Qualcomm wins US antitrust lawsuit over licensing (2)

Qualcomm Inc. persuaded a U.S. appeals court to set up a 2019 ruling that throws a pall over its licensing business and threatens to boost the smartphone industry.

The ruling Tuesday by a three-judge panel is a blow to the Federal Trade Commission, which last year won a contract requiring the company to renegotiate multi-billion dollar patent licenses with phone makers.

Qualcomm climbed more than 5% on the news, and shares were trading at $ 110.65 in New York at 12:33 p.m.

The FTC had no immediate comment and Qualcomm did not immediately respond to a request for comment.

If the ruling puts an end to the FTC case against Qualcomm, it will represent the end of years of legal and regulatory entanglements for the largest maker of chips running smartphones. In July, Qualcomm announced that China’s Huawei Technologies Co. has signed a license and paid on recurring patent costs. That agreement has put Huawei, the latest major holdout, on Qualcomm’s list of customers.

In May 2019, U.S. District Judge Lucy Koh in San Jose, California, sent Qualcomm shares tumbling when it ruled the company was charging phone makers “unfairly high” licensing and competitive competition. She instructed the chipmaker to negotiate licensing agreements with customers “in good faith” and without threatening to cut off access to their products. Koh’s order was put on hold pending appeal.

Qualcomm claimed on appeal that its licensing company benefits the entire sector by accelerating improvements to smartphones and the services they support. The company claims that it does not stop rival chipmakers from accessing its technology. Instead, fees are charged to phone makers who pay a percentage of the sales price of each handset.

The FTC case, filed in 2017, is among a number of challenges for Qualcomm’s practices of competitors, customers and regulators worldwide. The company in San Diego has most of that weather, won in court as a rule, and reserves its right to charge the fees. Koh’s ruling has been the biggest remaining challenge for the licensing model.

In a rare split between antitrust regulators, the US Justice Department filed with Qualcomm against the FTC, claiming that it could undermine the ruling of Koh American leadership in technologies including 5G wireless networks.

Qualcomm’s licensing practices are not competitive because “Qualcomm is under no anti-trust obligation to license competing chip suppliers,” the Court of Appeal ruled. If Qualcomm’s obligation to license patents on reasonable and reasonable terms was infringed, that problem belongs to contract and patent law, not anti-trust law.

The panel also said that Qualcomm’s “no license, no chips” policy “does not impose any anti-competitive duty on Rivals’ modem chip sales”, and it also undermines competition in the market.

The case is Federal Trade Commission v. Qualcomm Inc., 19-16122, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

(Updates with panel reasoning in 10th paragraph.)

– With the help of David McLaughlin en Ben Brody.

To contact the reporters on this story:
Susan Decker in Washington at [email protected];
Malathi Nayak in San Francisco at [email protected];
Ian King in San Francisco at [email protected]

To contact the editors responsible for this story:
Jon Morgan at [email protected];
David Glovin at [email protected]

Peter Blumberg

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