The US Federal Trade Commission has won a court ruling against Qualcomm that the company abused its dominant position in the smartphone chip market and charged excessive licensing fees. Qualcomm said it plans to appeal the decision by US District Judge Lucy Koh in San Jose.
The FTC, the federal competition watchdog in the US, brought the antitrust lawsuit against Qualcomm in January 2017. Qualcomm has faced similar charges in other markets, including the EU, Japan, Taiwan and South Korea. The accusations of inflated licensing fees also led to a two-year battle with Apple, which was only recently settled, allowing Qualcomm to collect back royalties from the iPhone maker.
Koh found that Qualcomm violated antitrust law, charging unreasonably high royalties for its patents and eliminating rivals. She challenged its practice of collecting billions of dollars by charging royalties on a percentage of a smartphone’s price."Qualcomm’s licensing practices have strangled competition" in key parts of the modem chip market for years, "and harmed rivals, OEMs, and end consumers in the process," the judge wrote. She added that the company’s lead in developing modem chips for smartphones using 5G made it likely that behavior would continue.
The judge ordered that Qualcomm negotiate or renegotiate licensing agreements with customers free of unfair tactics, such as threatening to cut off access to its chips. Qualcomm also must license its patents to rival chipmakers at fair and reasonable prices, and can’t sign exclusive supply agreements with smartphone makers like Apple that block rivals from selling chips into devices. The commitments will be monitored for seven years.
The news sent Qualcomm's share price over 10 percent lower in early trade in New York. The company said in a short statement that it "strongly disagrees with the judge’s conclusions, her interpretation of the facts and her application of the law". Qualcomm plans to seek an immediate stay of the ruling and an expedited hearing of its appeal at the US Court of Appeals for the 9th Circuit, based in San Francisco.
