After six days of testimony challenging Qualcomm's licensing policies, the FTC rests its case

After six days of testimony challenging Qualcomm's licensing policies, the FTC rests its case
With the entire smartphone industry watching the FTC v. Qualcomm non-jury trial intensely, the FTC rested its case today, the sixth day of proceedings. The trial is expected to last 10-days, and the antitrust agency is trying to prove that the chip maker's "no license, no chips" policy, and the royalties it demands, makes it a monopoly. The FTC's argument is that the company's policies tend to discourage competition. Qualcomm has responded by noting that it has never withheld chips from a customer, and that manufacturers turn to Qualcomm because their chips are superior to the competition's.

According to CNET, phone manufacturers are also complaining that Qualcomm's fees are based on a percentage of a handset's total value. These companies say that the fee should only be computed using a percentage of the value of the Qualcomm chip being licensed.

Today, the FTC called University of California-Berkeley economics professor Carl Shapiro to the stand. Shapiro took a look at how Qualcomm's policies have affected the chip market, and came to the conclusion that the company was operating as a monopoly through 2016 in respect to CDMA and premium LTE modem chips. The professor said under oath that Qualcomm is using its monopoly power to charge an "unusually high amount" to license its patents.

On Monday, Judge Lucy Koh heard testimony from an Intellectual Property consultant who said that the royalties on Qualcomm's standard-essential patents were too high. These patents, needed by manufacturers so that their products can meet technical standards, are supposed to be licensed on a fair, reasonable and non-discriminatory manner (FRAND). The consultant said that the royalty rate for a multimode LTE modem should be 6%. Apple's COO Jeff Williams testified yesterday that Apple asked for a 5% rate, or $1.50, based on the $30 cost of the component.  Instead, it paid $7.50 for each iPhone installed with the chip. The executive admitted that Apple signed an agreement with Qualcomm in 2013 because the company felt like it "had a gun to its head."

Now that the FTC has presented its case, Qualcomm will call up witnesses to testify in its defense. If the FTC prevails, Qualcomm will most likely have to change the way it does business in the U.S.

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14 Comments

1. monkeyb

Posts: 382; Member since: Jan 17, 2018

According to haters: Professor is an Apple sheep. IP consultant is dumb and he should be fired. Judge is paid by Apple to turn against an American company called QC. This is only about Apple.

8. Finalflash

Posts: 4062; Member since: Jul 23, 2013

He isn't dumb, but iFans definitely are. Seeing as how Apple was charging $20-30 for their rubber banding and rounded rectangle patents, I think it is fair to charge $7.50 for actual technology when Apple makes upwards of $400+ for those phones.

10. monkeyb

Posts: 382; Member since: Jan 17, 2018

Lol. You are basically saying he isnt dumb, he is just wrong. Ohh how lucky Apple is that the court is not calling you as witness. Haha

2. perry1234

Posts: 630; Member since: Aug 14, 2012

Charging as per the phone cost instead of as per the chip cost is downright WRONG if proved correct.

4. Charlie2k

Posts: 111; Member since: Jan 11, 2016

Why? Just go with other manufacturers products if you dont like their products. Apple got mad because they had to pay $1,5 extra to Qualcomm for a product they really want. For a product they then retail for $1000 with 50% profit. Its funny to see how Apple screw both ways, manufacturers and customers. Yet journalists love them and greenwash them all they can, especially now when customers are slowly walking up and buying way better phones from other manufacturers. Apple stock down 40% in 3 months. Apple and journalists are always saying how superior they regard them selfs and that they are the standard.. Why not price their products according to FRAND then? $150 iPhone

5. Peaceboy

Posts: 640; Member since: Oct 11, 2018

Then poor costumers are complaining apple’s prices. If they can’t afford a $1000 phone then they can have a phone that costs less.

6. Charlie2k

Posts: 111; Member since: Jan 11, 2016

Same goes for Apple regarding the $1,50 extra per chipset?

13. iushnt

Posts: 3060; Member since: Feb 06, 2013

@Peaceboy, If I have to spend $1000+ on a phone, I make sure it is android because of the hardware and softeware’s versatility. May be the highest offering of Note 9 or Mate 20 Pro.

11. Leo_MC

Posts: 6617; Member since: Dec 02, 2011

For the same reason the price of bread has nothing to do with your income.

14. perry1234

Posts: 630; Member since: Aug 14, 2012

The conversation went in a different direction than anticipated, but allow me to clarify. "Charging as per phone cost instead of as per the chip cost is downright WRONG if proved correct". In the above statement, I don't support Apple or Qualcomm, hence the absence of those names in my comment is something that should be noted. I have no issues if Apple pays even $30 per chip that it borrowed from Qualcomm. I am also aware that Apple is a penny pincher, what with the removal of 3.5mm dongle and the lack of fast charger in the box, for a phone that starts from $1000. The premise that I am at issue with, is the fact (*if it is correct) that Qualcomm is charging more money from Apple for possibly the same chip and the justification given is that Apple devices have a higher MSRP. Imagine if you went to a 5 star hotel and paid $500 per night. At the day of the checkout, you find another person, who stayed in the exact same room, and who availed exactly the same services, but he paid only $300 per night. Assuming that both of you are new customers with same benefits, would you honestly not argue back ? Now imagine if the receptionist replies : " Sir, we charged you $500 per night because we got to know that your annual income is $250,000 per year. The person X was charged only $300 because he only earns $150,000 annually" . Does that sound logical ? Another example would be if , say a person A is the cleaning lady at Microsoft....can she demand $200,000 an year because Microsoft is a rich company ? No, it depends on what service SHE is providing and not how rich MS is/ what MS is capable of paying. That is what's wrong with Qualcomm's argument.

3. tangbunna

Posts: 457; Member since: Sep 29, 2016

one day that same FTC will sue Starbucks for selling $3.5 latte to sell it at $1.5 as street coffee.

7. wickedwilly

Posts: 572; Member since: Sep 19, 2018

If Apple signed a contract in good faith, then later declines to pay because it is being charged too much, then this should be an open and shut case. The only argument I can think of is if Qualcomm forced Apple in some way, which clearly they cannot. Apple has and still does use its power to charge high prices, demand lower purchasing prices and uses the threat of legal action against small companies and individuals to get its own way. If there is a problem with a possible monopoly situation Apple should not have signed a contract and taken action in the courts before agreeing to buy the product at a set price. I wonder what would happen if all current iPhone users sued Apple because it has a monopoly on IOS and paid too much for their phones?

9. Venom

Posts: 3109; Member since: Dec 14, 2017

This is a pretty shady move from Qualcomm. Stop trying to be shady and just keep it fair and reasonable. Don't let greed be the end of your business.

12. Reybanz88

Posts: 86; Member since: Jul 28, 2016

It's so funny how so many people are on Apple's side... They should definitely pay the 7.50 USD and shut up. They charge too much to cry about the pricing on the best chip available. Apple isn't lowering it's pricing for anyone, so why should Qualcomm?

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