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U.S. court: Qualcomm must license tech to competitors

(Reuters)  — A U.S. federal judge ruled on Tuesday that chip seller Qualcomm must license some of its technology to competitors such as Intel. The preliminary ruling came in an antitrust lawsuit against Qualcomm brought by the U.S. Federal Trade Commission in early 2017. The lawsuit is scheduled to go to trial next year. The preliminary ruling by Judge Lucy Koh in the U.S. District Court for the Northern District of California said that Qualcomm must license some patents involved in making so-called modem chips, which help smart phones connect to wireless data networks, to rival chip firms. Qualcomm and the FTC had jointly asked Koh last month to delay ruling on the issue for up to 30 days while they pursued settlement talks. Koh denied that motion on Tuesday. It was not immediately clear whether the ruling would affect the settlement talks. Qualcomm shares were down about 0.3 percent to $63.26 after the news. Qualcomm did not immediately return a request for comment. The FTC and Intel declined to comment. Settling with U.S. regulators would be a turning point for the San Diego chip firm, which has been defending its business model amid lawsuits from large customers such as Apple and Huawei, as well as dealing with regulatory challenges to its practices around the world. At issue in the civil litigation and regulatory disputes is whether Qualcomms patent licensing practices, when combined with its chip business, constitute anticompetitive behavior. Regulators in South Korea and Taiwan initially ruled against Qualcomm, but it has appealed the rulings and settled some of them. In August, Qualcomm settled with Taiwanese regulators for $93 million and an agreement to invest $700 million in the country over the next five years.

Qualcomm must license patents to competing chipmakers, court rules

Qualcomm was dealt a major loss in one of its many ongoing legal battles this afternoon, with a federal court ruling that the company must license its modem patents to competing chipmakers, potentially weakening its stranglehold on the market. The ruling came out of a Federal Trade Commission lawsuit against Qualcomm, which was filed near the start of 2017. The crux of the lawsuit — whether Qualcomm used anti-competitive practices to maintain a monopoly over smartphone modems — isnt being ruled on here. But the court did hone in on a single question at issue: whether Qualcomm has to license standard essential patents to competitors. In this case, the court ruled it does. Qualcomm agreed to two separate policies that said it would offer select patents on a non-discriminatory basis. Those patents were essential to wireless standards — and only accepted into the standards because of Qualcomms agreement to license to everyone. After looking at the contracts, the court said it was unambiguous that Qualcomm was wrong here. Qualcomm did not immediately respond to a request for comment. If Qualcomm were allowed to keep its standard essential patents to itself, the court wrote, it would enable the company to achieve a monopoly in the modem chip market and limit competing implementations of those components. That phrasing may be concerning for Qualcomm, as whether it used anti-competitive practices to maintain a monopoly is at issue in the rest of the lawsuit. The ruling means that Qualcomm has to license patents necessary for building a smartphone modem to competing companies, like Intel. Until now, Qualcomm has only offered those licenses to companies that directly manufacture smartphones, and it seems that Qualcomm only did that when it was directly selling chips to them. Thats meant that a company like Intel, which badly wants to compete with Qualcomm in this market, has had to work around Qualcomms patents in order to sell modems of its own. And it means that a company like Apple or Samsung, that wants to sell a ton of smartphones, has largely had to rely on Qualcomms chips in order to do so. Thats bad news for Qualcomm, but good news for the rest of the industry. Should the ruling hold, it could enable more companies to build modems or for those modems to be more competitive than they are today. Intel, for instance, already makes competing modems, but theyve never been as fast as Qualcomms. What doesnt seem to be changing, however, is how much Qualcomm can charge for those patents. The FTC has also accused Qualcomm of charging too-high fees for its patents, despite these same agreements requiring it to only impose reasonable fees. Apple is suing Qualcomm over the very same issue, but courts have yet to rule on this. Qualcomm faces similar legal battles around the globe. Apple is suing it in multiple locations over onerous licensing fees, while Qualcomm has already been fined in South Korea, Taiwan, the European Union, and China for issues related to anti-competitive licensing practices.