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Qualcomm Facing Off With FTC in Antitrust Trial That Kicks Off Today
With the intense ongoing legal battle between Qualcomm and Apple, it's easy to forget that Qualcomm is also facing an FTC antitrust lawsuit for using anticompetitive tactics to remain the main supplier for baseband processors for smartphones.
The FTC hasn't forgotten, though, and FTC lawyers are in a Northern California courtroom before well-known judge Lucy Koh, who also presided over the Apple-Samsung legal fight.
Lawyers for Qualcomm, the FTC, Apple, and other manufacturers have gathered as the trial commences, with the FTC set to argue that Qualcomm refused to provide chips to OEMs without a patent license, refused to license its technology to rivals, and set exclusive deals with Apple.
Manufacturers like Huawei and Lenovo will testify that Qualcomm threatened to disrupt their chip supply during licensing negotiations, forcing them into signing deals.
The FTC first filed a complaint against Qualcomm in January 2017, which was actually the catalyst for Apple's own lawsuit against the company just a few weeks later.
In that complaint, the FTC said that Qualcomm uses its position and its portfolio of patents to impose anticompetitive supply and licensing terms on cell phone manufacturers, impacting its competitors.
Part of the complaint addressed a deal with Apple in which Qualcomm required Apple to exclusively use its modems from 2011 to 2016 in exchange for lower patent royalties. Qualcomm is also accused of refusing to license its standard-essential (FRAND) patents to competing suppliers and implementing a no license, no chips policy to drive up royalty payments beyond what's fair.
Qualcomm attempted to get the FTC's lawsuit against it dismissed, but in June, Judge Koh ruled that the lawsuit would proceed on the basis that the FTC adequately demonstrated that anticompetitive tactics were being used by Qualcomm.
In its defense, Qualcomm has claimed the FTC is using a "flawed legal theory" and has misconceptions about the mobile technology industry. "We look forward to defending our business in federal court, where we are confident we will prevail on the merits," Qualcomm said in a statement in January 2017.
As the FTC trial begins, Apple and Qualcomm's legal battle has also been escalating. As of today, Apple has pulled the iPhone 7 and the iPhone 8 in Germany after Qualcomm won a preliminary injunction in the country.
Qualcomm also won an import ban on older iPhone models in China, which Apple sidestepped through a software update that addressed functionality said to infringe on Qualcomm patents.
The FTC hasn't forgotten, though, and FTC lawyers are in a Northern California courtroom before well-known judge Lucy Koh, who also presided over the Apple-Samsung legal fight.
Lawyers for Qualcomm, the FTC, Apple, and other manufacturers have gathered as the trial commences, with the FTC set to argue that Qualcomm refused to provide chips to OEMs without a patent license, refused to license its technology to rivals, and set exclusive deals with Apple.
Manufacturers like Huawei and Lenovo will testify that Qualcomm threatened to disrupt their chip supply during licensing negotiations, forcing them into signing deals.
The FTC first filed a complaint against Qualcomm in January 2017, which was actually the catalyst for Apple's own lawsuit against the company just a few weeks later.
In that complaint, the FTC said that Qualcomm uses its position and its portfolio of patents to impose anticompetitive supply and licensing terms on cell phone manufacturers, impacting its competitors.
Part of the complaint addressed a deal with Apple in which Qualcomm required Apple to exclusively use its modems from 2011 to 2016 in exchange for lower patent royalties. Qualcomm is also accused of refusing to license its standard-essential (FRAND) patents to competing suppliers and implementing a no license, no chips policy to drive up royalty payments beyond what's fair.
Qualcomm attempted to get the FTC's lawsuit against it dismissed, but in June, Judge Koh ruled that the lawsuit would proceed on the basis that the FTC adequately demonstrated that anticompetitive tactics were being used by Qualcomm.
In its defense, Qualcomm has claimed the FTC is using a "flawed legal theory" and has misconceptions about the mobile technology industry. "We look forward to defending our business in federal court, where we are confident we will prevail on the merits," Qualcomm said in a statement in January 2017.
As the FTC trial begins, Apple and Qualcomm's legal battle has also been escalating. As of today, Apple has pulled the iPhone 7 and the iPhone 8 in Germany after Qualcomm won a preliminary injunction in the country.
Qualcomm also won an import ban on older iPhone models in China, which Apple sidestepped through a software update that addressed functionality said to infringe on Qualcomm patents.
[ 61 comments ]
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11 weeks ago
Their engineers developed the technology. Qualcomm spent the $$$ developing it. Why not? Sounds like you are advocating some form of technology socialism. However, I am not aware of FRAND, so if there is something universal they are supposed to be abiding by and they have been blatantly violating that, my opinion might change.
Qualcomm should get paid for the use of their tech, but FRAND requires that companies license standards-essential patents at Fair, Reasonable And Non-Discriminatory rates. Qualcomm requires manufacturers to use their chips—which they are paid for per item—and additionally pay Qualcomm royalties for the use of their patents. So these companies are paying Qualcomm twice for the same thing, and at rates that companies claim are many times higher than reasonable.
