Broadcom, Ericsson, NEC, Nokia, Panasonic, and TI, v. QUALCOMM
This announcement will provide fodder for message board virtual holy warriors for months and probably years to come. When the complaint to the European Commission in Brussels is fleshed out it will probably mirror the 61 page Broadcom complaint filed earlier by Broadcom in the US District Court (New Jersey):
broadcom.com
I. The "Anti-Competitive" Complaint to the EC ...
>> Leading Mobile Wireless Technology Companies Call on European Commission to Investigate Qualcomm's Anti-Competitive Conduct
tinyurl.com
Joint Statement and Media Release
Broadcom, Ericsson, NEC, Nokia, Panasonic, Texas Instruments
October 28, 2005
Broadcom, Ericsson, NEC, Nokia, Panasonic Mobile Communications and Texas Instruments have each filed Complaints to the European Commission requesting that it investigate and stop Qualcomm's anti-competitive conduct in the licensing of essential patents for 3G mobile technology.
The companies state that Qualcomm is violating EU competition law and failing to meet the commitments Qualcomm made to international standard bodies around the world that it would license its technology on fair, reasonable and non-discriminatory terms. Absent these commitments, the WCDMA 3G standard would not have been adopted. Qualcomm is infringing these rules by:
• ... trying to exclude competing manufacturers of chipsets for mobile phones from the market and preventing others from entering. To this end, Qualcomm has committed a number of abuses, ranging from the refusal to licence essential patents to potential chipset competitors on fair, reasonable and non-discriminatory terms to offering lower royalty rates to handset customers who buy chipsets exclusively from Qualcomm.
• ... charging royalties for its WCDMA essential patents that are excessive and disproportionate; in particular by imposing the same royalty rate on WCDMA 3G handsets as it does for CDMA2000 3G handsets despite the fact that Qualcomm has contributed far less technology to the WCDMA 3G standard than it has to the CDMA2000 standard.
The companies believe that Qualcomm's anti-competitive behavior has harmful effects for the mobile telecommunications sector in Europe, as well as elsewhere, because carriers and consumers are facing higher prices and fewer choices.
II. Individual Complainants Statements
• "Major telecommunications equipment companies on three continents are standing up and saying that Qualcomm's business practices are unfair, anticompetitive and ultimately illegal. Qualcomm's illegal practices stifle competition and ultimately hurt the consumer." - David A. Dull, SVP, Business Affairs; General Counsel; and Secretary, Broadcom Corporation -
• "Qualcomm committed to standard setting organisations that it would license its technology on fair, reasonable and non-discriminatory terms. In spite of this and in breach of competition law, Qualcomm is charging excessive and disproportionate royalties. This means ultimately that consumers may have to pay more than they should for their mobile handsets." - Kasim Alfalahi, VP IPR Licensing and Patents, Ericsson AB
• "Qualcomm's anti-competitive licensing practices and excessive royalties are restricting innovation and the development of 3G mobile telephony to the detriment of consumer choice." - Botaro Hirosaki, SVP, NEC Corporation -
• "Intellectual property rights have an increasing role in business. There are rules of law that apply to the licensing business, and patentees and other intellectual property rights owners cannot ignore them." - Ilkka Rahnasto, VP, Intellectual Property Rights, Nokia Corporation -
• "Panasonic Mobile Communications believes that Qualcomm is charging excessive and disproportional royalty rates in breach of EU competition law and industry requirements to offer licenses for essential patents on fair, reasonable and non-discriminatory terms." - Haruo Suzuki, Director, Panasonic Mobile Communications Co. Ltd. -
• "Standards are established to guide the industry's technology development and provide a healthy environment for innovation and competition. We believe Qualcomm has abused its licensing position in certain standards and has inhibited legitimate competition. If this conduct goes unchecked, the risk is that consumers in Europe and around the world will pay higher prices for mobile phones and services and have less access to innovative products." - Joe Hubach, General Counsel, Texas Instruments Incorporated -
III. QUALCOMM's Response
>> QUALCOMM Responds to Reports of Complaints filed by Competitors with the European Commission
QUALCOMM Press Release
San Diego
October 28, 2005
qualcomm.com
QUALCOMM Believes Claims Are Meritless
QUALCOMM Incorporated (Nasdaq: QCOM) today stated that, although it has not seen the actual complaint, the reported allegations made to the European Commission are factually inaccurate and legally meritless. The accusation that QUALCOMM has not lived up to its commitments to standard-setting organizations to license its essential patents on fair and reasonable terms is belied by the more than 130 licenses that QUALCOMM has granted to a broad range of companies, among them five of the six reported claimants (for a complete list of QUALCOMM’s licensees, visit www.qualcomm.com/technology/licensing). These licenses, including agreements with the world's largest and most sophisticated manufacturers of wireless telecommunications equipment, make QUALCOMM's patents the most extensively licensed portfolio in the cellular industry. The widespread market acceptance of QUALCOMM’s licensing program conclusively demonstrates that QUALCOMM’s licensing practices are fair, reasonable and pro-competitive.
