US FTC Sues Qualcomm Over Anti-Competitive Practices

After being hit hard by both Chinese and South Korean regulators over the past months, American firm Qualcomm is going under the regulatory spotlight once again. This time around, the fight is on their home turf with the FTC. According to the complaint, the SoC maker is withholding their products unless licenses are obtained for unrelated products and is refusing to license out standards essential patents to competitors all together.

The first issue is that Qualcomm holds a large stranglehold over the baseband processors and mobile SoC markets. With a few exceptions like Apple and Samsung, Qualcomm is perhaps the only source of high-end SoCs. Instead of just selling SoCs on their own, the company is requiring that customers also license the suite of standards-essential patents on Qualcomm’s terms rather than on FRAND (fair, reasonable and non-discriminatory). FRAND is usually required when it comes to standards-essential patents. Due to their monopoly on SoCs, the company is able to force their customers to take it or leave it and leaving isn’t really an option if they want to remain in the mobile market.

In addition to this claim, there is also the issue of licensing out standards-essential patents to competitors. Due to their R&D in baseband technology, anyone seeking to make a baseband processor to pair with a non-Qualcomm SoC has to pay a royalty to the company. While the usual terms would be FRAND, the FTX is alleging that this is not the case, with Qualcomm setting higher than reasonable royalties to make their competitors less attractive. In fact, the royalties set by Qualcomm for LTE for instance, are the highest among the pool of patent holders.

For its part, Qualcomm had denied any wrong doing. They claim that they have never withheld nor threatened to withhold its chips in order to get unfair or unreasonable licensing terms. Given that FRAND-based licensing is the basis of creating standards in the industry, it will be interesting to see how all this will play out. The company is also under investigation in the EU over anti-competitive practices as well.