Qualcomm Ruling Could Impact Industry Transition to 5G

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The fate of Qualcomm's patent licensing is in the hands of a U.S. District Court judge here. Her ruling also could impact hundreds of licensees the company holds across a cellular ecosystem in the early days of a transition to 5G.

SAN JOSE, Calif., Jan. 30, 2019 – 

The fate of Qualcomm's patent licensing – the most profitable business of one of the world's top ten chip vendors – is in the hands of a U.S. District Court judge here. Her ruling also could impact hundreds of licensees the company holds across a cellular ecosystem in the early days of a transition to 5G.

Sadly, no ruling in the case of the U.S. Federal Trade Commission v. Qualcomm can change a broader reality the evidence shows. The tech industry's way of determining the value of a company's contribution to a fundamental standard is laborious, subjective and opaque.

The FTC argued Qualcomm charged for years unfairly high royalties for its CDMA and LTE patents while it held greater than 90% share in modems and used threats of halting chip shipments to win favorable deals. Qualcomm countered it repeatedly earned a position as a leader in a booming, dynamic market and sought fair value for its patents without ever stopping chip shipments.

In a 2017 ruling, the FTC persuaded a judge to order a drug company to pay a billion dollars in illegally gained profits. But in this case, the FTC is seeking an injunction to change Qualcomm's licensing practices.

"The most likely remedy would be an order forcing Qualcomm to drop its 'no license, no chips' policy," said Mark Lemley, a law professor at Stanford who focuses on the tech industry.

The judge also could force Qualcomm to license to rival chip makers, said Jennifer Rie, an antitrust litigation analyst for Bloomberg Intelligence. Currently, Qualcomm and other patent holders focus licensing efforts on system OEMs because it is the most lucrative and keeps negotiations simple, but the practice leaves chip rivals open to infringement suits.

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