QUALCOMM disagrees with any suggestion that it has contributed less significant technology to the WCDMA 3G standard. Indeed, it is widely acknowledged that efforts to design around QUALCOMM’s fundamental innovations in formulating the UMTS/WCDMA standard were unsuccessful. It is especially ironic that the complaints are being lodged by suppliers who voluntarily entered into license agreements with QUALCOMM, acknowledging its leading WCDMA patent portfolio. This action appears to be nothing more than an attempt by these licensees to renegotiate their license agreements by seeking governmental intervention.
QUALCOMM has granted and announced far more licenses than any other company claiming to hold patents essential to the CDMA2000, WCDMA or TD-SCDMA standards. QUALCOMM's extensive licensing program has fostered the widespread adoption of leading-edge technologies and promoted vibrant competition throughout the wireless industry, encouraging innovation and technological advancement. Contrary to the reported allegation that QUALCOMM is seeking to exclude chip competitors, QUALCOMM has licensed major chip manufacturers, including Texas Instruments, NEC, Infineon, Philips, Agere, Motorola, VIA and Fujitsu.
“We are proud that our licensing program has enabled many new entrants to design innovative wireless devices and compete in the 3G marketplace,” said Dr. Paul E. Jacobs, chief executive officer of QUALCOMM. “It is not surprising that the reported allegations come largely from entrenched 2G suppliers who have the most to lose from the enhanced and expanded competition in 3G created by QUALCOMM’s widespread licensing and supply of enabling 3G technology, chipsets and software. The many new handset market entrants, working in cooperation with QUALCOMM, threaten the market shares of these entrenched manufacturers and their component suppliers. We welcome the opportunity to demonstrate these facts in an open and public process.”
"It is ironic that these companies claim that QUALCOMM’s behavior has harmful effects for the mobile telecommunications sector when the facts are completely contrary. In fact, the average selling price of WCDMA handsets is declining, and WCDMA subscriber uptake is increasing each at a faster rate than GSM experienced during its early commercial years,” said Steve Altman, president of QUALCOMM.
Unlike GSM, where there are a small number of entrenched suppliers, the WCDMA market enjoys healthy competition among many handset suppliers, including companies from Korea, Japan, China, the United States and Europe as a result of QUALCOMM’s proactive licensing of its substantial R&D investments and the widespread availability of chipsets and software from QUALCOMM and its licensees.
The allegations regarding royalty discounting, while misleading, are simply complaints about legitimate and lawful price competition, which is good for manufacturers, operators and especially consumers. QUALCOMM has never made the purchase of its chips a condition of granting a license.
QUALCOMM will vigorously defend against any claim of unlawful conduct in its licensing or chipset sales practices. <<
IV. FT Comments ... (before the QUALCOMM response).
>> Qualcomm Rivals Take Case to EU
Financial Times
October 28, 2005
tinyurl.com
Nokia, Texas Instruments and other leading makers of mobile phones and the chips that power them have formally complained to Brussels that Qualcomm, the US mobile chipmaker, has unfairly used its patents on 3G technologies to squeeze excessive royalties and licensing deals out of the industry.
US chipmakers Broadcom and Texas Instruments, and Ericsson, NEC, Nokia, Panasonic Mobile Communications have each filed complaints to the European Commission requesting it investigate Qualcomm and take action to stop its alleged anti-competitive conduct.
Qualcomm holds patents on Code Division Multiple Access (CDMA) technology that have generated billions of dollars in royalties. It is seeing worldwide adoption of its own next-generation CDMA2000 technology and the WCDMA standard it played a large part in creating. It earns royalties from both.
In a statement, the companies said Qualcomm had refused to license patents to chipset competitors on "fair, reasonable and non-discriminatory terms" while "offering lower royalty rates to handset customers who buy chipsets exclusively from Qualcomm".
They also said Qualcomm's royalties on WCDMA were "excessive and disproportionate", given that Qualcomm charged the same rate for CDMA 2000, despite less of its technology being used in WCDMA.
"Major telecommunications equipment companies on three continents are standing up and saying that Qualcomm's business practices are unfair, uncompetitive and ultimately illegal," said David Dull, general counsel at Broadcom.
Analysts said the unexpected coalition exposed the sector's fears that Qualcomm could take the lion's share of the spoils from the development of next-generation technologies.
Maurits Dolmans, partner at Cleary Gottlieb, the law firm representing Nokia, said Qualcomm's practices were keeping the costs of 3G technology prohibitively high, and were ultimately hurting consumers purchasing next-generation handsets.
"The amounts are very significant – possibly in the billions of dollars," he said.
Broadcom has already made a separate complaint in the US legal system, but has gathered a wider coalition to take the issue to the European Commission, Europe's leading antitrust authority.
The company said on Friday: "Qualcomm cannot comment at this time."
The Commission invariably takes months to scrutinise the legal arguments and facts of a case after receiving a complaint. <<
- Eric - |
