Which? can pursue class action patent suit against Qualcomm
UK consumer group and magazine Which? has been given the go-ahead to represent a class of buyers seeking £480 million from phone chipset manufacturer Qualcomm over its standard-essential patent (SEP) licensing practices.
The UK Competition Appeal Tribunal handed down a judgment Tuesday, May 17, granting Which? a collective proceedings order (CPO) to combine the claims of the consumers.
The class is seeking damages incurred from Qualcomm's “inflated” patent royalties, which they claim are passed onto the consumer of the smartphones.
Proceedings were proposed to be bought on behalf of purchasers of Long Term Evolution (LTE)-enabled Apple and Samsung phones between October 2015 through to December 2020—a class of around 29 million consumers.
Which? made the case that Qualcomm had abused its “dominant position” in the chipset market and overcharged smartphone makers to license its patents and that its market share rendered it an “unavoidable trading partner” for OEMs including LTE chipsets in their phones.
Abuse of power
Which? specifically objected to two of Qualcomm’s policies as the basis of its CPO appeal. Firstly, it accused the chipmaker of operating a “no licence, no chips” policy where a phone manufacturer wishing to purchase chipsets from Qualcomm must agree to take a free-standing licence of Qualcomm’s portfolio of patents.
These licensing terms include a requirement that the phone manufacturer pay royalties to Qualcomm for all handsets sold, including those incorporating non-Qualcomm chipsets.
Which? also claimed that Qualcomm refuses to grant exhaustive licences for its patents to rival LTE manufacturers. This practice, Which? argues, prevents competitors from being able to offer their OEM customers an “all-in” price for their chipsets that would incorporate the relevant licences from Qualcomm SEPs.
Qualcomm also requires rival manufacturers to inform Qualcomm of its sales of LTE chipsets so it can ensure that their customers have taken patent licences from Qualcomm, Which? claimed.
The estimation for aggregate damages passed onto consumers between 2015 and 2020 was £482.5 million, including interest, which equates to £7.56 per handset. As customers were assumed to have purchased more than one handset during the period, the total estimated damages per consumer was £16.64.
Qualcomm’s contentions
Qualcomm objected to the CPO application, saying that it did not accept the characterisation of its commercial conduct made by Which? and noted that it would be willing to contest the claims if it proceeded to trial. However, the judgment noted that Qualcomm did not mention the allegations of dominance and abuse made by Which?.
Qualcomm contested that Which? 's methodology for calculating the pass-on rate to consumers was “not fit for purpose” because it was incapable of establishing a causal link between Qualcomm's allegedly inflated rates and the retail prices of the Apple and Samsung branded phones.
It also said that the proposed claims are not suitable to be brought in collective proceedings as the costs of the proceedings will outweigh the benefits.
However, the tribunal dismissed the contentions and ruled that Which? met the CPO authorisation condition.
As a result, the tribunal will create a CPO on an opt-out basis for those of the class domiciled in the UK, and on an opt-in basis for class members domiciled outside the UK.
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