In Apple's case, things are a little more complicated. There was some sort of scheme where Qualcomm required Apple exclusively purchase their chips in exchange for the "right" to also license their patents (lol), but Qualcomm would give Apple rebates for the chip purchases because they're such a big customer. Then Qualcomm withheld the rebates once Apple started cooperating with regulatory agencies looking into Qualcomm's obviously illegal business practices.
Essentially, Qualcomm has been handsomely rewarded by getting their tech adopted into wireless standards (3G, LTE, now 5G, etc.). In exchange, they are required to license that tech at fair rates (FRAND) to other companies. Instead of doing that, Qualcomm extorts manufacturers by threatening to withhold their essential IP unless they also purchase Qualcomm chips and promise not to buy competitor's chips (or develop their own). Any company looking to make a product that connects to the internet must either buy Qualcomm or shut down. This is stifling innovation in order to line Qualcomm's pockets.
11 weeks ago
I love this: "Qualcomm has claimed the FTC ... has misconceptions about the mobile technology industry."
I.e. "the FTC just doesn't understand we should be allowed to extort everyone to maximize our profits!"
Great words to live by..."they have power so I guess everyone should just roll over and give up!" Just because Qualcomm has some patents doesn't mean they can extort the rest of the smartphone/tech industry; that's what FRAND is for.
I.e. "the FTC just doesn't understand we should be allowed to extort everyone to maximize our profits!"
Well, they have the technology and patents. So why can they not wield that power? Unless they stole technology, it's their technology to control. If Apple et. al don't want to be held hostage, get creative and find another solution. I admit that I am not on top of all of the details, but I suspect that Apple and others may apply the same control over their technology and patents.
Great words to live by..."they have power so I guess everyone should just roll over and give up!" Just because Qualcomm has some patents doesn't mean they can extort the rest of the smartphone/tech industry; that's what FRAND is for.
11 weeks ago
If Apple using their Technology without paying for it is what you describe as not ordering anything from them in the future then you may be right. However. We all sit up and complain when China is accused of stealing Technology and rightly so. Well guess what Apple is using someone else IP and trying to get away without paying for it.
Of course that's not what's happening. Apple has always paid Qualcomm for their tech, but they don't want to pay them twice: once for the chip and again for the tech inside the chip. Qualcomm's entire business model is illegal, and clearly the FTC (and numerous other regulatory agencies in multiple countries) agrees.
11 weeks ago
If Apple using their Technology without paying for it is what you describe as not ordering anything from them in the future then you may be right. However. We all sit up and complain when China is accused of stealing Technology and rightly so. Well guess what Apple is using someone else IP and trying to get away without paying for it.
Apple has no issue paying for it. They just don't want to have to (illegally) pay twice for the same thing.
11 weeks ago
Why, read the article, "using anticompetitive tactics"
Well, they have the technology and patents. So why can they not wield that power? Unless they stole technology, it's their technology to control. If Apple et. al don't want to be held hostage, get creative and find another solution. I admit that I am not on top of all of the details, but I suspect that Apple and others may apply the same control over their technology and patents.
11 weeks ago
However, I am not aware of FRAND, so if there is something universal they are supposed to be abiding by and they have been blatantly violating that, my opinion might change.
Read into what FRAND means. Putting your patents into creating an industry standard means you agree to certain ways of handling your IP. Qualcomm agreed, but thus far have not acted according to FRAND rules.
11 weeks ago
Their engineers developed the technology. Qualcomm spent the $$$ developing it. Why not? Sounds like you are advocating some form of technology socialism. However, I am not aware of FRAND, so if there is something universal they are supposed to be abiding by and they have been blatantly violating that, my opinion might change.
Yes, FRAND commitments significantly change the situation. Qualcomm only has the leverage it has, when it comes to SEPs, because of their inclusion in industry standards. And they are only included in industry standards because Qualcomm made contractual commitments to license on FRAND terms which it has been blatantly violating.
There are a lot of aspects of the situation - lots of things which Qualcomm has been doing which violate the laws of various jurisdictions and which violate the contractual commitments which it has made. We've discussed them a great deal in various other threads. So I won't go back through them here. I can point you to various legal filings and the findings of various regulatory bodies if you're interested in understanding the situation a little better.
But Qualcomm has effectively already lost the war. It's been ordered by a number of regulatory bodies not to do a number of the things which it used to do. It's already been ordered in the case which is the subject of this thread not to do one of the things which it had been doing. What remains to sort out are the details of its loss. (And that will happen in this case as well as in other legal cases which are ongoing - or in negotiated settlements it might enter into.) What will it be able to salvage of the tactics it had been using? It's fighting to hold on to as much as it can, but it knows that it can no longer use the scheme of improper behaviors which had worked together to allow Qualcomm to extort excess royalties from industry participants and stifle competition.
It hopes to win a few battles, and it may well do that. But, as I indicated, it's already lost the war. What's left to figure out is just what it will be left with when the all the smoke clears. How conditional will its surrender end up being?
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