US jurisdiction report: Qualcomm’s new antitrust nightmare
Apple had until its capitulation hoped to avoid Qualcomm’s dominant chip position in the market by sourcing its upcoming 5G chips from Intel. Little did it know that Intel would be unable to be a reliable source and that it was totally vulnerable to Qualcomm and its rather harsh “no licence: no chips” standard-essential patent licensing policy.
This policy of withholding the sale of its baseband processors unless and until a customer relents and accepts an elevated royalty-bearing licence has been criticised by many academics and those in the industry. This made customers of Qualcomm’s chips extremely vulnerable and at a disadvantage in licence negotiations.
Cellular networks, in general, operate on distinct networking standards, which change every few years. For decades, Qualcomm has been the leader in supplying chips that support these standards. Smartphone manufacturers had few choices when it came to sourcing such chips and most dealt with Qualcomm as their supplier.
For the past 20-odd years, Qualcomm’s customers have included Samsung, Huawei, LG, Lenovo, Nokia, ZTE, Sony, and Motorola. The chips supplied to these device makers often had little or nothing to do with the patents that Qualcomm required such companies to license. In 2016 alone, it realised close to $8 billion dollars in patent licensing revenue.
Against the antitrust law
Qualcomm must have been shocked out of its post-Apple celebration in May this year when US District Court Judge Lucy Koh ruled that its no licence: no chips policy violated US antitrust law.
The civil litigation in the US District Court for the Northern District of California is Federal Trade Commission v Qualcomm, case number 5:17-cv-00220. The court issued an injunction, ordering the company to license rival chipmakers. Koh found that Qualcomm’s complained-of conduct had strangled competition in parts of the computer chip market, harming not only its current and future competitors, but also smartphone makers and consumers.
