Judge denies Qual­comm bid to quash law­suit

The rul­ing means that the FTC’s an­titrust case will go for­ward.

Los Angeles Times - - COMPANY TOWN - By Mike Free­man mike.free­man @sdunion­tri­bune.com

A North­ern Cal­i­for­nia fed­eral judge has de­nied Qual­comm Inc.’s mo­tion to dis­miss the U.S. Fed­eral Trade Com­mis­sion an­titrust law­suit against the San Diego wire­less tech­nol­ogy com­pany, which means the case will go for­ward.

The suit, filed in Jan­uary, al­leges that Qual­comm uses its dom­i­nant mar­ket po­si­tion in cel­lu­lar modems to co­erce smart­phone mak­ers to pay too much to li­cense its large port­fo­lio of cel­lu­lar patents.

Qual­comm had said the law­suit should be dis­missed, ar­gu­ing that it was based on a flawed le­gal the­ory and failed to show how the mo­bile mar­ket had been harmed by Qual­comm — a view that act­ing FTC Chair­woman Mau­reen Ohlhausen shares.

But U.S. Dis­trict Court Judge Lucy Koh ruled late Mon­day that the case should pro­ceed, stat­ing in a writ­ten de­ci­sion that the FTC had done enough to assert anti-com­pet­i­tive conduct by Qual­comm in the way that it li­censes patents.

The law­suit is to be heard in fed­eral court in North­ern Cal­i­for­nia. No trial date has been set.

The de­ci­sion is a blow to Qual­comm, but not an un­ex­pected one. Mo­tions to dis­miss are rarely granted, and a hand­ful of tech com­pa­nies, in­clud­ing Sam­sung and In­tel, filed mo­tions sup­port­ing the FTC.

“We look for­ward to fur­ther pro­ceed­ings in which we will be able to de­velop a more ac­cu­rate fac­tual record and the FTC will have the burden to prove its claims, which we con­tinue to be­lieve are with­out merit,” Qual­comm Gen­eral Coun­sel Don Rosen­berg said.

The com­pany says the patent li­cens­ing plat­form en­ables smart­phone mak­ers to eas­ily en­ter the mar­ket with new de­vices with­out hav­ing to in­vest bil­lions in core cel­lu­lar tech­nol­ogy, ben­e­fit­ing con­sumers.

Qual­comm’s patent fees top out at 5% of the de­vice price — but caps, vol­ume dis­counts and other pro­grams can lead to a lower per­cent­age. Ap­ple, which sells its top-tier iPhone 7 mod­els for more than $700, pays Qual­comm on aver­age $10 per phone in patent fees across its smart­phone port­fo­lio, Canac­cord Ge­nu­ity an­a­lyst Mike Walk­ley es­ti­mated in May.

Qual­comm not only li­censes its smart­phone patents, it also is a top sup­plier of cel­lu­lar ra­dios and other chips used in smart­phones.

The FTC con­tends that Qual­comm won’t sell chips to smart­phone mak­ers un­less they first li­cense its thou­sands of patents. Be­cause th­ese smart­phone mak­ers fear that Qual­comm will cut off their chip sup­ply, they don’t ne­go­ti­ate hard enough to lower patent li­cense fees, the FTC says.

Qual­comm also re­fuses to li­cense its patents to ri­val chip mak­ers such as In­tel or Me­di­aTek, which the FTC claims is re­quired be­cause Qual­comm’s patents are in­cluded in cel­lu­lar tech­nol­ogy stan­dards.

If Qual­comm li­censed its patents to In­tel or Me­di­aTek, that would al­low smart­phone mak­ers to buy chips that al­ready in­clude Qual­comm’s patent fees, the FTC says. And In­tel and Me­di­aTek are in a bet­ter po­si­tion to ne­go­ti­ate tougher terms.

Qual­comm shares fell $1.13, or 2%, to $55.43 on Tues­day.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.