Qualcomm might be able to continue its anticompetitive chip selling policies

Qualcomm might be able to continue its anticompetitive chip selling policies
Last month, Judge Lucy Koh finally issued a ruling in a case that could force Qualcomm to change the way it does business. The case, known as the FTC (Federal Trade Commission) v. Qualcomm was originally heard during a ten-day period at the beginning of this year. With no jury seated, the FTC essentially put Qualcomm's business practices on trial in front of the judge. Qualcomm's "no license, no chips" policy, the collection of royalties based on the retail price of a phone, and its refusal to license its standard-essential patents were some of the company's anticompetitive behaviors that were brought up by the FTC.

Qualcomm has asked for a stay of the ruling so that it can appeal it, although Judge Koh has yet to make a decision on the request. The chip maker points out that if it starts renegotiating contracts as ordered by Judge Koh and then wins on appeal, it might not be able to reverse these deals once again. And Reuters reports that an FTC official thinks that Qualcomm has a good chance at overturning the ruling. FTC Commissioner Christine Wilson, appointed by President Donald Trump, wrote in the Wall Street Journal last week that the ruling against Qualcomm "radically expanded a company’s legal obligation to help its competitors," and was based on a flawed 1985 Supreme Court decision (more on that later).

Wilson's op-ed might give Qualcomm an idea on how to win an appeal of Koh's decision, according to several antitrust attorneys. Others believe that the appeals courts will find it hard to overturn Koh's ruling, which some say was based on the judge's strong fact-finding abilities and her determination about the credibility of those who testified before her.

Did Judge Koh misapply a 1985 Supreme Court decision in ruling against Qualcomm?

The aforementioned 1985 Supreme Court decision ruled that a company that drops a business arrangement that has proven profitable over time could be guilty of violating competition law. How does this relate to Qualcomm? The company once licensed its standard-essential patents to rival chip firms. These are patents that manufacturers need to license to make sure that their products are in compliance with technical standards. As a result, they must be offered to rivals on a fair, reasonable and non-discriminatory (FRAND) basis. In the early 2000s, Qualcomm stopped offering these patents to other chip makers and only licensed them to smartphone manufacturers.

During the trial, the company denied that it had ever offered full licenses to other chip makers and says that if forced into doing so by Koh's decision, it would be a new business arrangement, not the resumption of an old one. And that dovetails with Wilson's op-ed in the Journal in which she wrote that Koh's decision means that if a company sells a product to a competitor, it would have to sell every product it makes to every competitor or else be charged with violating antitrust law. The FTC commissioner also said that Judge Koh misapplied the 1985 Supreme Court decision.  University of Southern California law professor Jonathan Barnett agrees with Wilson and says that the Supreme Court ruling was supposed to be "very narrow." He says that there is a good chance that Qualcomm will be able to reverse Judge Koh's ruling.

Many investors are hoping the same thing. On April 15th, the day before Qualcomm and Apple reached a settlement on their legal issues, Qualcomm's shares closed at $57.18. Following news of the settlement, the stock soared peaking on May 1st at $89.29. The day before Judge Koh released her decision, Qualcomm's shares had already declined to $77.75. Following the ruling, the stock dropped to $65.37. The company's shares closed last week at $66.82.



1. oldskool50 unregistered

They are not anti-competive. They simply have the best technology period. Though i don't understand why you need a license to by a chip, they have a right to dictate terms of usage. If no one else can make a better option, then its not Qualcomm's fault. Qualcomm is not stopping anyone from competing. Others simply don't have the no-how to be able too. Sucks for them.

2. Dr.Phil

Posts: 2512; Member since: Feb 14, 2011

I really doubt you understand what Qualcomm has done over the past 20 years. Instead of making a lengthy reply, I'll just direct you to ArsTechnica because they did a wonderful deep dive into what has gone on. https://arstechnica.com/tech-policy/2019/05/how-qualcomm-shook-down-the-cell-phone-industry-for-almost-20-years/ There is one quote I will post here that kind of sums up why there is no competition for Qualcomm in the modem space: "If a chipmaker asked to license Qualcomm's patents, Qualcomm would only offer a promise not to sue the chipmaker itself—not the chipmaker's customers. Qualcomm also demanded that chipmakers—its own competitors—only sell chips to a Qualcomm-supplied list of "Authorized Purchasers" who had already licensed Qualcomm's patents. Needless to say this put Qualcomm's competitors—and would-be competitors—at a disadvantage. Qualcomm's patent licensing regime not only allowed it to impose a de facto tax on its competitors' sales, it effectively let Qualcomm choose its competitors' customers. Indeed, Qualcomm demanded that other chipmakers provide it with data on how many chips it had sold to each of its customers—sensitive commercial data that would allow Qualcomm to figure out exactly how much pressure it needed to apply to prevent a rival from gaining traction."

6. AbhiD

Posts: 885; Member since: Apr 06, 2012

This doesn't explain the unnecessary demands being made to Qualcomm that it should license it's Patents to other brands. WHY? Why should Qualcomm do that? It's freaking Qualcomm technology, their money that went into it, their efforts that went into it. It's their choice if they should offer their Patented technology to others or not. How the hell can they be forced to do it? This decision basically is a load of bull$hit

9. oldskool50 unregistered

I agree. It's their tech. Just liek Apple gets to charge whatever they want for their product they put money into, why shouldn't anyone else. apple who charges as much as 1000% the cost fo what it costs to make stuff, and yet these guys are complaining about Qualcomm? That's hypocritical to me.

