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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  • iwod - Wednesday, January 18, 2017 - link

    It wasn't extra, but Qualcomm making sure you dont get any cost saving by using other Baseband Modem. Those patents aren't invalid either. In the end it was much easier to buy chips from Qualcomm rather then doing it yourself.
  • londedoganet - Wednesday, January 18, 2017 - link

    Well, Qualcomm sure is nice to offer, with no prompting, to manage the budgets of its customers. /s

    By making it no cheaper to source from other suppliers, Qualcomm was being anti-competitive. Surely they could already win based on their actual merits, but they just had to price competitors out of the market in a roundabout manner (by raising license fees on the same slate of patents, which is discriminatory pricing, and against FRAND).
  • iwod - Wednesday, January 18, 2017 - link

    Not Really rising price. That was the false assumption. And this isn't some rip off patents like HEVC.
    And they still follow ( under a different view point ) FRAND.

    Qualcomm is one of the largest Semiconductor company on the market right now, they know full well the cost of Fabbing from TSMC and Samsung, projected manufacturing cost increase etc. So they offer their SoC for a VERY competitive price.

    i.e it wasn't a variable number, it was set long before as % of phone. What Qualcomm said is that instead of paying as this %, you can buy our Chip and get everything in one deal.
    And in grand view of things, or comparatively speaking, that % isn't an outrageous number.

    You could argue the % is high, but that is even more true for numerous other party from a technical perspective.
  • londedoganet - Wednesday, January 18, 2017 - link

    BTW, not disputing the fact that the patents are valid, or that Qualcomm should be paid for them.
  • Samus - Wednesday, January 18, 2017 - link

    Best Baseband modem or not, they should let whoever the fuck is buying them pair them with whatever components they want without penalty. Giving a price discount is totally fine (say a OEM buys 10k modems and 10k SoC together) but saying you can't have 10k modems without buying 10k SoC's when you have competitors that make compatible SoC's is entirely illegal.

    What's next, do you think Intel should require motherboard makers who buy their chipsets to use Realtek (a loose subsidiary of Intel) Codec's and Intel network controllers? They can have incentives to do so (Centrino anybody?) but they can't strongarm you into NOT buying from the competition. That's just bad for everybody...but them.
  • Old_Fogie_Late_Bloomer - Tuesday, January 17, 2017 - link

    I wonder which TLA's demands they were too slow to acquiesce to? IIRC they already basically admitted to backdooring their products (or, at least, didn't deny it quickly or loudly enough).

    Come to think of it, maybe this is retribution for that.
  • ddriver - Tuesday, January 17, 2017 - link

    Everything is back-door-ed nowadays. That's just the "norm". Most of the times they call it "vulnerabilities" when it gets accidentally discovered by third parties, and the first patch to fix it comes with a new backdoor. See, it is crucial to fix those "vulnerabilities" so that the ground is never evened for 3rd parties. Only the manufacturer and his benefactors are supposed to have access.
  • ddriver - Tuesday, January 17, 2017 - link

    OK, not "everything" everything, but everything that includes proprietary binary blobs.

    They say those blobs keep trade secrets, but that's just BS. If those are truly unique, they outta be patented and turned into a stream of revenues, from licensing or suing, plus binary blob or not, once a modest team sets up to it, it can be reverse engineers,

    What binary blobs truly hide is and has always been backdoors. If your system's deployed code is not 100% open source, they you are most definitely having backdoors. Note that backdoors can just as easily be implemented into deliberately careless and vulnerable open source as well.

    Software today is insanely bloated, and that needless bloat is a perfect place to hide backdoors, as it would take a significant amount of time to identify them even with open source code.
  • Murloc - Wednesday, January 18, 2017 - link

    it's not that simple imho. E.g. mobile games that quickly become successful can bring in the cash before they get ripped off, if there are any rip-offs at all that is (not worth it for games that don't make much money, possibly still worth it to make them for single developers though).
  • Murloc - Wednesday, January 18, 2017 - link

    and these games can be not backdoored even if they are proprietary binary blobs.

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