While Qualcomm had a great deal of success in settling its global feud with Apple, it was not so good against the Federal Trade Commission. Late Tuesday, Judge Lucy H. Koh ruled that Qualcomm violated antitrust laws, levied high royalties on its patents and subjected Qualcomm to surveillance for seven years to ensure fair competition.
This is a big deal for a number of reasons But first some background information. The main argument of the FTC was that Qualcomm knowingly used the patents of its baseband processor (modem) to stifle the competition, thereby violating its "fair, reasonable and non-discriminatory" (FRAND) obligations. In principle, FRAND is committed to ensuring that Standard Settling Organizations (SSOs) provide their proprietary technology to competitors at a fair price. Qualcomm has made a name for itself as a pioneer of CDMA technology – the communications standard currently used by Verizon and Sprint networks – but was accused by the FTC of forcing manufacturers with strong weapons into exclusive deals and higher licensing fees for their use to demand from competitors technologies. An unfavorable decision would be devastating for Qualcomm, as Qualcomm generates most of its revenue from licensing its patents and levying royalties.
For Qualcomm, the nightmare has basically come true. In her 233-page decision, Judge Koh ordered five appeals. First, it stated that Qualcomm could not withhold modem chips due to the patent license status of a customer and had to negotiate or renegotiate license terms "in good faith in conditions without imminent lack of access" licenses for patents (SEP) available under FRAND conditions and conciliate arbitration or judicial dispute settlement to define these terms and conditions as appropriate. Third, Judge Koh Qualcomm banned the conclusion of explicit or de facto exclusive agreements for his modern chipsets. Fourth, Qualcomm was told that it can not bother a customer who goes to a government agency. Most recently, and perhaps worst for Qualcomm, Judge Koh ordered to monitor Qualcomm for seven years. In particular, Qualcomm must report to the FTC each year whether it complies with the first four directives ordered by the court.
Regarding Qualcomm, the Company has already issued a statement expressing its intention to object as its shares fell 11 percent following the premarket deal. Nevertheless, it does not look good for Qualcomm. In the decision, Koh called the lousy defense of the company. In particular, it has blasted Qualcomm's statements for direct opposition to e-mails, handwritten notes and recorded statements to the IRS. One damned example is that a Qualcomm executive sent Motorola a letter complaining that she had not licensed her modem chip SEP to Qualcomm. She also brought out a PowerPoint slide in which Qualcomm made it clear that her practices may violate antitrust laws.
"In addition to the affidavits that contradicted their concurrent emails, handwritten notes, and recorded statements to the IRS, some Qualcomm witnesses also lacked credibility in other respects. For example, Dr. Irwin Jacobs (Qualcomm co-founder), Steve Mollenkopf (Qualcomm CEO) and James Thompson (Qualcomm-CTO) for so long, fast and practiced narratives on direct investigation that the lawyer of Qualcomm had to inform the witnesses to slow down … In contrast, every witness when he was faced by the FTC was very much restrained and slow to answer and sometimes cage. Koh noted that it was clear that Qualcomm had "stopped licensing competitors because Qualcomm decided to do so. It was more lucrative to license only OEMs. "She also explicitly stated that" Qualcomm's royalties are unreasonably high. "Basically, Judge Koh had none of Qualcomm's bullshit jumbo, but there are a few important implications for the future. Judge Koh, in particular, noted that Qualcomm's anti-competitive practices ultimately harmed consumers. These practices not only made telephones more expensive, but Qualcomm's high royalties were also considered potentially deterrent to OEMs investing in new features that would benefit consumers because they would have to pay more. And it's not just small OEMs that could be deterred. For example, Koh Jeff Williams, COO of Apple, quoted in her judgment.
"Apple spends a lot of time on beautiful products, so we spend an extra $ 60 on stainless steel and aluminum enclosures and the like, and according to the agreement, if we spend the cost, we say an extra $ 60 Unrelated to their IP, the Qualcomm agreement would cause them to collect $ 3, so it made no sense for us, and still does not make sense. "
Housing is one thing, but in In a separate case against Qualcomm, Apple also pointed to features such as Touch ID, enhanced displays and better cameras than innovation Qualcomm has benefited from it, although they have nothing to do with its development, and Apple eventually settled down because of its back regarding Qualcomms Stranglehold leaning against a wall over 5G modem chipsets, but given that Intel will no longer be able to deliver a competing 5G modem by 2020, Ap Ples position against Qualcomm in a license agreement with a term of six years. The capitulation of Apple at the time had many questions about how it might affect the FTC case, but in retrospect it may only have strengthened it.
In this sense, Koh's mandate that Qualcomm either negotiate or renegotiate its existing licensing agreements could have a far-reaching impact on the pricing of mobile phones, especially now that 5G is in sight. This is especially true considering that Qualcomm has basically cornered the 5G chipset market and that Qualcomm would probably have continued its greedy ways without FTC intervention.
[FTC via FOSS Patents]