7. shm224

Posts: 317; Member since: Mar 19, 2015

> Instead of making a lengthy reply, I'll just direct you to ArsTechnica because they did a wonderful deep dive into what has gone on. * which is to say, you don't understand what QCOM's licensing practices looks like, either. >"If a chipmaker asked to license Qualcomm's patents, Qualcomm would only offer a promise not to sue the chipmaker itself * this is consistent with the industry practice that has been around for two decades. No chipmakers are required to license SEPs as the royalties are collected only at the end of the supply chain, from the end-user device OEMs. This also lowers the barrier of entry and increases competition in the baseband market. > ... impose a de facto tax on its competitors' sales * I don't get it. why is it deemed a de facto tax? QCOM's wireless patents are SEPs and ALL users are required to license them, not just QCOM's competitors. Why would you want to sell chips to those who have no desire to pay the royalties that ALL users are required to license?

8. oldskool50 unregistered

If they are buying from Qualcomm, then they are not a Qualcomm competitor. I've already read that article before. I never said, Qualcomm was innocent. What i did say is no one is stopping anyone from competiting against qualcomm. if someone else wants to make a modem, all they have to do is do what qualcomm has spent BILLIOns doing. That is sitting down with all the carriers in the world, working with them to understand their technology, and making a modem that works effortlessly on their networks. because of this Qualcomm simply has the best tech. PERIOD. Now, if you don't want to buy from Qualcomm, then you need to spend the money to do the same. But fact is, they got there first. So the best option is to just buy their tech. They IMO, have a right to dictate the terms of usage, just like Apple, Microsoft, Intel and others have Term's of Usage. Tell a partner to not sell their product to someone else, means Qualcmmm is simply controlling their supply. Even if they are trying to prevent competitors from getting it, it still makes no since. If QC sells you chips, and then they expressly tell you; you can't resell them to certain vendors, they have that right. In the USA, it si perfectly legal to not do business with any entity you choose, and you don't have to give a reason, as long as the reasons are not discriminatory. In other words, Qualcomm could not say, I won't sell you a chip based on your gender, religious beliefs or color of skin as examples. But if they don't want to do business with you, they simply don't have too. How if you want to call that anti-competitive, then I disagree. Again, let's be clear. I do question Qualcomm's business practices. Many OEM's have complained to the FTC for years and the FTC found no wrongdoing. It wasn't until this BS with Apple, did the FTC decide to take a much closer look. If the FTC fines that Qualcomm is wrong, then they will pay a huge fine and will have to change. if not, then let it go dude. But the way I see it, as long as you aren't doing anything outright illegal, you have a right to dictate usage. What Qualcomm may be doing could be seen as wrong an immoral, but those are not illegal things.

3. Vancetastic

Posts: 1871; Member since: May 17, 2017

With that headline, I kind of expected a disclaimer on this article. Hmmm.

5. tangbunna

Posts: 495; Member since: Sep 29, 2016

when Nasdaq has no ripples, they start to slap big players to make tsunami.

10. oldskool50 unregistered

I think some people have a wrong idea about what QCOM is doing. The OEM's are complaining it is wrong. But is it? #1 - No license no chip - According to what I gather, QCOM does this, because even when you buy a chip from QCOM, it includes the licensing of their IP. Because in order to use the chip, their is other technology that is not directly tied to the chip, that is tied to QCOM's IP that is required in order for the chip to even work. You can't just stick a QCOM modem into your device and it works. There are other tech that is required with their IP license covers this. Royalty per device - This I would say is the most controversial stipulation. Since the OEM is already paying for a license the the cost of the chip to, why are they also collecting a royalty for every device made? To me that appears to be double dipping. Even if let's say the $9 they are charging Apple includes, the license, chip and royalty; it still seems to be a bit much. Being paid a royalty based on the end cost of the device seems wrong, even if it is not illegal. And the downside is, no one offers better tech than Qualcomm, so you don't have another option. But with all the money apple, Samsung and others have made, there has to be a way to make a modem that does what they need, that doesn't step on QCOM's IP. Samsung has a modem. The only problem is it on;y works best on GSM enabled networks. QCOM's possess' the technology that covers CDMA, and it seems there is no way to create a CDMA compatible modem without QCOM's IP. "IF" this is true, then that is a problem. Because if this is the case, then as Koh stated, those essential patents should be made available through non discriminatory means as they are required for the tech to work. But my guess is, QCOM charges so much to license, that it is cheaper to just buy their SoC with it included. So QCOM either needs ot be forced to license tech fairly to others, which of course would create compeition, which would bring down costs; and this would insure QCOM can't be anti-competitive. But saying QCOM doesn't have a right to dictate the terms of usage of their IP that they themselves pour billions into is complete BS, because they aren't doing anything no one else is doing.

* Some comments have been hidden, because they don't meet the discussions rules.

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