it is going to be put in) rather than a fixed amount.

8. torr310

Posts: 1602; Member since: Oct 27, 2011

I hope the government could do something to limit the patents of medicines and make them less expensive.

9. slashas

Posts: 108; Member since: Jul 17, 2017

Hell yeah, to invent and make medicine costs 1bn for inventing and 1$ for making, but charging 100$ for ten years and company is making 100bn. All medicine should we owned by government and sponsored by government globally, dirty business to make money on sick people...

13. Vokilam

Posts: 930; Member since: Mar 15, 2018

Are you nuts? That’s socialism - government should not own any business (that would be the end of economic progression). Government should STAY THE EFF OUT!!!!

16. Back_from_beyond

Posts: 1058; Member since: Sep 04, 2015

In the case of medicine I think he's right, thousands of people die every year because they can't afford the medicine that will save their lives, because pharmaceutical companies are greedy like any other company. Countries are run by big corporations nowadays. We're no longer socialist (not communist) nations, we're capitalist nations, pay-as-you-go nations. If you can't afford to live, you'll just have to die. We used to be different and we prospered. Capitalism however is unsustainable too.

25. Fibergk

Posts: 10; Member since: Dec 30, 2018

Ftc case is weak. It is relying on Huawei. Huawei wants to kill 5G investment in US. With 34 percent market share and below industry average operating margins financially ftc cannot prove industry Monopoly or any consumer harm due to licensing or chip pricing policies. Theatre without substance induced by whining ecosystem.

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