Judge: Qualcomm’s license terms for supplying modem chips are illegal

A US judge has ruled on the ongoing case between the FTC and chip designer Qualcomm. According to the judge, the license terms are not acceptable and Qualcomm is no longer allowed to bundle patent licenses with its modem chips for smartphones.

This ruling, which the blog Foss Patents reports with the publication of the full judgment, in fact means that Qualcomm must agree to the situation in which it must grant patents to other suppliers of modem chips on reasonable grounds. The practice of licensing the patents only if Qualcomm modems were purchased seems to have come to an end. One of the other demands in the ruling is that Qualcomm will be under surveillance for seven years and must report annually to the FTC whether and how it complies with this ruling. Whether this will remain is still uncertain; Qualcomm is appealing the ruling. The company says it “strongly disagrees with the judge’s conclusions, its interpretations of the facts and its application of the law.”

Judge Lucy H. Koh described Qualcomm’s licensing practices in her ruling as “stimulating competition” in certain parts of the modem market, which she claims has harmed competitors, manufacturers and consumers. She further finds that the royalties charged by Qualcomm are “unreasonably high.” She also has few positive words for the exclusivity contracts, with which customers receive a discount on Qualcomm’s hardware, provided they only purchase chips from Qualcomm. For example, Qualcomm has made such exclusivity deals with Apple in the past, prompting the European Commission early last year to fine almost a billion euros for abuse of a dominant position.

This ruling follows a case initiated by the Federal Trade Commission in 2017. The regulator found that Qualcomm engaged in anti-competitive practices. In that context, Apple and Qualcomm also regularly quarreled in court, although this hatchet was buried a month ago. Then the two manufacturers decided to settle all lawsuits and enter into a six-year license agreement. In addition, a multi-year agreement was concluded on the supply of chips. Apple mainly used modems from Qualcomm, as it designs its own socs without modems.