Qualcomm Faces Anti-Trust Lawsuit Over Patents, Licensing

Your phone might say “Apple” or “Samsung” or “LG” on the outside, but inside there are parts from dozens of companies, including Qualcomm, which now stands accused by federal regulators of using anticompetitive tactics to maintain an alleged monopoly on one important cell phone component.

According to the Federal Trade Commission’s antitrust complaint [PDF], Qualcomm used its dominant position as a supplier of certain baseband processors to impose anticompetitive supply and licensing terms on cell phone manufacturers, including Apple, as a way to weaken competitors.

Qualcomm holds patents that it has declared essential to industry standards that enable cellular connectivity. In exchange for having their patented technologies included in the standards, participants like Qualcomm typically commit to license their patents on what are known as “fair, reasonable, and non-discriminatory” (or FRAND) terms.

Companies can then negotiate a license and royalties allowing other companies to use the technology.

Regulators claim that Qualcomm threatened to disrupt cell phone manufacturers’ supply of baseband processors in order to entice them into providing the company with more royalties and beneficial license terms for the patents it holds.

In one case, Qualcomm allegedly prevented Apple from sourcing baseband processors from the company’s competitors from 2011 to 2016. The complaint claims that Qualcomm recognized that any competitor that won Apple’s business would grow. allegedly prevented Apple.

The FTC contends that the company then used this knowledge to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.

This, the complaint alleges, is done through Qualcomm’s so-called “no license, no chips” policy, in which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms.

The tactic requires cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. This constitutes an anticompetitive tax, the complaint states.

Additionally, despite its commitment to license standard-essential patents on FRAND terms, the FTC claims that Qualcomm has consistently refused to license patents to competing suppliers.

The FTC alleges that Qualcomm’s actions constitute a violation of the FTC Act, and is seeking a court order to undo and prevent Qualcomm from using its unfair methods in the future.

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