The Federal Trade Commission v. Qualcomm Incorporated bench trial will begin January 14, 2019, in the U.S. District Court for the Northern District of California with Judge Lucy H. Koh presiding. Qualcomm is a multinational semiconductor and telecommunications equipment company that designs and markets wireless telecommunications products and services. It derives most of its revenue from chip making and the bulk of its profit from patent licensing businesses. The FTC has alleged that Qualcomm uses monopoly power over cellphone chips to get inflated royalties on technology essential to mobile devices. For the fiscal year 2017, Qualcomm reported earnings of $2.5B with annual revenue of $22.3B.
The January 17, 2017, FTC’s Complaint for Equitable Relief (case 5:17-CV- 00220-LHK) states:
This enforcement action challenges Qualcomm’s unlawful maintenance of a monopoly in baseband processors, semiconductor devices that enable cellular communications in cell phones and other products. Qualcomm has engaged in exclusionary conduct that taxes its competitors’ baseband processor sales, reduces competitors’ ability and incentive to innovate, and raises prices paid by consumers for cell phones and tablets…
Qualcomm withholds its baseband processors unless a customer accepts a license to standard-essential patents on terms preferred by Qualcomm, including elevated royalties that the customer must pay when using competitors’ processors (“no license-no chips”)…
Qualcomm has consistently refused to license its cellular standard essential patents to its competitors, in violation of Qualcomm’s FRAND commitments.
The complaint also alleges that Qualcomm “extracted Baseband Processor exclusivity from Apple in exchange for partial royalty relief.”
Under these agreements, Qualcomm provided Apple large lump sum payments that constituted partial relief from Qualcomm royalties. Qualcomm conditioned this relief on Apple’s exclusive use of Qualcomm baseband processors in new iPhone and iPad models… If, during this period, Apple launched a new handset with a non-Qualcomm baseband processor, it would forfeit all future payments and, depending on when a handset launched, could be required to refund past payments.
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