Qualcomm said to face US anti-trust case over licensing
US ANTI-TRUST officials are poised to sue Qualcomm Inc. for allegedly using unfair practices in the way it licenses its technology, people familiar with the matter said.
Qualcomm, the biggest maker of semi- conductors for mobile phones, disclosed in 2014 that the Federal Trade Commission was investigating its licensing practices and said an enforcement action could lead to a fine or changes to its business.
The suit would be yet another regulatory challenge to Qualcomm’s most profitable business, technology licensing. The chip maker gets most of its profits from selling the rights to use patents that are essential to all modern mobile phone systems. Qualcomm has argued that its licensing follows industry standards that have been in place for more than 20 years and are used by other companies.
Last month, South Korea, home to two of its largest customers, fined the company 1.03 trillion won ( RM4.5 billion) and described its practices as monopolistic. The San Diegobased company said it will appeal that decision. Qualcomm is also the subject of investigations by the European Union and Taiwanese authorities.
The company’s shares fell three per cent to US$ 64.91 at 1.36pm in New York. Representatives of the FTC and Qualcomm declined to comment.
Qualcomm is the biggest developer of the technology that underlies how mobile devices communicate. The company has been heavily criticised for its high royalty rate demands and licensing conditions. It’s resulted in a slew of regulatory investigations world-wide. The chip maker has argued that the beneficiaries of regulatory action – phonemakers – have struck new deals that acknowledge the validity of Qualcomm’s patents and that users of its technology benefit from its heavy spending on research and development.
The FTC investigation focuses on a process where companies get together to develop industry standards so devices from different manufacturers can interoperate – so, for instance, data sent from an Apple phone can be received and understood by one made by Samsung Electronics Co.
Since the companies that develop those standards have the advantage of ensuring their patented inventions get included in the new specifications, they pledge to license the patents on “reasonable and nondiscriminatory” terms.
The definition of that phrase has been purposefully left undefined. As a result, courts and regulators have been struggling to interpret what’s fair and reasonable, and it has been a key issue during the legal wars among smartphone manufacturers.
The FTC has been scrutinising the use of foundational patents in licensing disputes, particularly in telecommunications. Weighing in on Google’s patent case against Microsoft the agency in 2012 advocated for limits in the ability of the US International Trade Commission to impose import bans when so- called “standard- essential patents” are infringed.
It kept that position regarding an import ban imposed on Apple phones in a case brought by Samsung in 2013.