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FTC Says Qualcomm Is Obligated To License To Rivals
Law(August 31, 2018)
The Federal Trade Commission pressed ahead with its challenge of Qualcomm’s licensing practices on Thursday, asking a California federal court to find that the company is required to license its standard essential patents to rival chipmakers through promises it made with the organizations that adopted them.
The FTC filed a motion for partial summary judgment on the issue, which is central to its case alleging Qualcomm illegally maintained its monopoly over baseband processors used in cellphones through its broader licensing practices. According to the commission, companies voluntarily agree to license SEPs on fair, reasonable and nondiscriminatory, or FRAND, terms when the standards are adopted by standard setting organizations. But the agency said Qualcomm has not lived up to its obligations when it comes to its cellular chips.
“In breach of these contractual commitments, Qualcomm has rejected requests from modem-chip
competitors to license patents essential to practicing these standards,” the motion said. “As a matter
of California contract law, Qualcomm’s FRAND commitments under the terms of these policies mean
that it must make licenses to relevant cellular SEPs available to competitors.”
The agency noted that it’s not seeking a ruling on the competitive impact of the refusals or on
Qualcomm’s duty to deal with competitors under antitrust law, which will be addressed at trial.
Rather, the agency said it’s seeking summary judgment “on a narrow legal issue relevant to
evaluation of Qualcomm’s conduct.” It’s asking for a ruling that the company’s so-called FRAND
obligations require it to license the relevant patents to competing chipmakers.
“As the FTC also alleged, and as evidence at trial will show, Qualcomm’s breach of those
commitments contributed to its ability to tax its competitors’ sales and maintain its monopoly in
markets for modem chips,” the partially redacted motion said.
The FTC lodged its suit in January 2017 after the antitrust watchdog voted 2-1 to sue Qualcomm
and seek an injunction to stop the chipmaker's licensing practices. The agency claims the company
illegally maintained its monopoly over baseband processors, which are semiconductor chips used in
cellphones, in violation of the antitrust laws.
In addition to refusing to license its SEPs to competing chipmakers, Qualcomm is also accused of
using its dominance in the semiconductor market to wrench higher royalties and anti-competitive
licensing terms from cellphone makers.
In its motion on Thursday, the agency said Qualcomm made commitments with the
Telecommunications Industry Association and the Alliance for Telecommunications Industry Solutions
over several patents that were adopted as SEPs for 2G, 3G and 4G cellular technology. The standards
are for modem chips that allow handsets to communicate over the cellular networks.
The agency argued that these terms include unambiguous obligations for Qualcomm to provide
licenses to any company that requests them and said the commitments serve as a binding contract.
“The court should grant partial summary judgment that Qualcomm’s simple, clear promises to ATIS
and TIA require Qualcomm to make licenses on FRAND terms available to competing modem-chip
sellers whose products implement or practice the relevant standards,” the motion said. “The court
should do so both to resolve a purely legal question and to streamline the trial in this matter.”
The FTC suit was followed by a flurry of private litigation against Qualcomm that was
consolidated in California’s Northern District in April 2017 before U.S. District Judge Lucy H. Koh.
Earlier this week, Judge Koh nixed a bid by the private plaintiffs for an injunction that would have
blocked Qualcomm from pursuing a patent infringement case that could force Apple to import only
iPhones with Qualcomm's chipsets.
A representative for the FTC declined to comment Friday. Representatives for Qualcomm did not
immediately respond to a request for comment.
The FTC is represented in-house by Jennifer Milici, Joseph R. Baker, Geoffrey M. Green, Nathaniel
Hopkin, Rajesh S. James, Philip J. Kehl, Daniel Matheson, Kenneth H. Merber and Mark J. Woodward.
Qualcomm is represented by Robert A. Van Nest, Eugene M. Paige and Justina Sessions of Keker Van
Nest & Peters LLP; Gary A. Bornstein and Yonatan Even of Cravath Swaine & Moore LLP; and Willard
K. Tom, Richard Taffet and Geoffrey T. Holtz of Morgan Lewis & Bockius LLP.
The case is Federal Trade Commission v. Qualcomm Inc., case number 5:17-cv-00220, in the U.S.
District Court for the Northern District of California |
