Qualcomm Takes Hit in FTC Case, Must License Modem Patents to Competitors

Credit: QualcommCredit: QualcommA U.S. federal court has ruled in a lawsuit filed by the U.S. Federal Trade Commission (FTC), which monitors acts of commerce, against Qualcomm over its alleged anti-competitive practices and abuse of FRAND patents. The ruling means Qualcomm must license its modem patents to competitors.

The Purpose of FRAND Patents

The court’s ruling should not be surprising, considering what FRAND patents mean. FRAND stands for fair, reasonable and non-discriminatory, and these terms are agreed upon by industry players whenever there are multiple competing technologies fighting to define a new standard.

Each industry player may have a preferred technology that they’re developing and can also have multiple patents for that technology. However, for a standard to be defined, one of those technologies needs to be chosen.

The issue is that the companies that haven’t been working on the technology that is proposed to be used as standard and don’t have any patents for it could object to adopting it as a standard. As a resolution, the company or companies developing the technology to be used as standard agree to license these patents to competitors under FRAND terms.

Without this agreement in place there would be no standard, as the other companies wouldn’t want to use the technology for which one of their competitors could charge exorbitant royalties and thus be forced to offer noncompetitive products to consumers.

Qualcomm Went Off-Course With its Licensing

When the LTE technology was chosen as a standard for “4G” wireless communications, Qualcomm was one of the primary developers and agreed to share its patents with other companies under FRAND terms. However, since then, as Qualcomm has gained a near-monopoly in the market through its integrated CPU+modem systems-on-chip (SoCs), it has also started increasing its licensing fees to both customers and competitors.

Besides the U.S. FTC, multiple antitrust agencies, including from South Korea, Taiwan, China and the European Union, as well as some companies, such as Apple, Samsung and Intel, have accused Qualcomm of violating the FRAND agreement.

The federal court agreed with the FTC's claims that Qualcomm has been violating FRAND terms and must start offering modem patents to competitors. It noted that if Qualcomm were allowed to keep its modem patents to itself, it would enable the company “to achieve a monopoly in the modem chip market and limit competing implementations of those components.”

The court has yet to rule if the company also has to offer these patents for reasonable prices, as the FRAND terms require. In its lawsuit, FTC accused Qualcomm of overcharging customers, such as Apple, for its patents. Apple is also suing Qualcomm over the same issue.

The current ruling should allow more companies to build high-performance wireless modems and increase competition, all of which should benefit the consumer in the end. And the ruling's impact should be even more positive for shoppers if the court eventually rules that Qualcomm should charge reasonable rates for those modem patents.

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