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FTC-DC1

The Federal Trade Commission has filed adjust confronting Qualcomm, alleging that the company exploited its position as the ascendant provider of baseband radios for LTE devices. In its brief, the FTC argues that Qualcomm used its position to extort college royalties from smartphone manufacturers. The FTC asserts that Qualcomm enforces a "No license, no chips," policy in which it will not sell parts to a cell phone manufacturer unless the manufacturer agrees to its patent and licensing terms. The terms of these licenses apparently include substantially elevated license rates on chips manufactured by Qualcomm competitors, which amounts to an unfair revenue enhancement to any company that wants to build a smartphone with a non-Qualcomm processor.

Qualcomm is also nether investigation for refusing to license standards-essential patents to its competitors. It has long been recognized in patent law that organizations tin can do good from creating a standard implementation for a engineering or capability that anybody can take advantage of. 2G, 3G, HSDPA+, 4G, LTE — all of these technologies are implemented according to specific standards. When companies contribute IP to the formation of a standard, they are typically required to obey what are known equally Fair, Reasonable, and Nondiscriminatory rules (FRAND):

Off-white – terms are not anticompetitive and would non be considered unlawful if imposed past a dominant firm in its relative market.

Reasonable – the licensing charge per unit for the patents themselves volition non event in dramatic cost increases or make the manufacture uncompetitive. The licensing rate would not be unreasonable if all firms were charged the same rate.

Nondiscriminatory: Licensees are treated equally. Rates are allowed to vary based on external factors like society volume, length of contract, or the creditworthiness of the licensee. Any the variations are, however, all licensees must exist treated every bit.

FRAND agreements are typically voluntary between the standards body and the patent holder, just the contracts are legally binding. If Qualcomm is indeed refusing to license standards-essential patents to competing baseband suppliers, it would explain both why the visitor shot to a near-consummate lock on the LTE market following that technology's introduction, likewise as shedding some light on why nearly all of the other LTE providers gave up and went abode. As of mid-2016, reports suggested Qualcomm had a 50% market share (that's actually downwards significantly from where it used to be), with the remaining market place divided between Samsung, Intel, MediaTek, and Spreadtrum. Samsung and MediaTek were 37% of the remaining 50% in the beginning one-half of 2022, merely that may accept begun to change since some percentage of iPhones also rely on an Intel broadband scrap. Notation that this data is worldwide, not Usa-specific.

LTE market share

Image by StrategyAnalytics

The FTC also alleges that Qualcomm signed an exclusivity deal with Apple from 2022 – 2022 in which Apple tree agreed to but use Qualcomm baseband chips and Qualcomm gave the visitor a lower licensing charge per unit as a consequence. This complaint against the company is but the latest in a string of similar findings. Republic of korea fined Qualcomm $854 million for its licensing practices, while People's republic of china fined it $954 meg afterward its own antitrust probe. The European union investigation is ongoing too.

Obviously our power to evaluate this complaint is limited, since in that location are sections redacted and we oasis't seen any of the testify on which the complaint is based. We cannot, for instance, draw whatsoever conclusions on Qualcomm'southward licensing rates or its offers of exclusivity, and since nosotros're talking about patent standards, those terms matter. One puzzling aspect to the FTC's filing is that it seeks to draw differentiation between the loftier-end LTE market in the United States and the general market place for LTE in lower-terminate smartphones. The complaint specifically alleges that Qualcomm faces limited competition for premium LTE processors (definitely true, as evidenced by the overwhelming number of smartphones that use Qualcomm radios). It does not make a full general complaint about the rest of the LTE market, though it does state that Qualcomm's royalty rates and non-FRAND licensing terms apply to the general market for baseband, rather than the premium LTE infinite.

Qualcomm has issued its ain dissenting statement, arguing that the FTC'due south instance is significantly flawed. "This is an extremely disappointing decision to rush to file a complaint on the eve of Chairwoman Ramirez's departure and the transition to a new Administration, which reflects a precipitous break from FTC practice," said Don Rosenberg, Qualcomm'due south executive vice president and general counsel.

The timing of this annunciation is interesting, said Anshel Sag, an analyst with Moor Insights & Strategy, as it comes within the concluding week of the electric current assistants as their FTC appointees prepare to step down. "It will be very interesting to run across how the Trump assistants and their appointees handle this bombshell of a complaint," he said. "I believe that the Trump assistants may stop up existence much less heavy-handed with how they approach this complaint than the Obama administration would take been."