Appeals court tosses antitrust ruling against Qualcomm

Joanna Estrada
August 14, 2020

A 2019 antitrust ruling against mobile chipmaking giant Qualcomm has been thrown out by a USA appeals court.

San Diego-based Qualcomm "has asserted its economic muscle with vigor, imagination, devotion, and ingenuity". Callahan's 56-page opinion reversed the district court's "permanent, worldwide injunction prohibiting several" of Qualcomm's IP licensing practices. "We conclude that the FTC has not met its burden".

Qualcomm shares rose about 4% on the news.

"The Court of Appeals unanimous reversal, entirely vacating the District Court decision, validates our business model and patent licensing program and underscores the tremendous contributions that Qualcomm has made to the industry", said Qualcomm general counsel Don Rosenberg.

Ian Conner, director of the FTC's bureau of competition, said the ruling "is disappointing and we will be considering our options". First, the Ninth Circuit rejected the district court's conclusion that Qualcomm had an antitrust duty to deal with its modem chip competitors, like MediaTek and Intel.

The appeals court also vacated an order that the company redoes licensing accords with smartphone makers like Apple Inc and Samsung Electronics Co. Koh sided with the FTC, writing that Qualcomm's practice of requiring phone makers to sign a patent license agreement before selling them chips "strangled competition" and harmed consumers. The "heart" of the FTC's case on appeal was what it referred to as the "surcharge theory" - namely, that Qualcomm charged unreasonably high royalty rates for its patents that imposed a surcharge or tax on the use of rival chips because Qualcomm required OEMs to pay royalties even when they used competitors chips.

"Qualcomm is the developer and enabler of foundational technologies for the wireless industry", the firm noted at the time.

What antitrust ruling did the Qualcomm appeal overturn?

Hard bargain In 2017, the FTC sued Qualcomm and, on May 21, 2019, US District Judge Lucy Koh in San Jose made her ruling in the case public.

Those customers are now licensees, it said.

The ruling highlighted the reluctance of some courts to intervene in fast-moving tech markets.

The case has unfolded amid unusual circumstances. The incident began when FTC accused Qualcomm three years ago for forcing customers like Apple to work with it exclusively; and for charging excessive licensing fees for its technology.

For Qualcomm, the decision is a long-awaited vindication. The case had threatened to force the company to restructure its business and renegotiate licensing deals with its customers, denting a highly profitable patent royalty division.

Qualcomm's "no license, no chips" mantra was also accompanied by other issues here and there that manufacturers objected to.

People visit the Qualcomm Inc booth at the Mobile World Congress in Barcelona, Spain, on February 27 a year ago. Qualcomm is a leading developer of technologies that underpin superfast 5G communications technology and has come to be seen as a national champion during growing technological competition with China. Koh's ruling has been the biggest remaining challenge to the licensing model. The Ninth Circuit noted that USA antitrust law draws a sharp line between conduct that is anticompetitive and illegal and conduct that is "hypercompetitive" and permissible, concluding that Qualcomm's conduct fell into the latter category.

Other reports by Click Lancashire

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