Qualcomm’s legal problems are growing. This afternoon the United States Federal Trade Commission, which has been investigating Qualcomm for possible anti-trust issues since 2014, has moved on to the next stage in their investigating by formally charging the company with multiple antitrust violations. This is the latest in a series of moves from national regulatory authorities, which has seen China, South Korea, and the European Union all fine, settle with, or investigate the company.

As with the cases against Qualcomm in other nations, much of FTC’s suit sounds similar: that Qualcomm refused to follow FRAND practices on its patents, and that it used its leverage to force device manufacturers to use its modems by making competing modems more expensive via royalties. Furthermore the FTC also alleges that Qualcomm worked to prevent the adoption of competing (non-LTE) technologies altogether.

The FTC summarizes their key points as follows:

  1. [Qualcomm] Maintains a “no license, no chips” policy under which it will supply its baseband processors only on the condition that cell phone manufacturers agree to Qualcomm’s preferred license terms. The FTC alleges that this tactic forces cell phone manufacturers to pay elevated royalties to Qualcomm on products that use a competitor’s baseband processors. According to the Commission’s complaint, this is an anticompetitive tax on the use of rivals’ processors. “No license, no chips” is a condition that other suppliers of semiconductor devices do not impose. The risk of losing access to Qualcomm baseband processors is too great for a cell phone manufacturer to bear because it would preclude the manufacturer from selling phones for use on important cellular networks.
  2. Refuses to license standard-essential patents to competitors. Despite its commitment to license standard-essential patents on FRAND terms, Qualcomm has consistently refused to license those patents to competing suppliers of baseband processors.
  3. Extracted exclusivity from Apple in exchange for reduced patent royalties. Qualcomm precluded Apple from sourcing baseband processors from Qualcomm’s competitors from 2011 to 2016. Qualcomm recognized that any competitor that won Apple’s business would become stronger, and used exclusivity to prevent Apple from working with and improving the effectiveness of Qualcomm’s competitors.

Points 1 and 2 are fairly straightforward. If Qualcomm was not licensing their patents out at all, or not licensing them under FRAND terms, then that would allow the company to discourage the use of competing modems, either via royalties or the risk of a lawsuit for violating their patents. Qualcomm holds a number of standards-essential patents for both CDMA and LTE, with both network technologies seeing heavy use in the roughly decade-long time period the complaint covers.

Similarly, once device vendors agree to use Qualcomm’s chips, Qualcomm is also accused of forcing them to accept the company’s patent licensing terms, which according to the FTC is not a standard industry practice. The end result being that device vendors would be locked into paying higher patent royalties.

But perhaps the most interesting – and certainly most novel – aspect of the FTC’s complaint is specifically the company’s agreement with Apple. In their complaint, the FTC alleges that Qualcomm forged a deal with Apple specifically to prevent competitors (e.g. Intel) from getting a foothold in the market and eroding Qualcomm’s dominance. This aspect of the FTC’s complaint also extends to competing technologies, with the FTC further accusing Qualcomm of forging agreements with Apple in part to prevent the adoption of WiMax, which is now a failed standard that was overtaken by the more Qualcomm patent-heavy LTE.

Ultimately in filing this complaint, the FTC is looking to force Qualcomm to halt what the commission sees as anticompetitive actions and to ensure a competitive market for cellular modems/basebands. It’s worth noting that as this is just the initial complaint, unless the FTC and Qualcomm were to settle early, this likely will be a multi-year legal battle just to prove or disprove the FTC’s complaints (and that doesn’t include any potential remedies/fines). At the same time, LTE is now well-entrenched and 5G technology is under development, so the market won’t be standing still one way or another while this case is going on.

Finally, in response to the FTC’s complaint, Qualcomm has issued their own press release denying the allegations against them. Along with refuting the FCC’s claim that they withheld chips, the company is also voicing their disagreement at the FTC’s underlying legal theory and what they see as a lack of evidence. The company is also questioning the timing of the suit, noting that it comes days before the new presidential administration takes power, insinuating that the suit was filed now to get the case started before the new administration (and its appointed FTC members) took control.

Source: United States FTC

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  • HighTech4US - Wednesday, January 18, 2017 - link

    Typical retarded republican logic.

    Because they think that companies that are monopolies that abuse their monopoly by known monopolist tactics are great companies.
  • Shadowmaster625 - Wednesday, January 18, 2017 - link

    So Intel buys up Infineon and subjects it to Intel's bloated innovation-lacking corporate bureaucracy, and that becomes Qualcomm fault? Intel is the one who should be charged for being so inept as to destroy Qualcomm's competition. And you want to bring up the word republican? Qualcomm did nothing wrong. Their competition did. Their competition failed, through absolutely no fault of Qualcomm. Punishing the superior competition is about as stupid as bringing in 3rd world migrants.
  • Kvaern1 - Wednesday, January 18, 2017 - link

    That's how it sounds when they can't blame the money grabbers in the EU.
  • Samus - Wednesday, January 18, 2017 - link

    LMFAO. Too damn good? I'm no Samsung fanboy but it's pretty obvious Samsung (and Apple) have stronger ARM designs than Qualcomm. I mean, you do know what a piece of shit the Snapdragon 808 was, right?

    It's safe to say the reason we don't see more Samsung SoC's is due to Qualcomm's behavior. They don't have to license out their modems if they don't want too, but they should require companies that purchase their modems to pair them up with a Qualcomm SoC. That's like saying if you buy an Intel-based computer you can't use an nVidia card (because as we all know, Intel hates nVidia)
  • Alexvrb - Thursday, January 19, 2017 - link

    There are non-QC choices out there. Samsung and others also make modems. Samsung even combines their own SoCs and in-house basebands, yet they still can't come close to Qualcomm's sales (modems or SoCs). There's a whole lineup of QC chips, 808 was never a top model even when it was new. At various points of the market, SD chips generally hold their own, with a few exceptions over the years. I certainly wouldn't classify them as "too damn good" but also I don't think phone manufacturers choose SoCs at random for their designs.

    Oh and Apple? Who does Apple sell those chips to again? They limit the market share of their SoCs... so bringing them up in a discussion of market share against QC doesn't make a lot of sense. With that being said, Qualcomm's licensing is greedy and unfair. It has little to do with SoC performance. They're hurting profits of their competition through abusive tactics. I do fear however that we tread down the potentially thorny path of "who decides what patents are worth". I hope they can find a fair middle ground that doesn't set a bad precedent for patent royalties that would hinder investment in (and licensing of) new technology.
  • iwod - Tuesday, January 17, 2017 - link

    1. So Qualcomm, who made the best Baseband, and selling for a competitive price is being sued?
    2. We have already established Intel's modem is far behind Qualcomm, both in features and performance.
    3. If Qualcomm refuse to license those patents, how did LG, Huawei, Samsung and Mediatek made their own baseband modem?
    4. In the likelihood of Qualcomm do license out patents, it is more likely most have calculated the cost to do it themselves and make a modem that is half as decent as Qualcomm isn't worth it.

    So I dont think this is anything similar to what Intel did to AMD. The margin on both is totally different too.
  • shabby - Tuesday, January 17, 2017 - link

    Qualcomm told apple not to implement wimax on its phones in return for rebates, intel told its partners not to use amd in return for rebates... seems very similar to me.

  • iwod - Wednesday, January 18, 2017 - link

    That is completely different. No Telecoms, at least most of the major telecoms on the planet wanted Intel to be their ONLY telecom Equipment provider. That was what Intel were aiming for, it was so clear that wanted the telecom to be another x86 desktop market. Most carrier opted for the traditional upgrade from Ericsson, Nokia, Alcatel, Siemens etc,

    And with No network, then there is no Phone. It is a chicken and egg problem.

    So for it to be similar to Intel AMD case, Qualcomm would have to told its partner NOT to use other LTE baseband chip like from those of Intel, which Qualcomm did not.
  • londedoganet - Tuesday, January 17, 2017 - link

    Regarding point 3, Qualcomm doesn't demand licenses from baseband manufacturers; it demands them from phone manufacturers. Just like how Microsoft gets patent fees from Android OEMs instead of from Google, even though it's Google's OS that supposedly infringes Microsoft patents.
  • londedoganet - Tuesday, January 17, 2017 - link

    In this way, other baseband manufacturers are allowed to make and sell their own basebands, but phone manufacturers have to pay Qualcomm for the patent license in order to use the basebands in their phones. And pay extra license fees if the baseband used wasn't manufactured by Qualcomm.

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